Econ Mid term
____ 1. Demand curve ____ 2. Quantity demanded ____ 3. Consumer surplus ____ 4. Total consumer surplus A The quantity that buyers are willing and able to buy at a particular price B Measured by the area beneath the demand curve and above the price C The consumer's gain from exchange, or the difference between the maximum price a consumer is willing to pay for a certain quantity and the market price D A function that shows the quantity demanded at different prices
1. D 2. A 3. C 4. B
Trade (exchange) may occur in the absence of production in either of these scenarios:
1.Two individuals have different endowments and the same preferences (tastes). 2.Two individuals have different preferences (tastes) and the same endowments.
____ 13. Surplus ____ 14. Shortage ____ 15. Equilibrium price ____ 16. Equilibrium quantity M A situation in which the quantity demanded is greater than the quantity supplied N The quantity at which the quantity demanded is equal to the quantity supplied O The price at which the quantity demanded is equal to the quantity supplied P A situation in which the quantity supplied is greater than the quantity demanded
13. P 14. M 15. O 16. N
In which year did the UK go off the gold standard?
1931. September 20, 1931.
3. An apple 4. A recipe for apple pie handed down by mothers to their daughters (and fathers to their sons!) 5. A recipe for apple pie on the San Jose Mercury News website accessible only by subscription 6. An apple tree in a public park next to a sign that invites the public to pick apples A A good that is excludable and rival, i.e., a private good. B A good that is nonexcludable and nonrival. i.e., a public good. C A good that is nonexcludable and rival, i.e., a common resource. D A good that is excludable and nonrival, i.e., a club good.
3.A 4.B 5. D 6.C
5. Normal good ____ 6. Inferior good ____ 7. Substitutes ____ 8. Complements E A decrease in the price of one good leads to a decrease in demand for the other good F A good for which demand decreases when income increases G A decrease in the price of one good leads to an increase in demand for the other good H A good for which demand increases when income increases
5. H 6. F 7. E 8. G
____ 9. Supply curve ____ 10. Quantity supplied ____ 11. Producer surplus ____ 12. Total producer surplus I The amount of a good that sellers are willing and able to sell at a particular price J The producer's gain from exchange, or the difference between the market price and the minimum price at which a producer would be willing to sell a particular quantity K A function that shows the quantity supplied at different prices L Measured by the area above the supply curve and below the price
9. K 10. I 11. J 12. L
When the bank was finally wound up, what were depositors paid?
92.5 cents on the dollar
Assume two countries (A and B), each of which can produce two goods (gizmos and widgets). Which statement below is FALSE? A If country A enjoys an absolute advantage in the production of both goods, there cannot be scope for international specialization and exchange B If country A has a comparative advantage in the production of gizmos, it follows that country B has a comparative advantage in the production of widgets.
A
Business fluctuations have been a feature of national economies since at least the A industrial revolution B beginning of the twentieth century C the Great Depression of the 1930s
A
Economic growth that occurs as a result of organizational change—like the development of markets and monetization leading to increased specialization and division of labor—is known as A Smithian growth B Promethean growth
A
Economic growth that occurs as the labor force expands but there is no increase in output per capita, is known as A extensive growth B intensive growth
A
If the average level of prices (as measured by a price index) is rising, nominal GDP would A rise faster than real GDP B rise slower than real GDP C fall
A
If the purchasing power of money rose, the average level of prices would A fall B rise
A
In an hour Amy can pick either two baskets of apples or three baskets of grapes. And in an hour Bob can pick either one basket of apples or one basket of grapes. Both Amy and Bob consume apples and grapes. Who has an absolute advantage in picking apples? A Amy B Bob C neither D both
A
In an hour Amy can pick either two baskets of apples or three baskets of grapes. And in an hour Bob can pick either one basket of apples or one basket of grapes. Both Amy and Bob consume apples and grapes. Choose the correct statement below. A Although Amy is faster than Bob in picking apples and picking grapes, there is scope for specialization and exchange. B Since Amy is faster than Bob in picking apples and picking grapes, there can never be any scope for specialization and exchange
A
In an hour Amy can pick either two baskets of apples or three baskets of grapes. And in an hour Bob can pick either one basket of apples or one basket of grapes. Both Amy and Bob consume apples and grapes. If Amy spends part of her day picking grapes for Bob and Bob spends part of his day picking apples for Amy, A both might be better off B both could never be better off
A
In an hour Amy can pick either two baskets of apples or three baskets of grapes. And in an hour Bob can pick either one basket of apples or one basket of grapes. Both Amy and Bob consume apples and grapes. Who has a comparative advantage in picking grapes? A Amy B Bob C neither D both
A
In an hour Amy can pick either two baskets of apples or three baskets of grapes. And in an hour Bob can pick either one basket of apples or one basket of grapes. Both Amy and Bob consume apples and grapes. Who has an absolute advantage in picking grapes? A Amy B Bob C neither D both
A
Which statement below is FALSE? A A supply curve slopes downward from left to right. B As price rises, quantity supplied increases. C The market supply curve is found by adding horizontally the individual supply curves.
