Econ Questions

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Reducing global carbon omissions is difficult because of the public good nature of the climate change policy that exhibits

Non-rivalry and nonexcludability

from 2005 to 2007, the European Union experienced "wine lakes" a surplus of wine brought about by government policies that encouraged overproduction. Which policy would result in a surplus of wine?

Price floor

Which statement is NOT a key principle of economics

Rational thinking requires perfect info

The classical form of the production function states the output is determined by

Some function of available labor or capital.

Labor productivity is not a major determinant of

The money supply

An example of a natural resource is an untapped vein of platinum

True

Which factor would cause a decrease in the demand for coffee?

a decrease in the price of tea (a substitute for coffee)

which of these would not cause a shift in the aggregate demand curve?

a reduction in raw material prices

which of these is not one of the reasons for phenomenal growth of the us economy over the past century

a reduction to capital-to-labor ratio

what does the 45 degree line in the aggregate expenditures model represent?

a reference line where income equals spending

which statement about markets is correct>

all markets involve a transaction of some type

which person would not be considered employed?

an unpaid employee working 10 hours a week?

which statement best illustrates opportunity costs

as more rice is produced

the international monetary fund was founded

as part of the Bretton Wood agreements

The ___ is the amount by which annual gov spending exceeds tax revenues

budget deficit

if the fed wishes to raise the federal funds rate, how would it accomplish this objective>

by selling bonds, which lowers the price of bonds.

in effect, the phillips curve framework implies that to fight inflationary expectations, policymakers must

cause unemployment

Which of these would NOT cause a shift in the aggregate demand curve?

change in the price level

in 2018, the US ran both a ___ account deficit and a ___ account surplus

current; capital

Which factor may adversely affect the ability of purchasing power parity to hold?

custom duties

when the economy is operating at the natural rate of unemployment ___ unemployment is zero.

cyclical

which event will shift the aggregate demand curve to the right

decrease in taxes

Aggregate____ is the output of goods and services demanded at different price levels

demand

A glut of oil in the world market would likely result in ___ in the US

disinflation

The US gross domestic product is equal to the total market value of all

final goods and services produced by resources in the United States.

the concept of intergenerational imbalance refers to

future generations funding the current generation's benefits

Thomas Malthus beloved that population increased ___ and food resources increased ___.

geometrically; arithmetically

Which expenditure component of GDP tends to be the MOST volatile over time?

gross private domestic investment

suppose that an artist has priced his painting at $150, but it remains unsold. we can conclude that the price of $150 is too

high for this painting and should be lowered

which of these is not a problem for policymakers who want to reduce the national debt

high interest rates make it more difficult to pay down debt

which action would reduce frictional unemployment

holding job fairs

Assume that Bob reads an article for class concerning the US labor market that reports an increase in entrepreneurial activity. To verify this info, he could refer to the

household survey

Hannah is not at work because she broke her leg, but she will return once it heals. She is

in the labor force

As income increases, consumption ____

increases at a slower rate

Which asset is NOT included in M2?

large-denomination time deposits

if a country calculates its real GDP using the year 2012 as its base year, the value of its real GDP will be ____ than its nominal GDP as long as prices have risen since 2012

less than

When the interest rate falls, American bonds become ___ attractive to foreign investors, often leading to a __ in the value of the US dollar in foreign exchange markets

less; decrease

If the economy is currently operating below long-run output, what should the Federal Reserve do?

lower interest rates from their current level

___ are all examples of discretionary spending

national defense, income security, and veteran's benefits

if a short term interest rate becomes larger than long-term interest rates, the yield curve becomes _ sloped, and the chance of a recession becomes __ likely

negatively, more

In the US, social security and medicare are examples of

pay-as-you-go programs

a ____ in the business cycle usually means the economy is operating at its capacity

peak

Free trade is known as a __ game because ___.

positive-sum, both parties to a transaction can achieve positive gains

in the short run, the aggregate supply curve is

positively sloped

an example of a less tangible component of a countrys infrastructure is

property rights

Which activity would not qualify a person as being in the labor force?

