Econ Final Review
The table below contains data for Caprianum, a country that produces only two products: cars and sunglasses. The real GDP for 2019 using 2010 as the base year equals _____. Year Cars Produced Price of Cars Sunglasses Produced Price of Sunglasses 2010 100 $15,000 5000 $100 2019 150 $16,000 6000 $150
$2,850,000
Suppose that this year a small country has a GDP of $500 billion. Also assume that I = $100 billion, G = $150 billion, and Xn = $20 billion (net export). How big is C?
$230 billion
North Freedland has an adult population of 100,000. Of these people, 72,000 are employed and 8,000 are unemployed. unemployment rate
10
According to this diagram, the opportunity cost of moving from point A to point B is ___.
100 bales of hay
Suppose average GDP growth rate is 5%. At this rate, how many years will it take GDP to double?
14 years
An increase in exports of $10,000 caused income to increase by $25,000. Based on this information the value of the multiplier is ___.
2.5
Assume the economy follows the simple aggregate expenditure model. What is the equilibrium GDP in this economy?
3000
Suppose the nominal rate of interest is 9% and the rate of inflation is 5%. The real rate of interest is ___.
4%
In one hour, George can fix 4 flat tires or type 200 words. His opportunity cost of fixing a flat tire is:
50 words
Which of the following is an example of an automatic stabilizer?
A rise in unemployment compensation when the economy is in a recession.
How can an increase in economic growth be represented on a Production Possibilities Frontier (PPF)?
A shift outward of the frontier
Which of the following statements about a surplus is true?
A surplus leads to lower prices.
Based on the information in the previous question, which of the following best describes how the market for energy drinks will adjust?
A surplus will lead to a decrease in price.
Using fiscal policy to stabilize the economy is a challenge because of several lags associated with its implementation. Which of the following is NOT true for the fiscal policy timing lags?
Implementation lag: the time it takes for banks and financial markets to react to the policy change.
Which of the following is not included in the natural unemployment rate?
Cyclical Unemployment
Which of the following is NOT true?
Generally, a tax multiplier is larger than a spending multiplier.
Which of the following statements is a normative statement?
Higher taxes are good for the country.
Which of the following statements is NOT true regarding the circular flow diagram?
Household spending becomes revenue to business through the resource market.
You observe that production and employment are both falling, but the price level is rising. Which of the following would explain these changes?
a decrease in the short-run aggregate supply
Gross domestic product measures the value of ___.
all final goods and services produced in a year
If a country is able to improve the level of technology it has available, all else equal we would expect ___.
all of the above
Specialization and trade ___.
allows each side of the trade to produce beyond their individual ppf's
Crowding out occurs when
an increase in government spending causes a decrease in business investment.
Suppose at the current level of activity, the marginal cost exceeds the marginal benefit. According to the marginal decision rule, to maximize net benefits a decision maker would ___.
decrease the level of the activity
Suppose the government has tax revenues of $3 billion and expenditures of $4 billion. The government will have a budget
deficit of $1 billion.
A decrease in the average price of goods and services over time is ___.
deflation
Consider the market for energy drinks. Suppose, ceteris paribus, that a medical report states that consuming energy drinks increases the risk of strokes. We would expect ___.
demand to fall
According to Keynes, the major factor determining household spending and saving is ___.
disposable income
In the aggregate expenditure model, expenditures will rise if ___.
disposable income rises
When the price of smartphones increases, all else equal consumers will buy a smaller quantity because of the _________ effect and the __________effect.
income, substitution
In a market system, the three fundamental economic questions are determined by ___.
individuals interacting in a market
The national debt
is the accumulation of deficits over time.
Increases in the foreign exchange value of the dollar will ___.
lower both production and employment
In the following diagram, a decrease in income would cause a move from point Q to ___.
point T
When considering fiscal policy, automatic stabilizers ____.
reduce concerns about the recognition policy lag
Two countries, Hanover and Oberfell, have different rates of economic growth. This difference is probably the result of ___.
the labor productivity in one country is greater than the labor productivity in the other
Assume the economy is growing at a rate of 3%. According to the rule of 70 ___.
the size of the economy will double in 23 years
If we assume that wages and prices are "sticky", the aggregate supply curve is ____.
upward sloping
Gross domestic product is based on
where goods are produced.
Which of the following factors are NOT the ways to increase productivity?
Increasing government spending on subsidizing firms' production
Which is NOT correct about human capital?
Investment in human capital has little effect on the long-term economic growth.
Which of the following statements is true?
One way to create economic growth is to improve the technology that is available for production.
What can you say for sure when demand increases and supply decreases at the same time?
Pe will rise, but the impact on Qe is unclear without additional information.
Which of the following would shift the demand curve for snow skis?
People express a preference for snowboarding
Which of the following statements about scarcity is correct?
Scarcity forces us to make choices
Pepsi is considered to be a substitute for Coke for consumers. All else equal, suppose the price of price of Pepsi decreases and the price of syrup (an ingredient used to make coke) decreases. How will this affect the equilibrium price and quantity for Coke?
The equilibrium price of Coke cannot be determined, but the equilibrium quantity of Coke will decrease.
