Econ Final
A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $150. If customers deposit $50 into the bank, what is the value of the money supply?
$150
The price index was 120 in 2012 and 126 in 2013. What was the inflation rate?
5.0 percent
Of the total income earned in the U.S. economy, approximately
67 percent is earned by workers, and 33 percent is earned by owners of land and capital.
Which of the following best illustrates the concept of "derived demand?"
An automobile producer's decision to supply more cars will lead to an increase in the demand for automobile production workers.
Which of the following is not included in U.S. GDP
The market value of an oil change that Ben performs on his own car
Which effect of a price change moves the consumer along the same indifference curve to a point with a new marginal rate of substitution
The substitution effect
If the price of a good increases, all else equal, consumers perceive
a decrease in purchasing power.
A person who is counted as "unemployed" by the Bureau of Labor Statistics
a. is also in the labor force. b. must have recently looked for work or be on temporary layoff. c. must be at least 16 years old. d. All of the above are correct. (CORRECT)
Your college roommate receives a pay raise at her part-time job from $9 to $11 per hour. She used to work 25 hours per week, but now she decides to work 20 hours per week in order to spend more time studying economics. For this price range, her labor supply curve is
backward sloping.
If a firm experiences diminishing marginal productivity of labor, the marginal product
decreases as total product increases
In a fractional-reserve banking system, an increase in reserve requirements
decreases both the money multiplier and the money supply
Other things the same, an increase in population growth
decreases capital per worker. However, a higher population growth rate is associated with a decreased pace of technological progress.
To be counted as "employed" in the U.S. labor force statistics, a person
does not have to be working for pay if they are working for a family business and does not have to be working full time
The money supply decreases if
households decide to hold relatively more currency and relatively fewer deposits and banks decide to hold relatively more excess reserves and make fewer loans
Thomas, a U.S. citizen, works only in Canada. The value of the output he produces is
included in U.S. GNP, but it is not included in U.S. GDP
Consider the labor market for computer programmers. During the late 1990s, the value of the marginal product of all computer programmers increased dramatically. Holding all else equal, what effect did this process have on the labor market for computer programmers? The equilibrium wage
increased, and the equilibrium quantity of labor increased.
Josh is a full-time college student who is not working or looking for a job. The Bureau of Labor Statistics counts Josh as
neither in the labor force nor unemployed
Other things the same, if a country saves more, then
net capital outflow rises, so net exports rise.
According to the assumptions of the quantity theory of money, if the money supply decreases by 7 percent, then
nominal GDP would fall by 7 percent; real GDP would be unchanged.
The price level is a
nominal variable
Economic variables whose values are measured in monetary units are called
nominal variables
unemployment
not part of GDP because it is a transfer payment
when economists talk about growth in the economy, they measure that growth as the
percentage change in real GDP from one period to another
Country A and country B both increase their capital stock by one unit. Output in country A increases by 10 while output in country B increases by 8. Other things the same, diminishing returns implies that country A is
poorer than Country B. If Country A adds another unit of capital, output will increase by less than 10 units.
Nominal GDP will definitely increase when
prices increase and output increases
Inventors often obtain patents on new products and processes, thereby turning new ideas into
private goods and increasing the incentive to engage in research.
Electronics firms may be able to get patents on their ideas. Doing so makes their ideas
private goods rather than public goods. This gives people more incentive to engage in research
More generous unemployment insurance would
raise frictional unemployment
You buy a new car built in Sweden. Other things the same, your purchase by itself
raises U.S. imports and lowers U.S. net exports.
A nation's standard of living is best measured by its
real GDP per person.
When prices rise
real estate is a better store of value than money
Accumulating capital
requires that society sacrifice consumption goods in the present
Cyclical unemployment refers to
short-run fluctuations around the natural rate of unemployment
A consumer chooses an optimal consumption point where the
slope of the indifference curve equals the slope of the budget constraint.
The amount of unemployment varies
substantially over time and across countries.
Severe adverse-selection problems may result in
too few good used cars being offered for sale
The consumer price index is used to
turn dollar figures into meaningful measures of purchasing power
A competitive, profit-maximizing firm hires workers up to the point where the
value of the marginal product equals the wage.
Because the CPI is based on a fixed basket of goods, the introduction of new goods and services in the economy causes the CPI to overestimate the cost of living. This is so because
when a new good is introduced, it gives consumers greater choice, thus reducing the amount they must spend to maintain their standard of living.
According to behavioral economics, an employee will likely
work less hard if she is a satisficer and if she believes a coworker is overpaid
A car mechanic knowing more about what's wrong with your vehicle than you do is best explained by which of the following concepts:
Asymmetric information
Suppose the price of good X increases and consumers purchase more of good Y. Which of the following statements is necessarily true about good Y
Good Y could be a normal or inferior good
If real output in an economy is 1,000 goods per year, the money supply is $300, and each dollar is spent an average of 4 times per year, then according to the quantity equation, the average price level is
1.20
Which of the following bundles could not lie on the same indifference curve with A and B and satisfy the four properties of indifference curves?
3 movies and 3 books
Suppose the United States unexpectedly decided to pay off its debt by printing new money. Which of the following would happen?
All of the above are correct
Transfer payments
All of the above are correct
Which of the following is included in the consumption component of GDP
All of the above are included in the consumption component of GDP
Which of the following is an example of commodity money
The gold standard
The value of Austria's exports minus the value of Austria's imports is called
Austria's net exports.
Each August many high school and college students visit a doctor's office to have a sports physical. If the price of sports physicals rises, what happens in the market for nurses?