A
Which statement below is FALSE? A. A country's population cannot produce within that country's domestic production possibilities frontier. B A country's population cannot produce beyond that country's domestic production possibilities frontier. C International trade enables a country's population to consume beyond that country's domestic production possibilities frontier.
A
Which statement below is TRUE? A Net exports equal the foreign purchases of domestically produced goods minus the domestic purchases of foreign goods. B Net exports are positive when the balance of trade is in deficit.
A
1. Inflation 2. Inflation rate 3. Real price 4. Velocity of money (v) 5. Deflation 6. Disinflation 7. Money illusion 8 Nominal rate of return 9. Real rate of return 10. Fisher effect 11. Monetizing the debt
A A price that has been corrected for inflation. B A decrease in the average level of prices. C This occurs when people mistake changes in nominal prices for changes in real prices. D The rate of return that does not account for inflation. E The tendency of nominal interest rates to rise with expected inflation rates. F The nominal rate of return minus the inflation rate. G An increase in the average level of prices. H This occurs when the government pays off its debts by printing money. I A reduction in the inflation rate. J The percentage change in the average level of prices (as measured by a price index) over a period of time. K The average number of times a dollar is spent on final goods and services in a year.
1. Saving 2. Investment 3. Time preference 4. Market for loanable funds 5. Financial intermediary 6. Bond 7. Collateral 8. Crowding out 9. Arbitrage 10. Stock 11. Initial public offering (IPO) 12. Owner's equity 13. Leverage ratio 14. Insolvency
A Examples are banks, bond markets, and stock markets that reduce the costs of moving savings from savers to borrowers and investors. B Something of value that by agreement becomes the property of the lender if the borrower defaults. C The buying and selling of equally risky assets, which ensures that equally risky assets earn equal returns. D A sophisticated IOU that documents who owes how much and when payment must be made. E The desire to have goods and services sooner rather than later (all else being equal). F The purchase of new capital goods. G A certificate of ownership in a corporation. H This arises when a firm's liabilities exceed its assets. I The ratio of debt to equity. J This occurs when suppliers of loanable funds (savers) trade with demanders of loanable funds (borrowers). K The value of the asset minus the debt. L The first time a corporation sells stock to the public in order to raise capital. M Income that is not spent on consumption goods. N The decrease in private consumption and investment that occurs when government borrows more.
South Korea has a much higher GDP per person than Ghana, West Africa, because it has institutions that make it in people's self-interest to A Hong Kong B North Korea C Singapore D South Korea
A Hong Kong B North Korea C Singapore D South Korea
1. Economic growth 2. Physical capital 3. Human capital 4. Technological knowledge 5. Institutions 6. Free rider 7. Economies of scale
A Knowledge about how the world works that is used to produce goods and services B The "rules of the game" that structure economic incentives C Someone who consumes a resource without working or contributing to the resource's upkeep D The stock of tools including machines, structures, and equipment E The growth rate of real GDP per capita F The productive knowledge and skills that workers acquire through education, training, and experience G The advantages of large-scale production that reduce average cost as quantity increases
tests your knowledge of patents, copyrights, trademarks, and trade secrets. Identify all those statements below that are TRUE. Choose one or more. A Patents provide a more exclusive right than copyrights. B Patents last longer than copyrights. C Trademarks may last indefinitely. D Firms are not legally prevented from discovering and using one another's trade secrets through reverse engineering.
A Patents provide a more exclusive right than copyrights.. C Trademarks may last indefinitely. D Firms are not legally prevented from discovering and using one another's trade secrets through reverse engineering.
Consider the case where real GDP and population are both growing, and real GDP is growing faster than population. Which statement below is TRUE?
A Real GDP per capita would increase and faster than real GDP. B Real GDP per capita would increase but slower than real GDP. C Real GDP per capita would remain the same. D Real GDP per capita would fall.