Why will an increase in government spending lead to a lower increase in equilibrium real GDP than the government purchases multiplier would suggest?
The increase in aggregate demand from the increase in government spending will increase the price level, an effect not accounted for in the multiplier calculation
Which of the following statements is TRUE?
The labor force is composed of those that are employed and those that are unemployed.
Which of the following is an example of macroeconomic analysis?
To avoid a recession in the economy, the Federal Reserve lowered the interest rates.
The following table about the composition of GDP has been contaminated. Now Fed hires you to recover each number that has been covered by the stains. Which of the following choice represents the correct numbers combination?
(2009II X-M, 2009IV G, 2010I C) = (-339.1, 2959.2, 10362.3)
Based on this table, what is the marginal propensity to consume? Real GDP (Y) Net Taxes (T) Disposable Income (Yd) Consumptions (C) Marginal Propensity to Consume (MPC) $25,000 $3,000 $16,400 $30,000 $3,000 $19,900 $35,000 $3,000 $23,400
0.75
Suppose the CPI had a value of 130 in Year A and in Year B it has a value of 143. The rate of inflation from the end of Year A to the end of Year B is ____.
10
When real GDP is $35,000, what is the level of disposable income? Real GDP (Y) Net Taxes (T) Disposable Income (Yd) Consumptions (C) Marginal Propensity to Consume (MPC) $25,000 $3,000 $16,400 $30,000 $3,000 $19,900 $35,000 $3,000 $23,400
32000
After graduating high school, Josh received an offer to work at a computer company with an annual salary of $50,000 and another offer to work at an automobile company with an annual salary of $30,000. Josh can also work in his father's firm but he would not receive a salary. In the end, Josh decides to go to college. What is his opportunity cost of going to college?
50,000
From the following table, if you use CPI in year 1984 as the base year, what is number that is the closest to the CPI in 2021?
500 is the closest to CPI in 2021
Suppose the table below represents the population for a hypothetical country. Assume that this data is collected in the month of March. What is the unemployment rate in this country for March? Classification Number of People Population 800 Employed 550 Not Working and Seeking Work 50 Children in School 80 Retirees 70 Full-time college students 30 Institutionalized 20
8.3
North Freedland has an adult population of 100,000. Of these people, 72,000 are employed and 8,000 are unemployed. labor force participation rate
80
North Freedland has an adult population of 100,000. Of these people, 72,000 are employed and 8,000 are unemployed.
80000
Prime Minister Mukergee wants to increase economic growth in her country. Which of the following will help her accomplish her goal?
All of the above.
Suppose two countries, the US and Canada, are both producing shirts and boots. If we already know the US has the comparative advantage in producing boots, then ___.
Canada must have the comparative advantage in producing shirts
Which of the following is not a component of the business cycle?
Discount factor
Which of the following events occur when the price is $25?
Excess supply (surplus) of 100
Suppose that a concert ticket has a price of $100 and a ticket to King's Island has a price of $50. Which of the following statements is true?
The relative price of a King's Island ticket is ½ of a concert ticket.
A sheep herder raises sheep for their wool. A textile mill converts the wool to cloth for use in clothing. A clothing company uses the wool cloth to make a sweater. Assume that the total product of these firms represents the only components of the sweater and that they will have no other uses. Use the following table to determine which of the following statements is true. Company Product Total Sales Value Added Sheep Land Ranch Wool $14.00 Bill's Mill Wool Cloth $33.00 Sweaters R Us Sweater $75.00 Total Value Added
The total value added for the production of sweaters is $75.00.
What impact would you expect a natural disaster to have on the economy's potential output (ceteris paribus)?
There would be no change.
Which of the following will increase supply of TVs?
Workers producing TVs become more productive.
Economic models ___.
are all the above
When faced with an inflationary gap, a discretionary or stabilization policy would ___.
attempt to decrease aggregate demand
In a diagram of aggregate expenditures, an increase in the mpc would cause the AE line to ___.
become steeper
Sarah works in the hardware store. She read a report that consumers' incomes have increased, ceteris paribus. Sarah noticed that sales of paint and paint brushes increased. She knew it was because ___.
both paint and paint brushes are normal goods
The price level has fallen from 210 to 200. The Keynesian model would explain this change in the price level as the result of a ___.
decrease in aggregate demand
Households decide to save more. In the long run, if the government does not intervene, the price level will ___ and employment will ___.
fall, not change
In the market for beer, ceteris paribus, an increase in the productivity of brewery workers will ___.
lower the price and raise the quantity sold
Suppose the mpc is .90. If the government wanted to increase income by $90,000, it could ___ taxes by ___.
lower, $10,000
The marginal decision rule says we will maximize the net benefits of an activity when ___.
marginal benefits are equal to marginal costs
Assume the economy is currently operating at its full-employment level of output. All else equal, an increase in imports will ___ in the long run.
reduce price, but not production
When there is a decrease in the supply, the equilibrium price will ___ and the equilibrium quantity will ___.
rise; fall
Excess demand (shortage) will exist whenever ___.
the actual price is below the equilibrium price
