Econ Final Review
Which of the following is an example of a price cap regulation?
A government regulation has forced cable TV operators to lower the price of cable TV from $55 a month to $30 a month.
Who in the following statements is a full-time worker and who is a part-time worker?
Dan works at Subway for 8 hours each day from Monday through Friday. Mary works at Starbucks' for 4 hours each day on weekends.
Which of the following illustrates property rights?
Dave has patented his invention.
Which of the following is an example of strategies?
Dell makes an annual economic profit of $5 billion by investing in R&D and an economic profit of $6 billion by not investing in R&D.
Which of the following firms produce at the efficient scale?
Dell produces 100 computers a week at which its average total cost is minimized.
Cost-push inflation is an inflation that begins with an increase in _____.
cost
National debt is the amount of government _____ - _____ that has arisen from past _____.
debt outstanding; debt; budget deficits
Which of the following is an example of an intermediate good or service?
Samsung buys compressors for manufacturing refrigerators.
Who in the following statements is a part-time worker for economic reasons?
Sherrie is a graduate who started working at Safeway pharmacy for 4 hours each day, three days a week, as they do not currently have a full-time opening.
There are five firms in a market and the market shares of the firms are 40 percent, 25 percent, 20 percent, 10 percent, and 5 percent. What is the Herfindahl-Hirschman Index for this market?
The Herfindahl-Hirschman Index for this market is 2,750
A recessionary gap is a gap that exists when potential GDP _____ real GDP and that brings a _____ price level. An inflationary gap is a gap that exists when real GDP _____ potential GDP and that brings a _____ price level.
exceeds; falling; exceeds; rising
Rent seeking is the lobbying for special treatment from the _____ to _____ or to divert consumer surplus or producer surplus away from others.
government; create economic profit
An open market operation is the purchase or sale of _____ - _____ - by the _____ in the open market.
government securities; U.S. Treasury bills and bonds; New York Fed
The unemployment rate is the percentage of the people in the _____ who are unemployed.
labor force
A real business cycle is a cycle that results from fluctuations in the pace of growth of _____ and _____.
labor productivity; potential GDP
The nominal interest rate is the dollar amount of interest expressed as a percentage of the amount _____. The real interest rate is the goods and services forgone in interest, expressed as a percentage of the amount _____ and calculated as the nominal interest rate minus the _____.
loaned; loaned; inflation rate
Which of the following firms is most likely to be a monopoly?
local distributor of electricity
The Federal Open Market Committee is the Fed's _____ committee.
main policy making
The nominal wage rate is the average _____ wage rate measured in _____ dollars. The real wage rate is the average _____ wage rate measured in the dollars of _____ year.
hourly; current; hourly; a reference base
The U.S. labor force participation rate ______.
increased from 59%in 1960 to 67% in 1999
Aggregate demand decreases if fiscal policy ______ taxes or ______ transfer payments.
increases; decreases
Aggregate demand decreases if the exchange rate ______ or foreign income ______.
increases; decreases
The productivity curve is the relationship that shows how _____ changes as the quantity of _____ changes.
real GDP per hour of labor; capital per hour of labor
Potential GDP is the value of _____ when all the economy's factors of production - labor, capital, land, and entrepreneurial ability- are _____.
real GDP; fully employed
Aggregate demand is the relationship between the quantity of _____ demanded and the _____ when all other influences on expenditure plans remain the same.
real GDP; price level
Aggregate supply is the relationship between the quantity of _____ supplied and the _____ when all other influences on production plans remain the same.
real GDP; price level
Macroeconomic equilibrium occurs when the quantity of _____ demanded equals the quantity of _____ supplied at the point of intersection of the _____ curve and the _____ curve.
real GDP; real GDP; AD; AS
Between 1914 and 2014, the average growth rate of real GDP per person in the United States was 2 percent a year. During this period, ______ grew at a faster rate than ______.
real GDP; the population
Social interest theory is the theory that _____ achieves an _____ allocation of resources. Capture theory is the theory that the regulation serves the self-interest of the producer and results in _____, _____, and deadweight loss.
regulation; efficient; maximum profit; underproduction
When the price level and the money wage rate rise by the same percentage, unemployment _______.