1. Unemployed workers 2. Unemployment rate 3. Labor force participation rate 4. Discouraged workers 5. Underemployment rate 6. Frictional unemployment 7. Structural unemployment 8. Median wage 9. Union 10. Employment-at-will doctrine 11. Active labor market policies 12. Cyclical unemployment 13. Natural unemployment rate 14. Baby boomers
A Short-term unemployment caused by the ordinary difficulties of matching employee to employer. B A Bureau of Labor Statistics measure that includes part-time workers who would rather have a full- time position and people who would like to work but have given up looking for a job. C Persistent, long-term unemployment caused by long-lasting shocks or permanent features of an economy that make it more difficult for some workers to find jobs. D Unemployment correlated with the business cycle. E The wage such that one-half of all workers earn wages below the median and one-half of all workers earn wages above the median. F The people born during the high birthrate years, 1946-1964. G This says an employee may quit and an employer may fire an employee at any time and for any reason. H Examples are work tests, job search assistance and job retraining programs that focus on getting unemployed workers back to work. I The rate of structural plus frictional unemployment. J Adults who do not have a job but who are looking for work. K The percentage of adults in the labor force. L An association of workers that bargains collectively with employers over wages, benefits, and working conditions. M Workers who have given up looking for work but who would still like a job. N The percentage of the labor force without a job.
Are people in the U.S. better off when other countries grow rich? A Yes, people in the U.S. are better off. B No, people in the U.S. are worse off.
A Yes, people in the U.S. are better off.
Is population growth good for idea generation? A Yes, population growth is good for idea generation. B No, population growth is bad for idea generation.
A Yes, population growth is good for idea generation. B No, population growth is bad for idea generation.
An intellectual property (e.g., a patented invention or a copyrighted book) is an example of A a club good B a nonrival private good C an excludable public good
A a club good B a nonrival private good C an excludable public good
Increases in technological knowledge probably explain A a large part of why economic growth occurs over time B a small part of why economic growth occurs over time
A a large part of why economic growth occurs over time
Inflation is A always and everywhere a monetary phenomenon B moderate or non-existent under commodity-money standards C both A and B are true
A always and everywhere a monetary phenomenon B moderate or non-existent under commodity-money standards C both A and B are true
Consider the dynamic version of the quantity theory of money. Which variables are exogenous? (Choose one or more.) A The rate of change of the stock of money. B The rate of change of the demand to hold money. C The rate of change of the (exchange) value of money. D The rate of change of the purchasing power of money. E The inflation rate.
A and B
Consider the simple quantity theory of money. Which variables are exogenous? (Choose one or more.) A The stock of money. B The demand to hold money. C The (exchange) value of money. D The purchasing power of money. E The average level of prices
A and B
Which statements below are TRUE? (Choose one or more.) A Adam Smith's account of the division of labor illustrates the inductive method. B David Ricardo's explanation of comparative cost illustrates the deductive method. C Neither statement is true
A and B
Which statements below are TRUE? (Choose one or more.) A At the time that Adam Smith wrote The Wealth of Nations (1776) his views would have been regarded as heterodox. B In the nineteenth century classical political economy was the ruling orthodoxy until the 1870s. C Neither statement is true
A and B
In An Essay on the History of Civil Society (1767), Adam Ferguson famously wrote that "Every step and every movement of the multitude, even in what are termed enlightened ages, are made with equal blindness to the future; and nations stumble upon establishments, which are indeed the result of human action, but not the execution of any human design." Here are four examples of what Ferguson would have called "establishments." Which are "the result of human action, but not the execution of any human design"? (Choose one or more.) A the English language B correctly shelved books in a public library C the schedule of trains on the BART system D the free market E None of the above.