reading help-wanted ads

The Federal Reserve will most likely halt its quantitative easing program by

selling assets from its portfolio

An increase in technology:

shifts the PPF curve outward

All of these are considered monetary policy lags EXCEPT ___lag

speculation

which of these are two things people can do with money received as disposable personal income

spend money or put it into savings

David Ricardo

suggested that countries would benefit from trade

over the past 10 years, laptop computer prices have decrease while their quantity has increased. this indicates that

supply has increased more than demand

A perpetuity bond is sold with the following terms: coupon rate = 5% and face value = $100. 5 years after the bond is issued, the market rate of interest on similar bonds is 6%. Which statement accurately describes the situation if the bond is sold the secondary market at that time (five years after its initial issue)?

the bond will sell for about $833.33 in the secondary market

a perpetuity bond is sold with the following termsL coupon rate = 5% and face value = 1000. five years after the bond is issued, the market rate of interest on similar bonds is 6%. which statement accurately describes the situation if the bonds is sold in the secondary bond market at that time>

the bond will sell for about $833.33 in the secondary market

What happens when desired saving exceeds desired investment?

the economy is not in equilibrium and income will fall

what happens when desired savings exceeds desired investment?

the economy is not in equillibrium and income will fall

Monetary targeting is setting a steady growth rate in

the money supply

labor productivity is not a major determinant of

the money supply

the difference between the nominal and real exchange rate is that

the real exchange rate takes relative purchasing power into account, while the nominal rate does not

which of these is not a problem in measuring consumer prices?

the reference period used for the CPI is 1982-1984.

in the market for designer jeans, surplus is transferred from producers to consumers when

there is a shortage of designer jeans.

which term does not mean the same as the other three

tight money

One of the major limits to trade is

transaction costs

A change in the price of a good will cause a change in the quantity supplied

true

Compounding means that growth builds on prior growth

true

Even though recent legislation has slowed the rise in health care costs, the overall cost of Medicare remains unsustainable in the long term

true

The US exports more services than it imports services

true

if an employer uses an escalator clause to determine an employee's raise each year, in an inflationary environment, the employer is more likely than the employee to want to use the personal consumption expenditures prices index in this clause

true

In the market for cable television fewer people are subscribing to cable while the cost of providing cable television has increased. As a result we can expect

unknown change in the equilibrium price but a decrease in the equilibrium quantity of cable television.

Scarcity is best defined as when

unlimited wants exceed limited resources

If the marginal propensity to consume is .65, the spending multiplier is

2.86

if the marginal propensity to consume if .65, the spending multiplier is

2.86

Which of these will not be included in the GDP?

A cruise on the A cruise on a ship registered in Norway

Which one of these would not lead to higher prices?

An increase in the food supply

Imagine two countries with identical endowments of resources. Using all its resources. Broland can produce 5,000 books or 8,000 forks. using the same resources, Nomia can produce 4,000 books or 7,000 forks. Which country has a comparative advantage producing books?

Broland, because it gives up 1.6 forks for each book produced

When the price of running shoes is higher than the market equilibrium price, which of these occurs

Consumer surplus falls, and deadweight loss rises

The broadest measure of inflation is the

GDP deflator

the broadest measure of inflation is the

GDP deflator

Net domestic product measures

GDP minus depreciation

If aggregate expenditures equal $6200 in aggregate income equals $5800, businesses will produce

More, raising both employment and income

GDP per capita is found by dividing GDP by population

True

Government policy to achieve high employment may cause inflation to rise too quickly

True

in the free market, the main signal to the market that pushes prices towards equilibrium comes from

a surplus or shortage of goods available for sale

If a student were not studying economics, he could be doing one of the following: sleeping in (values at $5), playing cards with his friends (which he values at $10), or working (he would have earned an extra $8). The opportunity cost of studying economics is therefore

$10

most trade is based on specialization, according to

competitive advantage

The difference between the demand curve and the market price is called

consumer surplus

other things equal, if US disposable income falls, imports will___and the current account deficit will__

fall, decrease

The Leading Economic Index fell in July and August, rose in September, and fell again in October. Based on this, we should expect a recession in the near future

false

Which activity is an example of a nonmarket transaction?

growing your own food in a vegetable garden

new Keynesian economics critique rational expectations by arguing that short-term wage stickiness is brought about by

imperfect information and efficiency wages

which of these is not a reason the aggregate demand curve is negatively sloped?

income effect

increases in government spending ____ equilibrium income, and increase in taxes ___ equilibrium income

increase; decrease

in the long run, attempts to expand beyond an economy's natural rate of unemployment tend to result in

increased inflation

the study of economics

is about people making decisions regarding their use of scarce resources

If disposable income is $3000 and saving is $1200, how much is the average propensity to consume?

