Final Questions and Answers

Use the information in the table above plus the fact that indirect taxes less subsidies are $10 billion and depreciation is $30 billion to calculate the value of GDP

A) $180 billion

If the number of people unemployed is 100, the number of people employed is 1000, and the working-age population is 1400, then the labor force participation rate is

A) 78.6 percent

Which of the following explains why the demand for loanable funds is negatively related to the real interest rate?

A) A lower real interest rate makes more investment projects profitable.

The best example of a cyclically unemployed individual is

A) Charles who lost his job as a real estate salesperson when the housing market went soft because of a recession.

Which of the following is a positive statement? (2)

A) Our planet is warming because of an increased carbon dioxide buildup in the atmosphere

The Ricardo-Barro effect of a government budget deficit refers to

A) a change in private savings supply.

the official U-3 unemployment rate

A) includes persons without a job who have made efforts in the last week to find a job.

) If Frito Lay, an American snack company, opens a new manufacturing facility in Mexico and produces snacks which are distributed in South America, then Mexicoʹs GDP ________ and U.S. GDP ________.

A) increases; does not change

The word ʺfinalʺ in the definition of GDP refers to

A) not counting intermediate goods or services.

Full-time students and prisoners are ________.

A) not in the labor force

If net taxes exceed government expenditures, the government sector has a budget ________ and government saving is ________

A) surplus; positive

Potential GDP is the

A) the maximum amount of production that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation.

Bill Bonecrusher graduates from college with a choice of playing professional football at $2 million a year or coaching for $50,000 a year. He decides to play football, but eight years later he quits football to make movies for $3 million a year. His opportunity cost at graduation was ________ and eight years later was ________

A. $50,000, $2 million

which of the following items are considered to be physical capital

A. II and III

the price of cereal rises. people eat eggs instead of cereal because...

A. a decrease in the quantity demanded of cereal because of the substitution effect

Marginal benefit is the

A. additional gain from one more unit of an activity

If the Fed purchases government securities

A. banks' reserves will increase

According to the inter temporal substitution effect, a higher price level

A. decreases the quantity of real GDP demanded

The production possibilities frontier

A. depicts the boundary between those combinations of goods and services that can be produced and those that cannot

which of the following shifts the supply curve for oranges?

A. disastrous weather that destroys about half of this yearʹs orange crop

the above figure shows the market for oranges. which figure shows the effect of an increase in the price of bananas, a substitute for oranges

A. figure A

the above figure shows the market for oranges. which of the figures shows the effect of changing consumer preferences...

A. figure A

the above figure shows the market for oranges. which figure(s) show the effect of a new government program that provides each public school child with an orange to start the day

A. figure A and D

In the above figure, household income is shown by flow

A. flow A

In one day, Sue can change the oil on 20 cars or the tires on 20 cars. In one day, Fred can change the oil on 20 cars or the tires on 10 cars. Sue's opportunity cost of changing oil is ________ than Fred's and her opportunity cost for changing tires is ________ than Fred's.

A. greater, less

When price levels rise, the quantity of nominal money demanded will ___ and the quantity of real money demanded will ___.

A. increase, stay the same

In the above figure, the economy will be at full employment if the price level

A. is above 110

auto workers negotiate a wage increase. how does this wage hike affect the supply of cars?

A. it decreases the supply

Most students attending college pay tuition and are unable to hold a full-time job. For these students, tuition is

A. part of the opportunity cost of going to college. So are their forgone earnings from not holding a full-time job.

Considering the PPF for the office buildings and housing show in the figure above, which point on the diagram show that resources to produce office buildings and housing are misallocated, unused or both

A. point F

Suppose the price of a football is $20.00 and the price of a basketball is $10.00. The ________ of a football is

A. relative price, 2 basketballs per football

Suppose the equilibrium price of a bottled water has risen from $1 to $2...

A. rightward and demand

If there is a shortage in the market for snowmobiles, then the price of a snow mobile will

A. rise

A key issue in the presidential election of 2012 between President Obama and Romney...

A. the aggregate demand curve shifts leftward

in the above figure, if the demand curve is D2 then

A. the equilibrium price will be P1 and the equilibrium quantity will be Q2

resource use is allocatively efficient when

A. we produce goods with the highest opportunity cost

resource use is allocatively efficient

A. when marginal benefit equal marginal cost

which of the following shifts the demand curve for movie downloads rightward?

B a 10 percent increase in people's income if movie downloads are a normal good

Nominal GDP is

B) GDP valued at prices of that year.

Which of the following is TRUE regarding real GDP?

B) I and III

In the above figure, the economy is at point a on the initial supply of loanable funds curve SLF0. What happens if the real interest rate rises?

B) There would be a movement to a point such as b on supply of loanable funds curve SLF0.

The five categories of income used in the income approach to the measurement of GDP are

B) employee compensation, net interest, rental income, corporate profits, and proprietorʹs income.

net investment equals

B) gross investment minus depreciation.