remains the same
A means of payment is a method of _____ a debt.
settling
The Herfindahl-Hirschman Index is the _____ of the percentage market share of each firm summed over the _____ firms (or summed over all the firms if there are fewer than _____) in a market.
square; 50 largest; 50
A cost of living index is a measure of the change in the amount of money that people need to spend to achieve a given _____.
standard of living
Suppose that the number of jobs in the fishing industry decreases but the number of jobs in the travel industry increases. Initially, ______________.
structural employment increases
Economic growth is defined as the _____ .
sustained expansion of production possibilities
The cyclical surplus or deficit is the budget balance that arises because _____ and _____ are _____ their full-employment levels.
tax revenues; outlays; not at
Exports of goods and services are items that firms in _____ produce and sell to _____.
the United States; any other country
The PCE price index is an average of the current prices of _____ included in the consumption expenditure component of GDP, expressed as a percentage of _____ year prices.
the goods and services; base
Gross national product is _____
the market value of all the final goods and services produced anywhere in the world in a given time period by the factors of production supplied by the residents of that country
When cyclical unemployment increases and other things remain the same, ______.
the natural unemployment rate does not change
In an oligopoly, the outcome _______.
may be the monopoly outcome, or the perfect competition outcome, or something in between
In the short run, a monopolistically competitive firm ______.
might incur an economic loss
The city of Portland has three major cab service companies.
mutual interdependence; takes
In monopolistic competition, _______.
no one firm's actions directly affect the actions of the other firms
Currency consists of _____.
notes (dollar bills) and coins
Saving is the amount of income that is _____ in net taxes or spent on _____ goods and services.
not paid; consumption
Monopoly is a market in which one firm sells a good or service that has _____ substitutes and _____ blocks the entry of new firm
no close; a barrier
The labor force is the number of people employed plus the _____.
number unemployed
The dry cleaning industry is in monopolistic competition. In the short run, the profit-maximizing price is $10 per item and the average total cost is $6 per item. In long-run equilibrium, the profit-maximizing price is $8 per item. In long-run equilibrium, what is the economic profit of a firm in the dry cleaning industry?
n long-run equilibrium, the dry cleaning firm makes $0 economic profit.
Classical macroeconomics is the view that the market economy _____, that aggregate fluctuations are _____, and that government intervention _____ improve the efficiency of the market economy.
works well; a natural consequence of an expanding economy; cannot
Monetarist macroeconomics is the view that the market economy _____, that aggregate fluctuations are _____, but that fluctuations in the _____ generate the business cycle.
works well; a natural consequence of an expanding economy; the quantity of money
If real GDP is $1,000,000, exports are $200,000, imports are $300,000, and aggregate labor hours are 100,000, labor productivity is _____.
$10 per hour
If tax revenues are $3,500 billion and the government's budget balance is a $720 billion deficit, calculate the government's outlays.
$4,220
Hyperinflation is inflation at a rate that exceeds _____ percent a month (which translates to _____ percent per year).
50; 12,875
The reference base period is a period for which the _____ is defined to equal _____. Currently, the reference base period is 1982-1984.
CPI; 100
Which of the following is money?
Charlie's checking account deposit at the Bank of America.
Which of the following countries is facing a recession?
Japan's real GDP of 3.8 percent in the first quarter decreased by 0.3 and 0.4 percent respectively in the second and third quarters of 2012.
M2 consists of _____ plus _____ and _____ deposits, _____, and other deposits.
M1; savings deposits; small time; money market funds
The core inflation rate is the annual percentage change in the _____ price index _____ the prices of food and energy.