.6

suppose a store sells candy bars for .89 for 1 and 1.5 for two. the marginal cost for the second candy bar is

.61

If the spending multiplier in an economy is 5, what is the corresponding marginal propensity to consume?

.80

If the marginal propensity to consume is .9, what is the size of a multiplier?

10

If the marginal propensity to consume is 0.9, what is the size of the multiplier?

10

The nation of Workovia has a population of 15 mil people, of whom 10 mil are in the labor force and 9 mil are working. Workovia's unemployment rate is

10%

Reducing global carbon emissions is difficult because of the public goods nature of climate change policy that exhibits

nonrivalry and nonexcludability

Demand-pull inflation scenarios took place in the

1960s for the US and from 1985 to 1995 for Japan

How large was the unemployment rate during the great depression?

25%

If your goal was to have the largest amount of money in your bank account as possible in two years, which option would you choose

A beginning deposit of $930, earning 8% per year

the public debt is the

portion of the national debt that is held by individuals, companies, and pension funds, along with foreign entities and foreign governments

Which of these would not cause a shift in the aggregate demand curve

A reduction in the raw material prices

a breakthrough in solar energy research that halves the cost of electricity will

shift the aggregate supply curve to the right

an increase in technology

shifts the production possibilities frontier curve outward

When Mr. Wilson worked full time, he paid a cleaning service to have his house cleaned twice a month. Now that he is retired, Mr. Wilson does his own cleaning. What is the effect on GDP? a.) GDP is unaffected by this change. b.) GDP falls as a result of this change. c.) GDP at first rises but then falls. d.) GDP rises as a result of this change.

B

Two countries specialize in trade based on their comparative advantage

Both countries are able to consume at a point beyond the original PPF

the target federal funds rate is the Fed's primary approach to monetary policy

true

When the economy is operating at the natural rate of unemployment _________ unemployment is zero

Cyclical

Which statement is correct with respect to determining the market price of a product ?

Demand and supply are equally important

the long-run supply curve is

vertical

_________ Is a reduction in the rate of inflation

Disinflation

The balanced budget multiplier is

Equal to one

A change in the quantity of laundry detergent supplied occurs when more sellers enter the laundry detergent market

False

Which statement about economic models is FALSE?

In practice, it is easy for an economist to isolate economic variables

Johnny is 17 and works in his fathers bubblegum store 10 hours a week after school. His father pays him no money but by his video games for him. However, Johnny earns a spot on the high school football team and no longer works in his father store. How is Johnny categorized in the unemployment figures?

Johnny is not part of the labor force

Which statement illustrates what an effective price ceiling does to a market price

Like a helium balloon bumps against a room ceiling, unable to rise to the level to which it would go if it were outside, price ceilings hold price is down below equilibrium.

The change in consumption associated with change in income

Marginal propensity to consume

If the CPI increases from 150 to 153 and a person's monthly retirement benefit has an escalator clause that ties it to the CPI, by how much would the monthly payment increase if the original amount is $750?

$15

Jackie finds a pair of jeans that she likes but the price tag is missing. she is willing to buy them as long as they're not more than $100. the cashier informs Jackie that the price is $72. Jackie buys the jeans, and therefore achieved a consumer surplus of

$28, the difference between what she was willing to pay and the price

The equilibrium price of cocoa beans is $40 per bushel what would be a binding price ceiling?

$30

the equilibrium price of cocoa beans is $40 per bushel. which would be a binding price ceiling

$30

if Kim's salary was $50,000 last year and this year she receives a cost-of-living increase tied to the CPI, what will her salary be this year assuming the CPI has risen from 110 to 114?

$51,818

According to the equation for the Phillips curve, if wages increase by 3% and productivity increases by 5%, then inflation will be

-2%

if the spending multiplier in an economy is 5, what is the corresponding marginal propensity to consume?

.80

How many hours does a person have to work for pay to be counted as employed?