Economics is best defined as the study of how people, businesses, governments, and societies

B) make choices to cope with scarcity.

When the economy is at full employment the

B) natural unemployment rate equals the unemployment rate.

Suppose that over a period of years the country of Quasiland switched from being an agriculturally-based economy to a technologically-based economy. As a result, many people lost jobs because they lacked the correct skills. As they search for new jobs, these people are part of

B) structural unemployment.

The idea that a government budget deficit decreases investment is called

B) the crowding-out effect.

In the balance sheet above, the entries are in million of dollars for the FBN bank. If the desired reserve ratio is 10 percent, the FBN bank has desired reserves of

B. 120 million

In the US, the central bank is the

B. Federal reserve system

France's government is running a budget deficit. With no Ricardo-Barro effect, which of the following events will occur?

B. II and III

The figure above shows Roger's PPF, point a is an ___ point and at that point production is ___

B. attainable, inefficient

In one week Alice can produce 5 pairs of shoes or 4 bookshelves while Roger can produce 10 pairs of shoes or 6 bookshelves. Then Alice should specialize in the production of

B. bookshelves

A person has a comparative advantage in producing a particular good if that person

B. can produce it at lower opportunity cost than anyone else can.

Facebook sold shares of a stock for the first time in an IPO oan May 18, 2012...

B. capital loss

In the above figure, flow B represents households ________.

B. consumption expenditure

The figure above illustrates the effect of

B. decreases in real GDP

the fact that a rock star earns $5 million a year while a teacher earns $25,000 is most directly an example of an economy answering the ____ question

B. for whom

According to the figure above the opportunity cost of producing another computer is

B. higher at B

A president of the US promises to produce more defense goods without any decreases in the production of other goods

B. if US is producing within the PPF

Which of the following issues prominent in the presidential election of 2012 shifts the aggregate demand curve rightward?

B. increasing Medicare, Medicaid...

Omar goes to college to become an engineer, This is an example of an

B. investment in human capital

Due to the recession in 2008, firms decreased their profit expectations. As a result, there was a ________ shift in the ________ loanable funds curve.

B. leftward, demand for

Today, Julie attended her 12:30 Economics class. If she hadn't gone to class, Julie would have gone out to lunch with friends. She had other options; she could have worked or slept in. Julie's opportunity cost of going to class is the

B. lunch she gave up

as a person consumes more of a good, the

B. marginal benefit decreases

the marginal benefit from a good is the amount a person is willing to pay for

B. one more unit of the good

Joy produces 2 balloon rides and 4 boat rides an hour...

B. producing on his production possibilities frontier

In the united states, GDP is typically measured

B. quarterly

peanut butter and jelly are complements...

B. supply of jelly, a decrease, and increase

marginal cost is the opportunity cost

B. that arises from producing one more unit of a good or service

If you have $5,000 in wealth and the price level decreases 20 percent, then

B. the $5,000 will buy more goods and services

what term is used to describe the lowest point of a business cycle

B. trough

On Saturday morning, you rank your choices for activities in the following order: go to the library, work out at the gym, have breakfast with friends, and sleep late. Suppose you decide to go to the library. Your opportunity cost is

B. working out at the gym

the above figure shows the market for oranges. which figure shows the effect of a nation-wide consumer boycott of eating oranges

C figure B and C

the "law of supply" states that, other things remaining the same, firms produce

C more of a good the higher its price

This year Pizza Hut makes a total investment of $1.3 billion in new stores. Its depreciation in this year is $300 million. Pizza Hut's gross investment is ________ and its net investment is

C) $1.3 billion; $1.0 billion

Use the information in the table above to calculate the value of private saving

C) $25 million

Use the information in the table above to calculate the value of government saving

C) $5 million

Suppose that last year the Consumer Price Index was 124; this year it is 130.7. What was the inflation rate between these years?

C) 5.4 percent

The population of Tiny Town is 100 people and the labor force is made up of 75 people. If 5 of these people are unemployed, the unemployment rate is

C) 5/75 × 100.

Households will choose to save more if

C) Both answers A and B are correct.

GDP Equals

C) C+I+G+(X-M)

Which of the following are equal to one another?

C) II equals III, but not I

Which of the following is a positive statement?

C) When the national unemployment rate is 9 percent, the unemployment rate for inner-city youth is often close to 40 percent.

If Nike, an American corporation produces sneakers in Thailand this would

C) add to Thailandʹs GDP but not to U.S. GDP.

The factor market can best be described as where

C) firms buy the services of labor, land and capital

A good economic model

C) includes only those features of the world that are needed for the purpose at hand.

If our exports are $2.2 billion and our imports are $2.7 billion

C) the United States is borrowing from the rest of the world.

In 2012, consumers in Dexter consumed only books and pens. The prices and quantities for 2012 and 2013 are listed in the table above. The reference base period for Dexterʹs CPI is 2012. What is the cost of the CPI basket in 2010?

C. $320

In the figure above, the economy is at point A when the price level rises to 120...