PCE; excluding
Excess reserves are a bank's _____ reserves minus its _____ reserves.
actual; desired
A marginally attached worker is a person who does not have a job, is _____ and _____ to work, has _____ specific efforts to find a job within the previous _____ weeks, but has looked for work sometime in the recent past.
available; willing; not made; four
The Consumer Price Index is a measure of the _____ of the prices paid by _____ consumers for a fixed market basket of consumption goods and services.
average; urban
The velocity of circulation is the _____ number of times in a _____ that each dollar of money gets used to buy final goods and services.
average; year
Reserves consist of the currency in the _____ plus the balance on its _____ account at _____.
bank's vaults; reserve; a Federal Reserve Bank
The monetary base is the sum of _____, _____, and _____ at the Fed.
coins; Federal Reserve notes; banks' reserves
Perfect price discrimination is the price discrimination that extracts the entire _____ surplus by charging the _____ price that _____ are willing to _____ for each unit.
consumer; highest; consumers; pay
Full employment is when there is no _____ unemployment or, equivalently, when all the unemployment is _____ or _____.
cyclical; frictional; structural
Depreciation is the _____ in the value of _____ that results from its use and from obsolescence.
decrease; capital
When the unemployment rate is ______ than the natural unemployment rate, cyclical unemployment is _______.
less; negative
A cartel is a group of firms acting together to _____ output, _____ price, and increase _____.
limit; raise; economic profit
The production function is a relationship that shows the _____ quantity of _____ that can be produced as the quantity of _____ employed changes and all other influences on production remain the same.
maximum; real GDP; labor
Fiat money are objects that are _____ because the law decrees or orders them to be _____.
money; money
The equation of exchange is an equation that states that the quantity of _____ multiplied by the velocity of circulation equals the _____ multiplied by _____.
money; price level; real GDP
The working-age population is the total number of _____ aged _____ years and over who are not in jail, hospital, or some other form of institutional care or in the U.S. Armed Forces.
people; 16
The business cycle is a _____ but _____ up-and-down movement of total _____ and other measures of economic activity.
periodic; irregular; production
Economic freedom is a condition in which people are able to make _____ choices, their private property is _____, and they _____ markets.
personal; protected by the rule of law; are free to buy and sell in
At a business cycle trough, cyclical unemployment is ______ and at a business cycle peak, cyclical unemployment is ______.
positive; negative
Rate of return regulation is a regulation that sets the _____ at a level that enables a firm to earn a specified target rate of return on its _____.
price; capital
The prisoners' dilemma is a game between two _____ that shows why it is hard to _____ even when it would be beneficial to both players to do so.
prisoners; cooperate
A south sea island produces only coconuts. In 2010, the price of a coconut is $1.50 and the quantity produced is 400. In 2016, the price of a coconut is $2.50 and the quantity produced is 450. 2010 is the base year. Real GDP in 2016 is ______.
$675
The money multiplier is 1.5 and the currency drain ratio is 0.5. What is the desired reserve ratio?
0.5
You deposit $200 in a savings account on January 1, and the bank pays you interest of $10 at the end of the year. During the year, the average price level rises by 2 percent. The real interest rate on your savings account is ______.
3 percent a year
The currency drain ratio is 0.2 and the desired reserve ratio is 0.2. What is the money multiplier?
3.0
Consider the business cycle, and then choose the statement that is correct.
A business cycle is periodic but irregular.
Choose the statement about money that is correct.
Barter requires a double coincidence of wants.
Chained-dollar real GDP is the measure of real GDP calculated by the _____.
Bureau of Economic Analysis
Which of the following is an example of a final good or service?
Dan bought a Toyota Camry.
Who in the following statements is a discouraged worker?
Dan is available to work but has not looked for a job in the past eight weeks because of repeated applications but no single offer.
A monopoly that can perfectly price discriminate has a marginal revenue curve that is steeper than the demand curve for the good that the monopoly produces. If a monopoly can perfectly price discriminate, it produces no deadweight loss and is more efficient than a single-price monopoly.
False True
Which of the following is an example of product differentiation?
I prefer Nike shoes while my friend prefers Puma shoes.
Which of the following is an example of a price-discriminating monopoly?
IMAX charges $6 per movie ticket for children younger than 8, and $8.50 per movie ticket for adults.
In December 2004, checkable deposits owned by individuals and businesses were $667 billion; Upper M 1 was $ 1 comma 372 billion; currency held by individuals and businesses was $ 697 billion; Upper M 2 was $ 6 comma 422 billion; savings deposits were $ 3 comma 520; and small time deposits were $ 817 billion. Calculate traveler's checks in circulation in December 2004. Calculate money market funds and other deposits in December 2004.