1 hour a week

which statements is/are true I. the crowding-out effect can be mitigated if the funds from deficit spending are used for public investment

1 only

For which growth rate with the rule of 70 be most accurate

1% (smallest choice)

Suppose the market basket of goods and services cost 3,500 in 1996 but today cost 4,250. Using 1996 as the base year, the consumer price index for today is

121.4

If nominal GDP in 2014 is $20,000 billion well real GDP is $16,000 billion, then the GDP inflator in 2014 is

125

if nominal gdp in 2014 is $20,000 billion while real GDp is $16,000 then the GDP deflator in 2014 is

125

A bank has $50,000 in deposits from its checking account customers and loans of $49,000. Of the $49,000 loaned out, $43,000 had remained in the checking accounts of the loan recipients but now has been withdrawn as cash by the loan recipients. The bank had $50,000 cash on hand prior to the remaining loan proceeds being converted to cash, and the reserve requirement is 25%. The reserve ratio for this bank after the remaining loan proceeds are converted to cash is___, and it ___meeting its reserve requirement

14%; is not

If the price of shoes is $40 per pair the quantity supplied will be ______ pairs of shoes

20

a bank has 50,000 in checking accounts deposits and loans of 49,000. of the 49,000 loaned, 43,000 remains in the checking accounts of the loan recipients. the bank has 50,000 cash on hand and the reserve requirement is 25%. the amount of its required reserves equals

23,250

If a country's national debt is $50 billion, of which $10 billion is held by gov agencies, $15 billion is held by foreign entities, and $25 billion is held by domestic citizens, what portion of the national debt is externally held?

30%

if the reserve requirement is 25% a new deposit of 1,000 leads to a potential increase in the money supply of

4,000

At equilibrium, if spending increases by $1200 and the corresponding increase in income is $1500, what is the multiplier

5

A bank has $50,000 in deposits from its checking account customers and loans of $49000. Of the $49000 loaned out, $43000 remains in the checking accounts of the loan recipients. The bank has $50000 cash on hand, and the reserve requirement is 25%. The reserve ratio for this bank is__and it___meeting its reserve requirement

53.76%; is

The typical length of a recession has been ___ months and is usually __ than the subsequent period of expansion

8 to 18; shorter

Karl's keychain sold 900,000 keychains. at the end of the business year, the company's inventory was 6,000 keychains. how much did Karl's output contribute to GDP in 2015???

896,000

if gdp was 10 trillion in 2001 and the gdp deflator was 200 in 2000 and 110 in 2001, what was real gdp??

9.09 trillion

which of these is likely to have the smallest impact on a country's growth in real GDP per capita?

A 10% growth in population

Which of these is likely to have the smallest impact on a country's growth in real GDP per capita

A 10% growth in the population

Which of these would not shift the investment demand schedule?

A change in interest rates

Which item is most likely an inferior good

A city bus ticket

Suppose that Japan is a nation of savers with a marginal propensity to consume of .6 and that the US is a nation of spenders with a marginal propensity to consume of .9. Which statement is correct?

A small increase in spending will have a more powerful effect in starting a recovery in the US than in Japan

Which circumstance will cause a decrease in demand

An increase in the price of a complementary good

If demand for a product rises, what happens to consumer surplus, assuming supply does not change and the market sells at the equilibrium price?

Consumer surplus will be larger after the increase in demand

Rising cotton prices have for school tours to switch from fabric to linen. what happened to consumer surplus in the market for linen, assuming supply held steady in the market sells at the equilibrium price?

Consumer surplus will be larger after the increase in demand

Do you creasing the accessibility to college in order to final workers into the workforce faster Will

Decreased productivity of the economy

If the cost of a typical market basket is 420 18, for 10 in 2019, and 415 in 2020, then during this. The economy is undergoing

Disinflation

What is a difference between the typical structure of a retirement savings account (401k) and an individual retirement arrangement (IRA)?

Employers often match 401k contribution, but they do not match IRA contributions

Catherine spends hours each day tending to her garden landscaping, and sweeping leaves from her cul-de-sac. Prospective homebuyers increase their desire to live on the street, increasing all home values on the street. Catherine's neighbors are benefiting from

External benefit

Which of these is not a problem and using the GDP to measure standards of living

Failure to include exports and imports

A market is a physical location that enables buyers and sellers to interact and transact with one another

False

An increase in interest rates will lead to an increase in aggregate demand

False

Country X is practicing expansionary monetary policy. This drives down the price of its imports and drives up the price of its exports

False

During the 2007-2009 recession the Federal Reserve was not able to counteract any of the effects of a falling money multiplier on teh economy

False

Economic models must fully reflect reality

False

If the reserve requirement is 1%, a $10,000 decrease in deposits means that the actual money supply will decrease by more than $1 million

False

Saving is 0 when the economy is in macroeconomic equilibrium in the simple Keynesian model

False

Since 2008, females have had higher unemployment rate than males.