A and D
Financial intermediaries include (choose one or more) A banks B hedge funds C mutual funds D pension funds
A banks B hedge funds C mutual funds D pension funds
If inflation is lower than market agents expected, wealth would be redistributed from A borrowers to lenders B lenders to borrowers
A borrowers to lenders
The natural unemployment rate A changes slowly over time B may change quickly over a matter of months
A changes slowly over time
Dissaving occurs when A consumption is greater than income B income is greater than consumption
A consumption is greater than income
Stock markets (choose one or more) A enable savers to diversify risk B provide an instrument, that is equity, which is liquid for savers C provide an instrument, that is equity, which is a long-term commitment for borrowers D provide thousands of stockholders with the means to exert control over firms by buying and selling stocks
A enable savers to diversify risk B provide an instrument, that is equity, which is liquid for savers C provide an instrument, that is equity, which is a long-term commitment for borrowers D provide thousands of stockholders with the means to exert control over firms by buying and selling stocks
If unemployed people stop looking for work, the labor force participation rate would A fall B rise
A fall
If unemployed people stop looking for work, the unemployment rate would A fall B rise
A fall
Since World War II, the U.S. male labor force participation rate has A fallen B remained stable C risen
A fallen
Ceteris paribus, if you were to own stock in a bank, you would rather that it were A illiquid but not insolvent B insolvent but not illiquid
A illiquid but not insolvent
Which country's economy has not converged with that of the U.S. since 1980? invest in physical capital, human capital, and technological knowledge A invest in physical capital, human capital, and technological knowledge B efficiently organize these resources for production C both A and B
A invest in physical capital, human capital, and technological knowledge B efficiently organize these resources for production C both A and B
What would you expect to shift the demand for loanable funds to the left? (Choose one or more) A investors becoming less optimistic B government withdrawing an investment tax credit C more households taking out home mortgages
A investors becoming less optimistic B government withdrawing an investment tax credit
Interest rates and bond prices move in A opposite directions B the same direction
A opposite directions
Intermediation fails when (choose one or more) A property rights are insecure B interest rates are controlled C lending is politicized and banks are government owned D banks fail and bank panics ensue
A property rights are insecure B interest rates are controlled C lending is politicized and banks are government owned D banks fail and bank panics ensue
Ceteris paribus, the higher the interest rate, A the greater the quantity of loanable funds supplied by savers B the greater the quantity of loanable funds demanded by borrowers
A the greater the quantity of loanable funds supplied by savers
Ceteris paribus, the lower the interest rate, A the greater the quantity of loanable funds supplied by savers B the greater the quantity of loanable funds demanded by borrowers
A the greater the quantity of loanable funds supplied by savers
In the dynamic AD-AS model, the vertical axis measures A the inflation rate B the price level
A the inflation rate
The economist's definition of investment is A the purchase of new capital goods B the transfer of ownership rights of already existing capital
A the purchase of new capital goods
Business fluctuations are sometimes known as (choose one or more) A business cycles B trade cycles C economic fluctuations
A, B, C
Which statements about business fluctuations are true? (Choose one or more.) A Business fluctuations are irregular. B Business fluctuations are unpredictable. C Recessions are characterized by falling output and employment. D Generally speaking, recoveries last longer than recessions.
A, B, C, D
Negative real shocks included (choose one or more) A bank failures that led to a reduction in financial intermediation B the National Industrial Recovery Act (NIRA) and the Agricultural Adjustment Act (AAA), both of 1933, which reduced supply C the Smoot-Hawley Tariff of 1930 that led to foreign retaliation, which created a spiraling decline in world trade, and reduced the scope for exploiting international differences in comparative advantage and lowered productivity D the onset of the so-called Dust Bowl
All
What would you expect to shift the supply of loanable funds to the right? (Choose one or more) A growing life spans B fewer children to feed and clothe now C the expectation that your grown-up children will be less likely to support you in old age
All
Which statements below are TRUE? (Choose one or more) A In the early 1930s, the U.S. money supply fell by about a third. B Currency held by the public rose during this period. C Bank deposits fell during this period. D This monetary contraction was the largest negative shock to aggregate demand in twentieth-century American history.
All
Intellectual creativity may be encouraged in many different ways, and not just through patents and copyrights. Identify all those ways in which either inventions or literary and artistic creativity have been encouraged. Choose one or more. A First mover advantage. B Privately funded research in universities. C Tax-funded research in universities. D Bill & Melinda Gates Foundation. E Pulitzer Prizes
All of the above
During the Great Depression (1929-1940), (choose one or more) A GDP plummeted by 30% B unemployment rates exceeded 20% C the stock market fell to less than a third of its original value D there were two periods of falling GDP—1929-1933 and 1937-1938
All of them
Business fluctuations are A irregular and unpredictable B regular and predictable
An irregular and unpredictable
Economic growth in output per capita, is known as A extensive growth B intensive growth
B
Economic growth that occurs as a result of a growth in the stock of capital per worker likely accompanied by technological innovation, is known as A Smithian growth B Promethean growth
B
If the average level of prices (as measured by a price index) is falling, nominal GDP would A rise B fall faster than real GDP C fall slower than real GDP
B
If the demand to hold money increased, the (exchange) value of money would A fall B rise
B
If the supply of money increased, the average level of prices would A fall B rise
B
In an hour Amy can pick either two baskets of apples or three baskets of grapes. And in an hour Bob can pick either one basket of apples or one basket of grapes. Both Amy and Bob consume apples and grapes. If Amy spends part of her day picking apples for Bob and Bob spends part of his day picking grapes for Amy, A both might be better off B both could never be better off
B
In an hour Amy can pick either two baskets of apples or three baskets of grapes. And in an hour Bob can pick either one basket of apples or one basket of grapes. Both Amy and Bob consume apples and grapes. Who has a comparative advantage in picking apples? A Amy B Bob C neither D both
B
The first country or region to experience the Industrial Revolution was A Belgium and northeastern France in the early nineteenth century B Britain in the second half of the eighteenth century C the United States in the early nineteenth century
B
Which statement below is FALSE? A.Macroeconomics looks at topics like economic growth, money, and the business cycle. B. An analysis of how raising the California sales tax affects the price and output of restaurant meals is principally a topic in macroeconomics. C. Microeconomics looks at topics like consumer behavior and industrial organization.