In December 2004 traveler's checks in circulation were $ 8 billion. Money market funds and other deposits in December 2004 were $ 713 billion.
_______ published The General Theory of Employment, Interest, and Money in _______. His theory was that ______.
John Maynard Keynes; 1936 too little private spending is the cause of depression and recession
Which of the following statements illustrates structural unemployment?
Outsourcing resulted in many job losses in the mid 2000s.
Which of the following is an example of consumption expenditure?
Rachel buying a TV.
Which of the following statements illustrates frictional unemployment?
Robin is quitting his current job to find another that has better prospects.
Choose the correct statement. 1. The most basic precondition for economic growth is an appropriate incentive system. 2. Property rights and markets create incentives for people to save and invest. 3. Early human societies based on hunting and gathering experienced economic growth. 4. Economic growth does not occur in the environment of an authoritarian political system.
Statements 1 and 2 are correct.
Which of the following economies is facing stagflation?
The European economy is experiencing a decrease in real GDP for three quarters and a rise in the price level.
Choose the statement about the Fed that is correct.
The FOMC meets approximately every six weeks to review the state of the economy.
Which of the following statements illustrates monetary policy?
The Fed has raised the federal funds rate by 0.3 percent.
Which of the following is an example of regulation?
The Surface Transportation Board influences the prices on interstate railroads.
Which of the following statements illustrates fiscal policy?
The US government has proposed a hike in the corporate tax rate.
Which of the following is an example of government expenditure on goods and services?
The White House buying internet services.
A bank holds $5 for every $100 in deposits. The bank wants to hold $1 for every $100 in deposits. The bank holds excess reserves of $7 comma 000 and actual reserves of $13 comma 000. What is the actual reserve ratio, the desired reserve ratio, and the desired reserves?
The actual reserve ratio is 0.05. The desired reserve ratio is 0.01. The desired reserves are $ 6,000.
Which of the following is an example of a duopoly market?
The city of Portland has three major cab service companies.
The inflation rate is 5 percent a year, the real GDP growth rate is 8 percent a year, and the rate of increase in velocity is 1 percent a year. What is the money growth rate?
The money growth rate is 12 percent a year.
An economy has a recessionary gap. With no change in aggregate demand, how does the economy return to full employment?
The money wage rate falls, aggregate supply increases, and the price level falls.
The real wage rate is $12.00 an hour and the CPI is 114. What is the nominal wage rate?
The nominal wage rate is $13.68 an hour.
Consider potential GDP and then choose the statement that is correct.
The potential GDP line is vertical because potential GDP is independent of the price level.
Consider aggregate supply and then choose the statement that is correct.
The quantity of real GDP supplied equals potential GDP at the price level at which the real wage rate is at its full-employment equilibrium level.
Which of the following is an example of deregulation?
The quota on milk production has been lifted by the Common Agricultural Policy of the EU.
Consider the demand for labor, and then choose the statement that is correct.
The real wage rate influences the quantity of labor demanded because what matters to firms is how much output they must sell to earn the dollars they pay the workers.
Which of the following statements illustrates diminishing returns?
The second billion hours of labor changes real GDP from $1 to $3 trillion and the third billion hours of labor changes real GDP from $3 to $4 trillion.
Consider what is included in the measurement of GDP, and then choose the correct statement.
The underground economy, which is not included in GDP is the part of the economy that is hidden from the view of the government.
In 2009, U.S. exports of goods and services are $1 comma 587 billion and imports of goods and services are $1 comma 976 billion. What is the value of net exports?
The value of net exports in 2009 is -389 billion dollars.
In the United States in 2002, the GDP price index was 89.5 and real GDP was $ 12,266 billion. What is the value of nominal GDP in 2002?
The value of nominal GDP in 2002 is $10,978 billion.
GDP is $30 billion and the quantity of money is $5 billion. What is the velocity of circulation?
The velocity if circulation is 6.
GDP in the United States increased between 2016 and 2017. Which of the following could NOT account for this increase?
We paid lower prices for our goods and services and production remained constant.