False

Supply-side fiscal policies have the disadvantage of setting up a tradeoff between low inflation and low unemployment rates

False

Suppose the economy is at full employment and companies suddenly increase their level of investment. A short-run increase in output will be followed by a reduction in output, resulting in an overall decrease in output

False

Surpluses, but not shortages, can exist when a market is in equilibrium

False

The Index of Economic Freedom shows that countries with the fewest economic freedoms have the highest per capita GDP

False

The balanced budget multiplier changes according to the values of the marginal propensity to consume and the marginal propensity to save

False

The consumer price index is a measure of the changes in the cost of production

False

The multiplier effect relates to change it in savings to the resulting changing investment.

False

The national income and product accounts have been used to track the United States economic performance since the Civil War

False

The nonaccelerating inflation rate of unemployment does not change over time

False

Whenever a borrower defaults on a bank loan, the depositor who made those funds available lose their money

False

The __ is/are equal to the total market value of all final goods and services produced in the US

GDP

Which statement is/are true?

I only (if cyclical unemployment is 0%, then the unemployment rate equals the natural rate of unemployment.)

In the market for gasoline, more consumers will begin driving at the onset of nicer weather, while the price of public transportation, a substitute, rises the demand for gasoline should

Increase

Suppose a country faces the following situation: inflation rate =4%; target inflation rate = 2%; current federal funds rate = 3%; and current GDP 4% below full-employment GDP. Which statement correctly describes monetary policy actions that would be recommended according to inflation targeting and the Taylor rule?

Inflation targeting would recommend contractionary policy; the Taylor rule would recommend expansionary policy

If an economy is on the vertical portion of the aggregate supply curve, then it

Is at full employment

Which scenario can occur when specialization in tasks is coupled with trade?

It can lead to gains for all parties

It's government spending falls and taxes rise, both will ________, but the effects of _________

Lower equilibrium income; government spending will be larger

Which statement regarding discretionary and mandatory spending is correct?

Mandatory spending may act as an automatic stabilizing force in the macro economy

If short-term interest rates become larger than long-term interest rates, the yield curve becomes ________ sloped, and the chance of a recession becomes __________ likely

Negatively; more

Jamestown offers a free community bus service to anyone wishing to use it. Is this service a public good?

No, it is not a public good because there are only a limited number of seats on each bus, which can fill up.

Imagine two countries with identical endowments of resources. Using all its resources, Broland can produce 5,000 books or 8,000 forks. Using the same resources, Nomia could produce 4,000 books or 7,000 forks. Which country has a comparative advantage producing forks?

Nomia because it gives up .57 book for each fork produced

Which situation indicates that total output in a country has grown the most when the starting output is the same in all situations?

Output per worker grows by 10% while the labor force grows by 10%

The introduction of the tablet computer to the US economy would best be represented on a production possibilities frontier as a ____ the PPF

Outward shift of

___ occurs when goods are produced at the lowest possible cost, and ___ occurs when individuals who desire a product the most receive those goods and services

Production efficiency; allocative efficiency

Which would best represent a normative question?

Should the minimum age to collect Social Security benefits be raised?

What is the main claim of the aggregate expenditures model?

Spending will generate income, which allows for more spending.

Which transaction would not be included in the GDP calculation of a country

Supplemental income paid by the government to a person with a disability

Suppose the Federal Reserve raises interest rates. Which situation would MOST likely trigger such a policy move?

The US dollar has depreciated, and inflation was high

Which scenario does not fall under the category of microeconomics?

The cost-of-living rise due to the rising housing and food prices

Suppose the national activity index of the federal reserve bank of Chicago dropped to -.83 this month after being above + .36 for the previous three months. This movement in the index indicates

The economy has probably moved into a recession

What happens when desired saving exceeds desired investment?

The economy is not in equilibrium and income will fall

What happens when desired savings exceeds desired investment?

The economy is not in equilibrium and income will fall

Which of these is NOT a concern raised by critics of the government's extensive policy response to the 2007-2009 recession?

The value of US treasury bonds may eventually become worthless as a default risk increases

In which situation is a country LEAST likely to be producing on its production possibilities curve?