C. 13.5 trillion

If the nominal GDP = $15 trillion and the quantity of money is $3 trillion what is the velocity of circulation?

C. 5

Suppose that you are spending two hours a day studying economics, and your grade is 85 percent. You want a higher grade and decide to study for an extra hour a day. As a result, your grade rises to 90 percent. Your marginal benefit is the

C. 5 point increase in your grade

Suppose a country, when operating on its PPF, can produce 2 tons of butter and 200 cars OR 3 tons of butter and 150 cars. The opportunity cost of 1 ton of butter is

C. 50 cars

The kitchen manager at an Italian restaurant is deciding what assignments he should give to his two cooks, John and David. John can make 25 pizzas or 40 servings of pasta per hour and David can make 20 pizzas or 30 servings of pasta. Which of the following should be the manager's choice?

C. David will make pizza because he has comparative advantage in making pizza.

Which of the following is considered a depository institution

C. II and III

When the Fed is __ it is __

C. adjusting the amount of money in circulation, conducting monetary policy

the "income effect" in the market for aspirin means that

C. an increase in the price of aspirin will reduce the total purchasing power of aspirin takers, making them able to afford fewer aspirin

The AD curve shows the sum of

C. consumption expenditure, investment, government expenditures on goods and services and net exports

marginal cost

C. decreases as more is produced

When talking about aggregate supply it is neccessary to

C. distinguish between long run agg. supply and short run agg. supply

Which of the following is a microeconomics topic

C. how rent ceilings impact the supply of apartments

When an economist talks of scarcity, the economist is referring to the

C. inability of society to satisfy all human wants because of limited resources.

an increase in the number of fast food restaurants

C. increases the supply of fast food meals

Fiscal policy

C. involves changing taxes and government spending

When you buy a hamburger for lunch, you are using money as a

C. medium of exchange

economic growth is the result of all of the following except

C. opportunity cost

the figure above shows the demand for fruit snacks. which movement reflects an decrease in demand

C. point a to point c

The largest part of what the US produces today is ____ such as ____.

C. services, trade and health care

An aggregate supply curve depicts the relationship between

C. the price level and aggregate quantity supplied

in the definition of GDP, "market value" refers to

C. valuing production according to market price

Which of the following is a normative statement?

C. you should eat less candy

Using the information in the table above, calculate the value of GDP

D) $140 million

Real GDP can be criticized as a measure of economic welfare because it

D) All of the above answers are correct

Inflation is a problem when

D) All of the above answers are correct.

Which of the following means that the CPI overstates the actual inflation rate?

D) All of the above cause the CPI to overstate inflation

Using the definition of unemployment, which of the following individuals would be unemployed?

D) All of these individuals are unemployed.

In the above figure, the economy is at point a on the initial supply of loanable funds curve SLF0. What happens if disposable income decreases?

D) The supply of loanable funds curve would shift leftward to a curve such as SLF1.

a discouraged worker ___ counted officially unemployed and ___ counted as in the labor force

D) is not; is not

A nation's investment must be financed by

D) national saving plus borrowing from the rest of the world.

the working age population can be divided into two groups

D) people in the labor force and people who are not in the labor force.

At one point along a PPF, 50 tons of coffee and 100 tons of bananas are produced. At another point along the same PPF, 30 tons of coffee and 140 tons of bananas are produced. The opportunity cost of a ton of coffee between these points is

D. 2 tons of bananas per ton of coffee

At the beginning of the year, Tom's Tubes had a capital stock of 5 tube inflating machines. During the year, Tom scrapped 2 old machines and purchased 3 new machines. Tom's capital stock at the end of year equals

D. 6 machines

The "law of demand" refers to the fact that, all other things remaining the same, when the price of a good rises

D. There is a movement up the demand curve to a smaller quantity demanded

The opportunity cost is illustrated in a production possibilities frontier (PPF) by a movement

D. along the PPF...

An inducement to take a particular action is called

D. an incentive

Because we face scarcity, every choice involves

D. an opportunity cost

ham and eggs are complements...

D. decrease and the demand curve for eggs will shift leftward

the above figure shows the market for oranges. which figure shows the effect of new successful advertising campaigns to eat more oranges

D. figure A and D

gross domestic product is a measure of the total value of all

D. final goods and services produced in an economy over a period of time

the figure above shows the demand for fruit snacks. which movement reflects an increase in demand

D. from point a to point d

The tools at the disposal of the Fed for changing the quantity of money do Not include

D. increasing the number of commercial banks

the business cycle is

D. irregular fluctuations of real GDP around potential GDP

If the price of a CD is equal to the equilibrium price, there will be ___ of CD's and the price will ___

D. neither shortage nor surplus; not change

As the price of a pound of peanuts falls, the

D. quantity of peanuts supplied will decrease.

which of the following is not part of the big economic question

D. why to incentives affect only marginal cost

Opportunity cost is best defined as

the highest-values alternative that is given up to get something