Which of the following is included in the measure of U.S. GDP?
a 2013 Grand Am produced and sold as a new car in the United States in 2013
When natural or legal forces work to protect a firm from potential competitors, the market is said to have _______.
a barrier to entry
Money multiplier is the number by which ________ is multiplied to find the resulting _________.
a change in the monetary base; change in the quantity of money
In each of the following transactions, classify the item as a final good, an intermediate good, or neither.
a final good; an intermediate good
Which of the following is an example of investment?
a firm adding unsold output to the inventory
A payoff matrix is a table that shows the payoffs for each player for every possible combination of _____ the players.
actions by
The government expenditure multiplier is the effect of a change in government expenditure on goods and services on _____.
aggregate demand
The tax multiplier is the effect of a change in taxes on _____.
aggregate demand
Demand-pull inflation is an inflation that starts because _____.
aggregate demand increases
When investment increases, _______
aggregate demand increases and income increases. The increase in income induces an increase in consumption expenditure so aggregate demand increases by more than the initial increase in investment
In game theory, strategies include _______.
all possible actions of each player
The quantity of labor demanded is the total labor hours that _____ during a given time period at a given _____. The demand for labor is the relationship between the _____ and the _____ when all other influences on hiring plans remain the same.
all the firms in the economy plan to hire; real wage rate; quantity of labor demanded; real wage rate
The GDP price index is an average of the current prices of _____ included in the GDP, expressed as a percentage of base year prices.
all the goods and services
Which of the following are examples of monetary policy that decrease aggregate demand?
an increase in transfer payments and an increase in interest rates
The natural unemployment rate is the unemployment rate when the economy is _____.
at full employment
The structural surplus or deficit is the budget balance that would occur if the economy were _____.
at full employment
Which of the following industries is an example of monopolistic competition?
audio and video equipment
The reference base period for the CPI is 1982-1984. In January 2012, the CPI was 226.7. This number tells us that the ______ of the prices paid by urban consumers for a fixed basket of consumer goods and services was ______.
average; 126.7 percent higher in January 2012 than the average of 1982-1984
The U.S. unemployment rate ______.
averaged 5.8 percent between 1948 and 2016
Cyclical unemployment is the fluctuating unemployment over the business cycle that increases during _____ and decreases during _____.
a recession; an expansion
The Nash equilibrium of a prisoners' dilemma game is that ______.
both players confess
At the end of 2007 a student has $500 in a bank savings deposit that is earning an interest rate of 5 percent a year. If the student leaves the savings account untouched, his deposit will have grown to $1000 ______.
by 2021
Net taxes are taxes paid minus _____.
cash benefits received from governments
The Federal Reserve System (the Fed) is the _____ of the United States.
central bank
______ macroeconomics is the view that the market economy works well, that aggregate fluctuations are a natural consequence of an expanding economy, and that government intervention cannot improve the efficiency of the market economy.
classical
A rise in the money wage rate when the economy is at potential GDP ______.
decreases aggregate supply because a rise in the money wage rate increases costs, so firms employ fewer workers
Aggregate demand decreases if expected future income, inflation, or profits ______. And aggregate demand decreases if fiscal policy ______ government expenditure.
decreases; decreases
Aggregate demand decreases if monetary policy ______ the quantity of money and ______ interest rates.
decreases; increases
When the price level rises but the money wage rate remains unchanged, unemployment ______ and the quantity of real GDP supplied ______.
decreases; increases
A price cap regulation is often combined with _______ in case the regulator sets the cap too high.
earnings sharing regulation
Excess capacity is the amount by which the _____ exceeds the quantity that the firm produces.
efficient scale
If the real wage rate is at the full-employment equilibrium level, real GDP is ______.
equal to potential GDP, which is efficient but is not the most that can be produced
Full-employment equilibrium occurs when equilibrium real GDP _____.
equals potential GDP
Marginal cost pricing rule is a rule that sets price _____ marginal cost to achieve _____ output. Average cost pricing rule is a rule that sets price _____ average _____ cost to enable a regulated firm to avoid economic loss.
equal to; an efficient; equal to; total
Net exports of goods and services increase when ______.
exports of goods and services increase and imports of goods and services decrease
Classical macroeconomics _______.
