Final Exam ECON 104

Who was the chair of the Federal Reserve Board of Governors that raised interest rates to 20% in the early 1980s to try and tame inflation? a. Janet Yellen b. Paul Volcker c. Ben Bernanke d. Alan Greenspan e. Ronald Reagan

B

If an economy is currently at a point where Y=AE, what could cause it to move to a higher AE and Y, but still equal. a. The price level in the United States rises relative to the price level in other countries. b. Household wealth declines. c. Congress passes investment tax incentives. d. The interest rate rises. e. B & D both would move to the new point.

C

An increase in the price level will: a. Shift the AD curve to the left b. Shift the SRAS curve to the right c. Shift the AE line up d. Shift the AE line down e. None of the above.

D

Which of the following ethnic groups, on average, have a higher unemployment rate month-to-month? a. Asians b. Whites c. Hispanics d. African Americans E. It varies significantly from month to month

D

Which type of unemployment is most often associated with long-term unemployment? a. frictional unemployment b. cyclical unemployment c. seasonal unemployment d. structural unemployment

D

The percent increase in the CPI from one year to the next is one way to measure the: a. GDP deflator. b. expected inflation rate c. nominal interest rate. d. real interest rate e. actual inflation rate

E

real wage formula

nominal wage/CPI x 100

Holding all else constant, if the economy's autonomous consumption increases, the aggregate expenditure function will: a. Shift upwards b. Become Flatter c. Shift Downwards d. Become Steeper e. None of the above

A

If the inflation rate is 6 percent and the nominal interest rate is 4 percent, then the real interest rate is: a. 2% b. -2% c. 1.5% d. -1.5% e. 0.67%

B

Per-capita Means

Per Person

Inflation Formula (%)

(CPI2-CPI1/CPI1) * 100

From 1960 to 2000, the labor force participation rate (LFPR) in the US increased from around 59% to 67%. The reason we saw this increase in the LFPR was: a. women entering the workforce at a higher rate than previous years. b. baby boomers being born and entering the labor force. c. a recovery in the labor markets from the downfall during WWII d. a change in the way the government calculated the LFPR. e. C & D are both correct.

A

The consumer price index is the: a. average of the prices of the goods and services purchased by a typical urban family of four. b. cost of a market basket of goods and services typically consumed in the current period. c. average of the prices of new final goods and services produced in the economy over a period of time. d. cost of a market basket of goods and services typically consumed in the base year.

A

If NGDP and RGDP in 1987 are $27,514 and $22,548 respectively, we know that: a. The inflation rate, as measured by the GDP Deflator, in 1987 is equal to 22.02% b. The inflation rate, as measured by the GDP Deflator, between the base year and 1987 is equal to 22.02% c. The inflation rate, as measured by the GDP Deflator, in 1987 is equal to 122.02% d. The inflation rate, as measured by the GDP Deflator, between the base year and 1987 is equal to 122.02% e. None of the above is correct.

B

In class, we created a Trade Chart where the last line showed the Gains from Trade Agreement. In order to show our hypothesis that everyone can be at least as well off when they specialize and trade, that last row must: a. have all values greater than zero. b. have all values great than or equal to zero. c. be what economists consider a fair trade. d. have at least 3 numbers greater than zero. The other can be negative. e. have all values less than zero.

B

The percentage change in real GDP is one way to measure: a. the inflation rate b. the real growth rate c. the labor force participation rate d. the unemployment rate

B

Holding all else constant, which of the following would cause the supply of hamburgers in Pennsylvania to decrease? a. A decrease in the price of hamburgers. b. An increase in the price of hamburgers. c. A disease that killed many cows in Pennsylvania. d. None of the above. e. A & C only

C

A parallel shift to the right in a linear production possibilities frontier: a. represents an increase in the maximum attainable amount of production of both goods. b. does not change the opportunity cost of either good. c. can be caused by an increase in immigrant labor. d. All of the above e. a & c only.

D

GDP Deflator Formula

(Nominal GDP/Real GDP) x 100

How do you solve for the real average hourly wage, in "base-year dollars"

(Nominal wage/CPI of that year) * 100

current unemployment rate

3.7%

A movement up along the supply curve could happen because of: a. an increase in price. b. a decrease in price. c. an increase in the cost of an input d. a decrease in the cost of an input e. None of the above.

A

Holding all else constant, decreases in animal spirts will make ______________ shift to the_________? a. aggregate demand; left b. aggregate demand; right c. short-run aggregate supply; left d. short-run aggregate supply; right e. long-run aggregate supply; right

A

Holding all else constant, which of the following would cause the quantity demanded for oranges in Pennsylvania to increase? a. A decrease in the price of oranges. b. An increase in the price of oranges. c. A hurricane in Florida. d. B & C e. None of the above.