B
Which statement below is TRUE? (Choose one.) A Changes in endogenous variables are used to explain changes in exogenous variables. B Changes in exogenous variables are used to explain changes in endogenous variables.
B
Which statement below is TRUE? A Government purchases do not include spending on goods and services by local and state governments. B Government purchases do not include unemployment benefits to those actively seeking work. C Government purchases do not include expenditure on diplomatic representation abroad because embassies are located outside of the United States.
B TRUE. Unemployment benefits are a transfer payment and are not paid to labor for its contribution to the current production of goods and services.
Which statement below is TRUE? A Raising the federal minimum wage would likely decrease structural unemployment. B Some frictional unemployment is inevitable.
B Some frictional unemployment is inevitable.
Cowen and Tabarrok (Figure 7.4) highlight two growth miracles and two growth disasters. A The growth miracles are Argentina and Nigeria, the growth disasters are Japan and South Korea. B The growth miracles are Japan and South Korea, the growth disasters are Argentina and Nigeria.
B The growth miracles are Japan and South Korea, the growth disasters are Argentina and Nigeria.
Ceteris paribus, if you were to own stock in a bank, you would rather that it had A a higher leverage ratio B a lower leverage ratio
B a lower leverage ratio
Differences in technological knowledge probably explain B a small fraction of the differences in the wealth of nations at any point in time A a large fraction of the differences in the wealth of nations at any point in time
B a small fraction of the differences in the wealth of nations at any point in time
Cyclical unemployment A falls during a recession and rises during a recovery B falls during a recovery and rises during a recession
B falls during a recovery and rises during a recession
If inflation is higher than market agents expected, wealth would be redistributed from A borrowers to lenders B lenders to borrowers
B lenders to borrowers
Cowen and Tabarrok (Figure 7.7) illustrate the robust empirical truth that corrupt countries have
B lower GDP per capita
Cyclical unemployment A changes slowly over time B may change quickly over a matter of months
B may change quickly over a matter of months
Crowding out occurs when the government borrows A less B more
B more
In The Wealth of Nations Adam Smith described how the manufacture of pins is divided into no fewer than eighteen separate operations, and he explained how this was an example of (choose one)A economies of scale B the division of labor
B the division of labor
The owners of a firm include A the bondholders B the stockholders C both A and B
B the stockholders
In the dynamic AD-AS model, the long-run aggregate supply (LRAS) curve is A horizontal B vertical at the economy's potential growth rate
B vertical at the economy's potential growth rate
Which statement below is TRUE? A Consumption is spending by households on goods and services, and includes purchases of new housing. B Consumption is spending by households on goods and services, and excludes purchases of new housing C Consumption is spending by households on goods and services, and excludes purchases of new housing and consumer durables.
B. Consumption includes household purchases of new consumer durables, which are regarded as consumed in the quarter in which they are purchased. Consumption also includes household purchases of housing services, both the rents paid for the accommodation provided by landlords and the imputed rental value of owner-occupied accommodation. TRUE by definition
Milton Friedman describes an infamous bank run in 1930. The bank was headquartered on Delancey Street in New York City. What was the name of the bank?
Bank of the United States
Who was chairman of the New York Federal Reserve and died in 1928?
Benjamin Strong (1872-1928). He served as Governor of the Federal Reserve Bank of New York for fourteen years until his death in October 1928.
Which statements below are TRUE? (Choose one or both) A Between 1929 and 1933 investment spending fell by nearly 75%. B The U.S. capital stock was lower in 1940 than it had been in 1930.
Both
Which statements below are TRUE? (Choose one or both) A From 1930 to 1932, there were four waves of banking panics. B By 1933, more than 40% of all American banks had failed.