fell into disrepute during the Great Depression
If the money wage rate increased from $40.00 to $44.46 an hour and consumer prices rose by 14 percent, we would expect ______ people to try to find a job and employed people to want to work ______ hours. The ______ would ______.
fewer; shorter quantity of labor supplied; decrease
Nash equilibrium is an equilibrium in which each player takes the best possible action _____ the action of the other player.
given
A medium of exchange is an object that is generally accepted in return for _____. Barter is the direct exchange of goods and services for _____, which _____ a double coincidence of wants.
goods and services; other goods and services; requires
Currency _________.
inside the banks is not money because it isn't available as a means of payment
The value of the CPI in the base period ______.
is 100 no matter what reference base period is chosen
Keynesian macroeconomics is the view that the market economy _____ and needs _____ to achieve full employment and sustained economic growth.
is inherently unstable; active government intervention
If the CPI rises from 120 to 126, then ______.
on average, the price paid by urban consumers for a fixed basket of consumer goods and services rises by 5 percent
The output gap is real GDP minus _____ expressed as a percentage of _____.
potential GDP; potential GDP
The inflation rate is the percentage change in the _____ from one year to the next. Deflation is a situation in which the _____ is _____ and the inflation rate is _____.
price level; price level; falling; negative
Automatic stabilizers are features of fiscal policy that stabilize _____ without explicit action by the government.
real GDP
Induced taxes are taxes that vary with _____.
real GDP
The economic growth rate is the annual percentage change of _____.
real GDP
The economic growth rate is the annual percentage change of ______.
real GDP
Fiscal imbalance is the present value of the government's commitments to pay benefits minus _____.
the present value of its tax revenues An automatic fiscal policy is a fiscal policy action that is triggered by _____. A discretionary fiscal policy is a fiscal policy action that is initiated by _____.
An open market operation is ______.
the purchase or sale of government securities by the Federal Reserve System in the open market
An automatic fiscal policy is a fiscal policy action that is triggered by _____. A discretionary fiscal policy is a fiscal policy action that is initiated by _____.
the state of the economy; an act of Congress
Full employment is defined as a situation in which _______.
the unemployment rate equals the natural unemployment rate
The four-firm concentration ratio is the percentage of the _____ in an industry accounted for by the four largest firms in the industry.
total revenue
The CPI market basket consists of items that ______ buy and ______.
urban households; the Consumer Expenditure Survey is used to update it frequently
The Rule of 70 is the number of years it takes for the level of any variable to double. It is approximately 70 _____ by the annual percentage _____.
divided; growth rate of the variable
The quantity theory of money is the proposition that when real GDP _____ potential GDP, an increase in the quantity of money brings _____ percentage increase in the _____.
equals; an equal; price level
Net exports of goods and services is the value of _____ of goods and services _____ the value of _____ of goods and services.
exports; minus; imports
Gross domestic product (GDP) is the market value of all the _____ goods and services produced _____ a country in a given time period.
final; within
Imports of goods and services are items that _____ in the United States _____ the rest of the world.
households, firms, and governments; buy from
M1 consists of currency held by _____ and _____, _____, and _____ owned by individuals and businesses.
individuals; businesses; traveler's checks; checkable deposits
A profit-maximizing monopoly never produces output in the _______ range of its _______ curve.
inelastic; demand
The federal funds rate is the _____ rate on _____ loans.
interest; interbank
Potential GDP is the value of real GDP when all the economy's factors of production - _____, _____, _____, and _____ - are fully _____.
labor; capital; land; entrepreneurial ability; employed
The slope of the production function becomes _______ steep as the quantity of _____ increases because of diminishing returns.
less; labor
The Great Depression was a period of high _____, low _____, and extreme economic hardship that lasted from _____ to _____.
unemployment; incomes; 1929; 1939
The labor force participation rate is the percentage of the _____ who are members of the labor force.
working-age population
Real GDP growth rate = ______.
[(Real GDP in current year minus Real GDP in previous year) divided by Real GDP in previous year] times 100
Real GDP is the value of the _____ goods and services produced in a given year expressed in terms of the prices in _____ year. Nominal GDP is the value of the _____ goods and services produced in a given year expressed in terms of the prices of _____ year.
final; a base; final; that same