A

If the United States lifts the embargo on Cuban products, what will happen in the U.S. market for Cuban cigars, holding all else equal? a. The supply curve will shift to the right. b. The demand curve will shift to the left. c. The supply curve will shift to the left. d. The demand curve will shift to the right. e. Both A & D

A

If, due to a recession, foreign workers begin to leave the United States to search for temporary work in their home countries until the recession has ended, this will a. shift the short-run aggregate supply curve of the home country to the right. b. move the home country's economy down along a stationary short-run aggregate supply curve. c. move the home country's economy up along a stationary short-run aggregate supply curve. d. shift the short-run aggregate supply curve of the home country to the left.

A

If, due to a recession, foreign workers begin to leave the United States to search for temporary work in their home countries until the recession has ended, this will... a. shift the short-run aggregate supply curve of the home country to the right. b. move the home country's economy down along a stationary short-run aggregate supply curve. c. move the home country's economy up along a stationary short-run aggregate supply curve. d. shift the short-run aggregate supply curve of the home country to the left.

A

In what historical period did the United States experience prolonged (more than 2 years in a row) deflation? a. The Great Depression b. The Great Recession c. The early 1980's d. Both A & B e. None of the above

A

The production possibilities frontier model shows that: a. if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good. b. if consumers decide to buy more of a product, its price will increase. c. economic growth can only be achieved by free market economies. d. a market economy is more efficient in producing goods and services than is a centrally planned economy. e. None of the above.

A

Which of the following economists is credited with being one of the first to estimate GDP? a. Simon Kuznets b. Richard Thaler c. Martin Feldstein d. Paul Krugman e. Richard Freeman

A

Which of the following historical figure is credited with trying to get stay-at-home moms' value to be added to GDP? a. Simon Kuznets b. John Maynard Keynes c. Herbert Hoover d. Paul Krugman e. Janet Yellen

A

Which of the following topics are covered in macroeconomics? a. Unemployment b. A firm's pricing strategy c. The government taxing cigarettes d. All of the above e. a & c only

A

Which of the following would be a consequence of substitution bias in the CPI? a. Businesses would overcompensate employees for inflation when giving cost of living raises. b. The inflation rate based on the CPI would underestimate the true level of inflation. c. Social Security payments would not adequately compensate retired workers for inflation. d. Judges would award child support payments that would not adequately keep up with the true cost of inflation. e. None of the above would be a consequence of substitution bias in the CPI.

A

In the United States, which government agency compiles the data needed to calculate GDP? a. Bureau of Labor Statistics (BLS) b. Bureau of Economic Analysis (BEA) c. National Bureau of Economic Research (NBER) d. The US Treasury e. The Federal Reserve Bank of St. Louis

B

The Jobs Report, which includes the household survey and the establishment survey, comes out the ______________ with a __________ lag. a. second Friday of the month; one month b. first Friday of the month; one month c. first day of the month; two month d. last day of the month; one month e. first Friday of the month; two month

B

The income effect of a price change refers to the impact of a change in a. demand when income changes. b. the price of a good on a consumer's purchasing power. c. income on the price of a good. d. the quantity demanded when income changes.

B

The natural rate of unemployment tends to be higher when: a. the government get rid of the minimum wage. b. the economy is rapidly advancing with new technologies. c. unemployment insurance benefits are paid for fewer weeks. d. labor unions are less effective

B

_____________ analysis is concerned with what ought to be, and _____________ analysis is concerned with what is. Economics is about ___________ analysis, which measures the costs and benefits of different courses of action. a. Positive; normative; positive b. Normative; positive; positive c. Positive; normative; normative d. Normative; positive; normative

B

An "automatic mechanism" in the economy brings the AD/AS model back to equilibrium by shifting the _____________ back to equilibrium. a. aggregate demand curve b. long-run aggregate supply curve c. short-run aggregate supply curve. d. it depends on if the initial shock was a demand or supply shock.

C

If an economy experiences unemployment, we would see: a. the PPF shift inward. b. the PPF shift outward. c. the PPF not shift but production fall inside the PPF. d. the PPF not shift but production fall outside the PPF.

C

If real GDP has fallen, we can say with certainty that: a. both prices and production have fallen. b. prices have fallen. c. production has fallen. d. prices have risen and production has fallen. e. None of the above can be said with certainty.