Both
Cowen and Tabarrok explain the Great Depression (1929-1940) with reference to A negative shocks to aggregate demand B negative real shocks C both A and B
C
If the demand curve were to shift to the left and cause the price to fall, the fall in price would A increase the total producer surplus received by sellers of the good B not change the total producer surplus received by sellers of the good C reduce the total producer surplus received by sellers of the good
C
If the supply curve were to shift to the left and cause the price to rise, the rise in price would A increase the total consumer surplus received by buyers of the good B not change the total consumer surplus received by buyers of the good C reduce the total consumer surplus received by buyers of the good
C
In an hour Amy can pick either two baskets of apples or three baskets of grapes. And in an hour Bob can pick either one basket of apples or one basket of grapes. Both Amy and Bob consume apples and grapes. What is Amy's opportunity cost of picking one basket of apples? A three baskets of grapes B two baskets of grapes C one-and-a-half baskets of grapes D two-thirds of a basket of grapes E one basket of grapes
C
International specialization and trade may be explained with reference to A. a difference in comparative advantage between countries B. the existence of increasing returns in production C. both A and B
C
The Great Depression was the title of a book published in 1934 that A reflected an Austrian school perspective B was written by Lionel Robbins C both A and B
C
What is the likely outcome if the instructor were to offer a graded quiz at the beginning of class? Every student in the class would arrive promptly. Fewer students in the class would arrive promptly. More students in the class would arrive promptly. There would be no change in student arrival times.
C
Which is the most volatile category of spending? A consumption B government purchases C investment
C
Which statement below is FALSE? A A demand curve slopes downward from left to right. B As price falls, quantity demanded increases. C The market demand curve is found by adding vertically the individual demand curves.
C
Which statement below is unambiguously a normative statement? Cutting income tax rates for high earners would lower tax revenues. Cutting income tax rates for high earners would encourage them to work harder and would raise tax revenues. High earners deserve to keep more of what they earn.
C
f the average level of prices (as measured by a price index) is rising, nominal GDP would A rise B fall C either A or B
C
Which statement below is TRUE? A If the unemployment rate falls below the natural rate, cyclical unemployment is positive. B If the unemployment rate rises above the natural rate, cyclical unemployment is negative. C If the unemployment rate is at the natural rate, cyclical unemployment is zero.
C If the unemployment rate is at the natural rate, cyclical unemployment is zero.
A economies of scale B international specialization and division of labor C both A and B
C both A and B
We may expect the breakdown of financial intermediation if A the government combines inflation with controls on interest rates B there is hyperinflation C either A or B is true
C either A or B is true
The natural unemployment rate comprises A frictional unemployment B structural unemployment C frictional unemployment plus structural unemployment
C frictional unemployment plus structural unemployment
An idea is an example of a pure public good. In other words, an idea is A excludable and nonrival B excludable and rival C nonexcludable and nonrival D nonexcludable and rival
C nonexcludable and nonrival
Since World War II, the U.S. female labor force participation rate has A fallen B remained stable C risen
C risen
In an hour Amy can pick either two baskets of apples or three baskets of grapes. And in an hour Bob can pick either one basket of apples or one basket of grapes. Both Amy and Bob consume apples and grapes. What is Amy's opportunity cost of picking one basket of grapes? A three baskets of apples B two baskets of apples C one-and-a-half baskets of apples D two-thirds of a basket of apples E one basket of apples
D
What is the opportunity cost of your decision to take this quiz? A. The feeling of relief you will experience when you finish this quiz. B. The grade you will receive from taking this course. C. The score you will receive as a result of taking this quiz. D. What you would have done if you hadn't taken this quiz. E. What you would have done if you weren't registered for this course.
D
Which statement below is TRUE? A Investment is spending on capital equipment. B Investment is spending on capital equipment and inventories. C Investment is spending on capital equipment, inventories, and structures by firms. D Investment is spending on capital equipment, inventories, and structures, and includes purchases of new housing by firms and households.
D
Hans Rosling sets A GDP per capita, real U.S. dollars (2000) on the horizontal axis and infant survival rate per 1,000 live births on the vertical axis B GDP per capita, real U.S. dollars (2000) on the vertical axis and infant survival rate per 1,000 live births on the horizontal axis C life expectancy on the horizontal axis and income per person on the vertical axis D life expectancy on the vertical axis and income per person on the horizontal axis
D life expectancy on the vertical axis and income per person on the horizontal axis
If the average level of prices (as measured by a price index) is falling, nominal GDP would A rise faster than real GDP B rise slower than real GDP C fall D either A or B E either B or C
E
In an hour Amy can pick either two baskets of apples or three baskets of grapes. And in an hour Bob can pick either one basket of apples or one basket of grapes. Both Amy and Bob consume apples and grapes. What is Bob's opportunity cost of picking one basket of apples? A three baskets of grapes B two baskets of grapes C one-and-a-half baskets of grapes D two-thirds of a basket of grapes E one basket of grapes
E
In an hour Amy can pick either two baskets of apples or three baskets of grapes. And in an hour Bob can pick either one basket of apples or one basket of grapes. Both Amy and Bob consume apples and grapes. What is Bob's opportunity cost of picking one basket of grapes? A three baskets of apples B two baskets of apples C one-and-a-half baskets of apples D two-thirds of a basket of apples E one basket of apples
E
If an input price rises, the supply curve shifts to the right
False
If consumers regard Mercedes and BMWs as close substitutes and the price of BMWs rises, the demand curve for Mercedes shifts to the left.