There are legal disputes over the ownership of 15% of the factory buildings in the country

A change in the price of a good will cause a change in the quantity supplied

True

A country is said to have an absolute advantage if it can produce more of a good than another country can

True

If a country's rate of population growth increases faster than its real GDP growth, the country's standard of living will decline

True

If foreign countries abandoned the use of the dollar as their only form of legal currency, the US money multiplier would likely increase

True

Nonprice factors that affect demand include income, prices of related goods, the number of buyers, and expectations about future prices, income, and product availability

True

Producer surplus is defined as the gap between the supply curve and the market price

True

The legal enforcement of contract rates is an important component of intangible infrastructure that promote economic growth.

True

The national income and product accounts are really scored a way to ensure the accurate economic information is readily available

True

The total of disposable income must be either spent or saved

True

Thomas Malthus thought that world starvation was inevitable

True

Whispering Valley Furniture hires 5 employees working 8 hours each to produce 80 rocking chairs. Which companys workers are more productive?

Whispering Valley Furnitures workers are more productive

the gold standard was characterized by all these EXCEPT

a system that tied interest rates to exchange rates

Gross Domestic Product is a measure of

a.) an economy's total output

If banks increase excess reserves to increase their ability to absorb a higher rate of defaults, the __ multiplier will __

actual; fall

prices

allow sellers to determine what goods to sell, help buyers find possible substitute goods, and contain info useful for all people involved in a transaction

the maximum amount of a good that may be imported during a specified period of time is called

an import quota

An economy is expected to produce higher profits for business owners at the same time that the country's stock market surges. What changes can be expected in the country's market for loanable funds?

an increase in demand and a decrease in supply

Which of these will shift the short-run aggregate supply curve to the right?

an increase in immigration from other countries

if there is excess demand for a currency, the currency will

appreciate

What are the determinants of short-run aggregate supply?

changes in input prices, taxes, and business and inflationary expectations

according to a cyclically balanced budget, what type of fiscal policies should be used during periods of economic expansion?

contractionary fiscal policy to generate a budget surplus

to counteract a positive demand shock, the federal reserve uses ___ monetary policy, which ___

contractionary; reduces both output and the price level

A solution to the simultaneous emergence of deflation and unemployment is to use policies that shift the aggregate

demand curve to the right

when the increase in price goes from 5% to 2% this is referred to as

disinflation

changes in taxes first cause changes in ____, and thus the government tax multiplier is ___ than the government spending multiplier

disposable income; smaller

with everything else held constant, if 5% of those considered to be frictionally unemployed found work while the number of people considered rot be structurally unemployed increased by 5%, the natural rate of unemployment

does not change

Thelma grows carrots in her garden, but she needs a winter coat. John has an extra coat he does not need but would like to bake a carrot cake. The two find each other and make an exchange. This situation is called the

double coincidence of wants

thelma grows carrots in her garden, but she needs a winter coat. John has an extra coat he does not need but would like to bake a carrot cake. the two find each other and make an e xchange. this situation is called the

double coincidence of wants

which effect does not deal with macroeconomics

effect of Walmart's pricing policies on consumers

Gov funding of Los Alamos National Labs is an example of the gov acting in its role to promote economic growth by

enhancing physical and human capital

Total surplus is maximized when the price is ___ the equilibrium price.

exactly at

which policy tends to be favored most by politicians seeking to be reelected

expansionary fiscal policy such as lower tax rates

in a two-country, two-good model, the

exports of one country must equal the imports of the other country

Kathryn spends hours each day tending to her gardens and landscaping, and sweeping leaves from her cul-de-sac. Prospective homebuyers increase their desire to live on this street, increasing all home values of the street. kathryn's neighbors are benefiting from an

external benefit

one way a stable financial system supports economic growth is that it

facilitates the movement of capital from savings to investment

"the economic wealth of this country was built..." this statement indicates that its author

fails to understand that all voluntary trades benefit both parties involved

assume taxes increase by $200 and the marginal propensity to consume is 0.75. equillibrium income would be likely to

fall by 600

Kim recently purchased a perpetual bond for $1000. The bond pays $50 in interest per year. If market interest rates rise to 7% after her purchase, the price of the bond

falls to $714

For calculations of employee compensation in the national income and product accounts, non monetary benefits, such as in-kind benefits, are excluded

false

The most common type of short-term debt is college loans

false

a microprocessor purchased by Dell is an example of a final good

false

about 10% of US dollars are held outside the US

false

an increase in interest rates will lead to an increase in aggregate demand

false

annually balancing the federal budget has been the prevailing approach since the 1930s

false

if Rodrigo writes a 1,000 check t his landlord and his landlord deposits that money into his or her bank, the money supply can increase by the amount of that check times the money multiplier