C

Specializing in the production of a good or service in which one has a comparative advantage enables a country to do which of the following? a. never have to engage in trade with other nations b. increase the variety of products that it can produce with a decrease in resources c. consume a combination of goods that lies outside its own production possibilities frontier d. produce a combination of goods that lies outside its own production possibilities frontier e. Both C & D

C

The Aggregate Expenditure Model focuses on the _______________ relationship between real spending and ______________. a. Long-run, Real GDP b. Long-run, Price Level c. Short-run, Real GDP d. Short-run, Price Level

C

The BLS collects price statistics from traditional full-price retail stores, which do not reflect the prices some consumers pay by shopping at discount stores or on the Internet. This is a description of which bias? a. the increase in quality bias b. the new product bias c. the outlet bias d. the substitution bias e. the discount bias

C

Which of the following statements is true? a. A decrease in supply causes equilibrium price to rise; the increase in price then results in a decrease in demand. b. If both demand and supply increase there must be an increase in equilibrium price; equilibrium quantity may either increase or decrease. c. An increase in demand causes a change in equilibrium price; the change in price does not cause a further change in demand or supply. d. If demand decreases and supply increases one cannot determine if equilibrium price will increase or decrease without knowing which change is greater.

C

Which of the following would shift a nation's production possibilities frontier outward? a. A decrease in the unemployment rate. b. A law requiring workers to retire at age 50 c. Discovering a cheap way to convert sunshine into electricity d. Trading with another country for goods you do not have a comparative advantage in. e. Both C & D.

C

Data that is plotted against time is called: a. cross-sectional data b. real data c. nominal data d. time-series data e. time-consistent data

D

If the economy is experiencing deflation, a. the nominal interest rate will be equal to the real interest rate. b. high nominal interest rates inflict serious losses on both household and business borrowers. c. the nominal interest rate will be higher than the real interest rate. d. the nominal interest rate will be lower than the real interest rate.

D

In the United States, which government agency collects the data needed to calculate the official unemployment rate? a. Bureau of Labor Statistics (BLS) b. Bureau of Economic Analysis (BEA) c. National Bureau of Economic Research (NBER) d. The US Bureau of the Census e. The Federal Reserve Bank of St. Louis

D

Suppose a cigar manufacturer currently sells 1,500 cigars per week and makes a profit of $3,000 per week. The plant foreman observes, "Although the last 500 cigars we produced and sold increased our revenue by $7,500 and our costs by $7,000, we are only making an overall profit of $3,000 per week so I think we need to cut back on production." What was the marginal benefit of producing the last 500 cigars? a. $500 b. $3,000 c. $7,000 d. $7,500 e. Need more information

D

The nominal interest rate equals the real interest rate ________ the inflation rate. a. divided by b. times c. minus d. plus

D

Which of the following is a true statement regarding the current values of the components of the US GDP? a. Consumption is the largest component of GDP. b. The services sub-category of consumption is larger than nondurable goods and durable goods combined. c. Total state government purchases is greater than total federal government purchases as a percentage of GDP. d. All of the above are true statements. e. Only A & B are true statements.

D

Consumption spending is $22 million, planned investment spending is $7 million, actual investment spending is $7 million, government purchases are $9 million, and net export spending is $3 million. Based on this information, which of the following is true? a. There was an unplanned increase in inventories. b. There was an unplanned decrease in inventories. c. Aggregate expenditure is greater than GDP. d. Aggregate expenditure is less than GDP. e. none of the above are true.

E

Gabby is the mayor of Lewistown PA and is a very smart economist. She gathers a ton of data regarding unemployment. Based on the data she collects, she decides to hold a job fair and invite local unemployed individuals and local businesses with job openings to attend. Based on this event, Gabby must believe what type of unemployment exists in Lewistown PA? A. Structural Unemployment B. Hyper Unemployment C. Cyclical Unemployment D. Natural Unemployment E. Frictional Unemployment

E

If the aggregate expenditure shifts downward, the aggregate demand curve: a. will always shift to the right b. will always shift to the left c. may shift to the right or the left d. may stay the same or shift to the right e. may stay the same or shift to the left

E

The unemployment rate is calculated by the __________ using the ____________. a. Federal Reserve; establishment survey b. NBER: household survey c. BLS; establishment survey d. Federal Reserve; household survey e. BLS; household survey

E

Under the required readings for Lesson 5, you had to read an article from The New York Times about companied in a certain country trying to hire but could not find workers because everyone was already working. This article was about which country? a. Zimbabwe b. Germany c. The United States d. Venezuela e. Denmark

E

What is the largest category in the CPI market basket? a. Education and communication b. Healthcare c. Food and beverages d. Transportation e. Housing

E

Which of the following is a true statement about the US Nominal GDP? a. GDP is measured in market value, not quantities. b. Current nominal GDP is between $19 and $20 billion. c. GDP does not include stocks/bonds or transfer payments. d. All of the above are correct. e. Only A & C are correct

E

Which of the following is not one of the four economic indicators we spoke about in class at the beginning of Lesson 4? a. The current level of GDP b. The current official unemployment rate c. The current inflation rate d. The current Federal Funds Rate e. The current nominal interest rate (3-month Treasury Bill rate)

E

______________ is/are the mechanism that allocate(s) scarce resources in a market economy. a. Decisions b. Scarcity c. The government d. Trade e. Prices

E

Used Houses are NOT Included in GDP

True