Demand increases from D1 to D2
Two economists found empirical evidence that when the price of rice decreased in the Hunan province of China, local residents consumed less rice than before the price decrease. The study provides a real-world example of a(n)
Giffen good
Which of the following is best explained with behavioral economics rather than traditional economics?
How people tend to be overconfident in certain situations
Which of the following causes of unemployment is not associated with a wage rate above the market equilibrium level?
Job Search
Tom is an organic gardener. For several years, he produced only for his own consumption. Last year, he sold his vegetables at a farmer's market. this year, he sold all of his vegetables to a company producing organic vegetable soup. When is the value of Tom's vegetables included in GDP
Only when he sells his vegetables at the farmer's market
Sandra uses her sewing machine, thread, and yards of denim to produce jean skirts. The sewing machine is an example of
Physical capital
When ranking movies by nominal box office receipts, what important fact is overlooked?
Prices, including those for movie tickets, have been rising over time
In addition to the consumer price index, the Bureau of Labor Statistics also calculates the
Producer price index
On a Sunday morning, Tom sold 300 cups of coffee for a total of $750.
The $750 is a nominal variable. The 300 cups of coffee is a real variable.
Which of the following statements best represents economists' beliefs about the bias in the CPI as a measure of the cost of living?
There is still debate among economists on the severity of the CPI bias and what to do about it
Which of the following is correct? Since 1950
U.S. exports and U.S. imports each about tripled.
When the relative price of a good decreases, consumers respond by buying
a larger quantity of that good and a smaller quantity of substitutes for that good.
The buyer runs a risk of being sold a good of low quality when there is
a problem involving hidden characteristics
Factor markets for chocolate bars are influenced by the
a. demand for chocolate bars. b. marginal productivities of labor and capital. c. market prices for final goods and services. d. All of the above are correct (Correct)
Educated people may generate ideas that increase production. These ideas
a. produce a return to society from education that is greater than the return to the individual. b. could justify government subsides for education. c. are external benefits of education. d. All of the above are correct. (CORRECT)
An optimizing consumer will select the consumption bundle in which the marginal rate of substitution
a. is equal to the price of the least-expensive good. b. exceeds the marginal utility of each good by the greatest amount. c. is less than the slope of the budget constraint. d. None of the above is correct. ( Correct)
For purposes of calculating the CPI, the housing category of consumer spending includes the cost of
a. shelter. b. fuel and other utilities. c. household furnishings and operation. d. All of the above are correct. (CORRECT)
According to the neoclassical theory of distribution, the wages paid to workers depend on the
a. supply of labor. b. demand for labor. c. marginal productivity of labor. d. All of the above are correct. (Correct)
If the exchange rate changes from 148 Kazakhstan tenge per dollar to 155 Kazakhstan tenge per dollar, the dollar has
appreciated. Other things the same, it now takes fewer dollars to buy Kazakhstani goods.
Paper dollars
are fiat money and gold coins are commodity money
When one party is better informed about an economic situation than another party, economists describe the problem as one of
asymmetric information
Which of the following is not an example of a principal trying to solve the moral-hazard problem? The principal
calls the agent's references
Frictional unemployment
can be created both by workers quitting to find more suitable jobs and changes in a country's comparative advantages.
According to the quantity theory of money, a 3 percent increase in the money supply
causes the price level to rise by 3 percent.
Which type of money has intrinsic value
commodity money
When prisoners use cigarettes or some other good as money, cigarettes become
commodity money and function as a unit of account
Productivity
explains most of the differences in the standard of living across countries.
Net Exports equal
exports minus imports
Which of the following are human capital and physical capital, respectively?
for an accounting firm: the accountants' knowledge of tax laws and computer software
The invention of the telegraph led to the loss of jobs for those who had delivered mail by horse but created jobs for telegraph operators and delivery persons. This is an example of
frictional unemployment created by sectoral shifts.
Which of the following items is included in U.S. GDP
goods produced by foreign citizens working in the United States
The primary cause of inflation is
growth in the quantity of money.
A firm with a very good product
has more to gain by signaling (advertising) than does a firm with an inferior product
If citizens of a country are not saving much, it is better to
have foreigners invest in the domestic economy than no one at all.
Net capital outflow
is always equal to net exports.
An efficiency wage
is higher than the equilibrium wage for that position and region
The existence of money
makes trade easier
Commodity money is
money with intrinsic value.
Suppose the only two goods that Charlie consumes are wine and cheese. When wine sells for $10 a bottle and cheese sell for $10 a pound, he buys 6 bottles of wine and 4 pounds of cheese - spending his entire income of $100. One day the price of wine falls to $5 a bottle and the price of cheese increases to $20 a pound, while his income does not change. The bundle of wine and cheese that he purchased at the old prices now costs
more than Charlie's income at the new prices
After 1980 in the United States,
national saving fell below investment and net capital outflow was a large negative number.
Suppose that over the past year, the real interest rate was 3 percent and the inflation rate was 1 percent. It follows that
the dollar value of savings increased at 4 percent, and the purchasing power of savings increased at 3 percent.
The consumer price index is subject to substitution bias because
the law of demand applies to most, if not all, goods.
In American politics, we often observe that during a campaign, the Democratic and Republican positions on many issues are similar, which illustrates
the median voter theorem
In which case below does a person's purchasing power from saving increase the most?
the nominal interest rate = 7% and inflation = 2%
When deflation exists,
the real interest rate is greater than the nominal interest rate.