False
If income falls, the demand curve for a normal good shifts to the right.
False
International specialization and trade enables a country's population to produce beyond that country's domestic production possibilities frontier.
False
Now assume that Amy has gotten better at picking apples so that in an hour she can pick either three baskets of apples or three baskets of grapes. And assume that Bob has gotten better at both activities so that in an hour he can either pick either two baskets of apples or two baskets of grapes. Here are three statements, each of which may be true or false. Identify the correct statement(s). A Amy and Bob will continue to specialize and trade to mutual advantage. B Amy is better off than she was before. C Bob is better off than he was before. 1.False 2.A 3.B 4.C
False, C, B
What does Milton Friedman think is the single largest source of instability?
Government
1. Gross domestic product (GDP) 2. GDP per capita 3. Gross national product (GNP) 4. Nominal variables 5. Real variables 6. Recession 7. Business fluctuations (business cycles) 8. Consumption 9. Investment 10. Government purchases 11. Net exports A. A significant, widespread decline in real GDP and employment B Private spending on tools, plant, and equipment used to produce future output C Short-run movements in real GDP around its long-term trend D The value of exports minus the value of imports E Spending by all levels of government on finished goods and services F The market value of all finished goods and services produced by a country's residents, wherever located, in a year G Private spending on finished goods and services H These variables have not been adjusted for changes in prices I GDP divided by population J The market value of all finished goods and services produced within a country in a year K These variables have been adjusted for changes in prices by using the same set of prices in all time periods
J, I, F, H, K, A, C, G, B, E, D
What was the ethnic ownership of this bank?
Jewish
Which famous British economist argued that the quantity of money did not matter?
John Maynard Keynes (1883-1946).
The division of economics into macroeconomics and microeconomics occurred as the consequence of the
Keynesian revolution of the 1930s and 1940s
According to Milton Friedman, what was the purpose of the Federal Reserve System?
Provide additional cash to meet the demands of depositors when a bank run arose.
At which famous British university did he (JMK) teach?
The University of Cambridge.
Did the money supply fall or rise in the U.S. between 1929 and 1933?
The money supply fell.
What did he (JMK) emphasize?
The role of autonomous spending.
"The long-run equilibrium is that unique point where the aggregate-demand curve crosses both the long-run aggregate-supply curve and the short-run aggregate-supply curve." This statement is A true B false
True
"The real growth rate deviates from its long-run rate when the inflation rate deviates from the rate that people expected to prevail." This statement is A true B false
True
Comparative advantage may explain specialization and trade.
True
If buyers expect the price to fall next period, they would be willing to buy fewer units at each price in the current period and the demand curve shifts to the left.
True
If buyers expect the price to rise next period, they would be willing to buy more units at each price in the current period and the demand curve shifts to the right.
True
If consumers regard cars and gas as complements and the price of gas rises, the demand curve for cars shifts to the left.
True
If productive capacity is destroyed in a war, the supply curve shifts to the left
True
If sellers expect the price to fall next period, they would be willing to sell more units at each price in the current period and the supply curve shifts to the right.
True
If sellers expect the price to rise next period, they would be willing to sell fewer units at each price in the current period and the supply curve shifts to the left.
True
International specialization and trade enables a country's population to consume beyond that country's domestic production possibilities frontier.
True
Was the United Kingdom on the gold standard in 1929?
Yes
Was the United States on the gold standard in 1929?
Yes
Does Milton Friedman believe that the quantity of money matters?
Yes, he believes it does matter.
Between 2001 and 2008, which country experienced very rapid hyperinflation?