false

if a $1000 bond is issued with a coupon rate of 12%, the bondholder will receive $12 per year for the life of the bond

false

if consumer surplus is $6 million and producer surplus is $4 million, then we know that deadweight loss is $2 million

false

in Keynesian macroeconomic equilibrium, there are pressures on the economy to move to a different income level

false

in the US the president, senate, and the chairperson of the fed must agree on spending and tax policies

false

in the balance of payments accounts, the current account includes the purchase and sale of foreign currency

false

increased trade and globalization are both beneficial for all domestic workers

false

it is possible for the fed to change the money supply without influencing the interest rate or influence the interest rate without impacting the money supply.

false

market failure occurs only when a market completely stops conducting business

false

over the past few decades, net exports in the US have been a positive percentage of GDP

false

savings deposits are included in M1

false

spending money on research and development hurts a national economy because it increases the average cost of all products

false

stocks and bonds are the most liquid assets

false

the 2007-2009 recession was not as severe as the previous two recessions, in 1991 and 2001

false

the full employment level is greater than the natural rate of unemployment

false

the law of supply states that as the price of a good increase, quantity supplied decreases, ceteris paribus

false

the law of supply states that if prices fall, consumers will purchase fewer products in the market

false

the long-run aggregate supply curve is vertical because of the assumption that all variables are fixed in the long run

false

there is a positive relationship between bond prices and interest rates

false

today, monetary policies are relatively unlikely to be reinforced because of the flexible exchange rate system

false

when aggregate prices rise, US goods become more expensive relative to goods from others countries, which leads to an increase in exports

false

which statement is generally NOT true with regard to the effect of trade on wages in developing countries?

foreign companies tend to reduce the overall number of jobs available in developing countries

Joan is trying to gather information on the membership at her Zen Center. She estimates that it will cost around $1,000 to gather the information but expects the information to lead to increased membership revenue of $1,100. Based on this information, Joan should

gather the information since the net gain will be $100

one of the major limitations of supply side fiscal policies is that they

generally take longer to impact the economy than policies targeting aggregate demand

One of the implications of the supply and demand model is that

government action is not necessary for a market to achieve equilibrium

the efficiency wage theory states that by paying their employees more than the market clearing wage, employers hope to

improve employee morale

Which factor poses the smallest problem with managing the national debt?

increase in foreign individuals and governments holding US dollars in reserve

Increases in gov spending ___ equilibrium income, and increases in taxes ___ equilibrium income

increase; decrease

The largest source of federal gov revenues is ___ taxes

individual income

In Productovia, aggregate demand increases and aggregate supply decreases. Based on the shifts of these 2 curves, which of these is a likely outcome?

inflation

Unanticipated ___ is detrimental to economic growth

inflation or deflation

the twin perils of the modern macro economy are said to be

inflation unemployment

the spending reduction necessary to bring an overheated economy back to full employment is called the

inflationary gap

In Sep. 2013, the Federal Open Market Committee said it would wait for more evidence that progress had been made on the economic recovery before it cut back on open market purchases. The Bureau of Economic Analysis did not release its advanced estimate of the 3rd quarter's GDP growth until a month after the quarter ended. The second estimate was released 2 months after the quarter ended, and a 3rd revised estimate was released about 3 months after the quarter ended. This wait for accurate data to be collected is known as the ___lag

information lag

The price of a bond is equal to

interest payment divided by yield

the price of a bond is equal to

interest payment divided by yield

the effects of expansionary fiscal and monetary policies differ under a flexible exchange rate system because they have different effects on

interest rates

the costs of cyclical unemployment can be minimized by

keeping the economy on a steady,low-inflationary growth path

a stronger dollar will shift the US aggregate demand curve to the ___ and ____ output demanded

left; decrease

Some analyst blame the last economic crisis on Federal Reserve policy. They argue that

low interest rates encouraged excessive mortgage borrowing, leading to the housing bubble

some analyst blame the financial crisis of 2007-2009 on the Fed Reserve policy. they argue that

low interest rates encouraged excessive mortgage borrowing, leading to the housing bubble

consider the market for new homes, ceteris paribus, which event will cause consumer surplus to increase, assuming the market sells at the equilibrium prices?