Zimbabwe
In the dynamic AD-AS model, a decrease in spending growth eventually leads to A a permanent decrease in inflation and a return to the long-run growth rate B a permanent increase in inflation and a return to the long-run growth rate
a permanent decrease in inflation and a return to the long-run growth rate
In the dynamic AD-AS model, an increase in spending growth eventually leads to A a permanent decrease in inflation and a return to the long-run growth rate B a permanent increase in inflation and a return to the long-run growth rate
a permanent increase in inflation and a return to the long-run growth rate
Cowen and Tabarrok set, A GDP per capita, real U.S. dollars (2000) on the horizontal axis and infant survival rate per 1,000 live births on the vertical axis B GDP per capita, real U.S. dollars (2000) on the vertical axis and infant survival rate per 1,000 live births on the horizontal axis C life expectancy on the horizontal axis and income per person on the vertical axis D life expectancy on the vertical axis and income per person on the horizontal axis
b
Generally speaking, A recessions last longer than recoveries B recoveries last longer than recessions
b
We should expect that the natural unemployment rate would rise if A workers become less "picky" about the jobs they take B government extends the period during which people may claim unemployment benefits C government requires the unemployed to purchase health insurance D government makes unemployment benefits liable for tax
b)government extends the period during which people may claim unemployment benefits
We should expect that the natural unemployment rate would fall if A workers become more "picky" about the jobs they take B government shortens the period during which people may claim unemployment benefits C government provides tax-financed health care to the unemployed D government exempts unemployment benefits from tax
b)government shortens the period during which people may claim unemployment benefits
In 1929 the AD curve shifted to the left as the result of (choose one or both) A a tight monetary policy, aimed at limiting a stock market bubble B a fall in stock prices (a wealth shock)
both
Banks lower transaction costs and risks for A borrowers B savers c) both A&B
c) both A&B
Which name explicitly recognizes the importance of markets
catallactics
Money illusion is when people mistake A changes in nominal prices for changes in real prices B changes in real prices for changes in nominal prices
changes in nominal prices for changes in real prices
In the dynamic AD-AS model, a fall in inflationary expectations shifts the SRAS curve A downward B upward
downward
In the dynamic AD-AS model, the aggregate demand (AD) curve slopes A downward from left to right B upward from left to right
downward from left to right
If one economy has an absolute advantage in the production of both goods
each economy specializes in the production of the good in which it has a comparative advantage, output of both goods would increase.
Deflation occurs when the average level of prices A falls B rises
falls
Inflation transfers real resources A from those who hold money to the government B from the government to those who hold money
from those who hold money to the government
Inflation is more volatile and less predictable when the inflation rate is A high B low
high
comparative advantage
if the opportunity cost of producing one good in terms of the other good differs between two countries, there is a basis for specialization and trade.
If each economy has an absolute advantage in the production of one or other good
it specializes in the production of the good in which it has a comparative advantage, output of both goods would increase.
According to Professor Lionel Robbins, an economic problem would arise if there exist
limited means that can be applied to more than one end together with multiple ends that can be ranked in order of importance
From the second half of the eighteenth century until the beginning of the twentieth century, which was the most popular name in English to describe what today we study as economics?
political economy
Changes in the money supply can change real GDP in the A long run B short run
short run
Almost all trade (exchange) occurs as a result of
specialization.
The velocity of money is usually A constant (fixed) B stable and predictable C volatile and unpredictable
stable and predictable
In the dynamic AD-AS model, a rapid and unexpected decrease in spending growth leads to A temporary increases in inflation and real growth rate B temporary decreases in inflation and real growth rate
temporary decreases in inflation and real growth rate
In the dynamic AD-AS model, a rapid and unexpected increase in spending growth leads to A temporary increases in inflation and the real growth rate B temporary decreases in inflation and real growth rate
temporary increases in inflation and the real growth rate
Which measure of inflation means most to U.S. households? A the CPI B the GDP deflator C the PPI
the CPI
The Fisher effect says that the nominal interest rate is equal to A the expected inflation rate minus the equilibrium real interest rate B the expected inflation rate plus the equilibrium real interest rate
the expected inflation rate plus the equilibrium real interest rate
The real rate of return is equal to A the expected inflation rate minus the equilibrium real interest rate B the expected inflation rate plus the equilibrium real interest rate
the nominal rate of return minus the inflation rate
In the dynamic AD-AS model, the horizontal axis measures A the real GDP B the real GDP growth rate
the real GDP growth rate
absolute advantage
the same amount of human effort—produces more in one location than in another.
In the course of two hundred years economics has changed its focus from
the study of wealth to the study of purposeful human action
In the dynamic AD-AS model, a negative real shock shifts the LRAS curve A to the left B to the right
to the left
In the dynamic AD-AS model, an decrease in spending growth shifts the AD curve A to the left B to the right
to the left
In the dynamic AD-AS model, a positive real shock shifts the LRAS curve A to the left B to the right
to the right
In the dynamic AD-AS model, an increase in spending growth shifts the AD curve A downward from left to right B upward from left to right
to the right
If a new technology is adopted, the supply curve shifts to the right
true
If income rises, the demand curve for an inferior good shifts to the left.
true
In the dynamic AD-AS model, a rise in inflationary expectations shifts the SRAS curve A downward B upward
upward
In the dynamic AD-AS model, the short-run aggregate supply (SRAS) curve slopes A downward from left to right B upward from left to right
upward from left to right
Only where one economy has proportionately the same absolute advantage in the production of both goods and thus the slopes of the two PPFs are identical
would there be no differences in comparative advantage and therefore no scope to raise output through specialization and trade.