low mortgage interest rates provide an incentive for potential homeowners to buy now

if a price floor is set above the equilibrium price in the market, consumer surplus will be

lower than it would be without the price floor

According to the Taylor rule, the more GDP falls below potential GDP, other things equal, the

lower the federal funds target rate

Student loans funded by the gov typically offer___interest rates than similar bank loans and ___

lower; can be paid back later

if mangos were widely accepted for purposes of exchange

mangos would be money

Physical capital includes

manufactured products that are used to produce other goods and services

The extra cost associated with undertaking some action is the a. marginal benefit. b. marginal cost. c. total net loss. d. total loss. e. total cost.

marginal cost

Jamestown offers a free community bus service to anyone wishing to use it. is this service a public good>

no, it is not a public good because there are only a limited number of seats on each bus, which can fill up

The introduction of the tablet computer to the US economy would BEST be represented on a production possibilities frontier (PPF) as an ___ outward shift of the PPF

outward shift of

the introduction of the tablet computer to the US economy would best be represented on a production possibilities fronton as a ____ the PPF

outward shift of

One argument against using taxation to pay off the public debt is that it will redistribute wealth from

poorer people who do not own bonds to richer bondholders

one argument against using taxation to pay off the public debt is that it will redistribute wealth from

poorer people who do not own bonds to richer bondholders

according to Malthus, what part of the economy might increase at a rate such that the data would show an increase from 1000 t0 2000 to 4000 to 16000?

population

which is not a purpose that prices play in a market?

prices rarely change, which allows markets to be more stable

a country has an absolute advantage in the production of a good if it can ___ of the good than another country

produce more

Actions taken by the European Central Bank to address the European Union's financial crisis from 2009 to 2013 include all of these EXCEPT

reducing taxes to provide stimulus packages

if firms' product demand increase, then the demand for loanable funds will shift to the ___ and the real interest rate will ___

right; increase

if national incomes of foreign countries fall at the same time the dollar appreciates, then in the US, the aggregate demand curve

shifts to the left

if a country's currency appreciates, what impact will it have on aggregate demand or aggregate supply?

short-run aggregate supply will rise due to lower prices on imported inputs

The Taylor rule

targets the federal funds rate

which assumption is not a problem related to using the CPI to accurately state the rate of inflation?

the CPI does not deal with producer prices

the sum of the balance of trade, the balance of income, and net transfers is

the current account

In a global economy, a problem with using expansionary fiscal and monetary policies to fix the problems in our country is that they can lead to retaliatory actions by other nations

true

One difficulty with the infant industry arrangement is deciding when to wean the firm off protection

true

The federal reserve risks aborting a recovery if it halts its quantitative easing programs too soon

true

When the economy booms, tax revenues rise faster than income

true

a price floor is binding if it is set above the market price

true

a rise in real GDP is associated with increased employment

true

barriers to free trade create inefficiencies in the allocation of foreign resources

true

discretionary spending by the federal gov must work its way through appropriations process of congress each year

true

environmental protection typically improves when a country's economy grows

true

human capital can increase by providing more educational opportunities

true

if a person borrows 2,000 at 5% interest and never makes any payments, the loan balance will be 2,205 after two years

true

if the economy is in a jobless recovery, output grows with little growth in employment

true

it can be said that macroeconomics was born during the Great Depression

true

leverage occurs when investors borrow money at low interest rates to purchase investments that may provide higher rates of return

true

macroeconomics focuses on issues such as job growth, economic growth, and inflation rates

true

money leakage make it more difficult to use monetary policy to putt the economy our of a recession

true

the fed works independently of political parties

true

the national income and product accounts are released quarterly to ensure that accurate economic information is readily available

true

the recessionary gap is equal to the GDP gap divided by the multiplier

true

the rule of 70 is fairly accurate for small growth rates

true

the rule of 70 states that the number of years required for a value (such as a nations GDP) to double in size is 70/ by the growth rate

true

thomas malthus thought that world starvation was inevitable

true

when a scarce good or resource is consumed by the person who does not value it most, economists refer to the situation as a misallocation of resources

true

when the OMC buys $1 million worth of bonds, $1 million of reserves is instantly put into the banking system

true

About ___ of US currency is held outside the US

two-thirds

In the market for electric vehicles (EVs), more vehicle manufacturers are releasing electric models at the same time that consumer preferences are changing toward EVs. As a result, we can expect an

unknown change in the equilibrium price but an increase in the equilibrium quantity of EVs

which is not a basic economic question that societies must answer?

why are these goods and services being produced?


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