HPU Macroeconomics Howard Final prep
Dollar bills in the modern economy serve as money because _______ A) they are backed by the gold stored in Fort Knox B) They have value as a commodity independent of their use as money C) they can be redeemed for gold by the central bank D) people have confidence that others will accept them as money
people have confidence that others will accept them as money
Hubbard and O'Brien (2021, p. 57) note the important role played by relative prices in the market, a point also made by 1974 Nobel laureate Friedrich Hayek (1899-1992) and echoed by former Princeton University economist Avinash Dixit as we discussed in class. Changes in relative price _____. A) Act as a lottery and auction B) constantly distort consumer decisions. C) provide information, or a signal to both consumers and firms. D) act as a central planner and can only function properly with a Board of price Controls to monitor them.
provide information, or a signal to both consumers and firms.
A critical function of the government in facilitating the operation of a market economy is A) producing goods and services for low-income households B) setting up and enforcing private property rights C) ensuring an equal distribution of income D) controlling the market prices of food items
setting up and enforcing private property rights
Potential gross domestic product (GDP) refers to A) the average level of education of the workforce and the price level B) technology and the quantity of capital per hour worked C) the business cycle and the growth rate of real GDP D) the growth rate of real GDP and the interest rate
technology and the quantity of capital per hour worked
What two factors are the keys to determining labor productivity? A) the average level of education of the workforce and the price level B) technology and the quantity of capital per hour worked C) the business cycle and the growth rate of real GDP D) the growth rate of real GDP and the interest rate
technology and the quantity of capital per hour worked
According to 1993 Nobel Prize winner Douglass North (1920-2015), the industrial Revolution occurred in England because A) the British parliament took control of the government and could credibly commit to upholding property rights. B) the British monarchy took control of the government and pledged not to raise taxes arbitrary C) the British courts became tied to the king and began to refuse to enforce property rights. D) the British Parliament instituted a command economy structure and implemented a planned economy.
the British parliament took control of the government and could credibly commit to upholding property rights.
When a foreign investor (ex. a Japanese trader) buys a bond (or a stock) issued in the United States _________ A) the balance on the capital account increases B) the balance on the current account increases C) the balance on the financial account increases D) the balance of trade increases
the balance on the financial account increases
The balance of payments includes all of the following accounts except: A) the current account B) the financial account C) the capital account D) the national debt account
the national debt account
Workers and firms both expect that prices will be 2.5% higher next year than they are this year. As a result, A) aggregate demand (AD) will increases by 2.5% B) workers will be willing to take lower wages next year, but not lower than a 2.5% decrease. C) the short-run aggregate supply (SRAS) curve will shift to the left as wage increases. D) the purchasing power of wages will rise if wages increase by 2.5%
the short-run aggregate supply (SRAS) curve will shift to the left as wage increases.
While many analysts defended the actions taken by the Federal Reserve and the Treasury to respond to the financial crisis in 2008, others were critical of these actions. The critics were concerned that by not allowing large firms to fail: A) smaller firms will resent not receiving similar assistance B) Stockholders and bondholders of these firms were not allowed to receive the proceeds from the sale of assets that would have occurred if the firms had declared bankruptcy C) there is an increased likelihood that other firms will engage in risky behavior in the future with the expectation that they will also not be allowed to fail D) there will be less competition in the U.S. economy, which could led to higher prices for consumers.
there is an increased likelihood that other firms will engage in risky behavior in the future with the expectation that they will also not be allowed to fail
Without an increase in the supply of the factors of production, how can a nation achieve economic growth? A) by producing more high-value goods and fewer low-value goods B) through technological advancement which enables more output with the same quality of resources C) by lowering the prices of factors of production D) by increasing the prices of factors of production
through technological advancement which enables more output with the same quality of resources
What did 1974 Nobel Prize winning economist Friedrich Hayek (1899-1992) say "the curious task of economics is ____ ?" (Hayek, 1988, p. 76) A. to allow government to better plan to optimize total production in the economy B. to provide the best framework to perfectly forecast changes in demand and supply C. to demonstrate to men how little they really know what they imagine they can design D. None of the above are correct.
to demonstrate to men how little they really know what they imagine they can design
What is the most important factor in successful learning (HINT: Only one is correct; Chew, 2011) A. the intention and desire to learn B. paying close attention to the material as you study C. learning in a way that matches your own learning style D. The time you spend studying E. what you think about when you study
what you think about when you study
Refer to table 8-18 A simple economy produces three goods: cameras, legal services, and books. The quantities produced and their corresponding prices from 2013 and 2018 are shown in the table above. What is the real GDP in 2018, using 2013 as the base year? A) $28,885 B) $11,790 C) $11,200 D) $10,275
$10,275
Scenario 10-1 Consider the following data for a closed economy (NX=0): Y=$12 trillion C=$8 trillion I=$2 trillion G= $2 trillion TR= $2 trillion T= $3 trillion Refer to scenario 10-1 Based on the information above, what is the level of private saving in the economy? A) $3 trillion B) $4 trillion C) $5 trillion D) $8 trillion
$3 trillion
Scenario 14-1 Currency $1000 Checking Account Balances $2000 Savings Account Balances $5000 Small-Denomination Time Deposits $6000 Non Institutional Money Market Fund Shares $7000 Refer to Scenario 14-1 Consider the information above for a simple economy. Assume there are no traveler's checks. M1 in this simple economy equals _______ A) $1000 B) $2000 C) $3000 D) $8000
$3000
Table 9-2 Product Base year (2013) 2018 quantity price price Milk 50 1.20 1.50 Bread 100 1.00 1.10 Assume the market basket for the consumer price index (CPI) has two products- bread and milk- with the above values in 2013 and 2018 for price and quantity: The CPI for 2018 equals ________ A) 118 B) 116 C) 86 D) 85
116
Table 9-5 Year CPI 2017 207 2018 215 Refer to Table 9-5. Consider the above value of the consumer price index (CPI) for 2017 and 2018. The inflation rate for 2018 was equal to A) 215 % B) 21.5% C) 8.0% D)3.9%
3.9%
Consider an economy made up of 500 people. Of which 400 are employed. 20 are looking for jobs, 30 are full-time students, and 15 are retired,under-aged and other individuals. How much is the unemployment rate (U3)? A) 3.76% B)4.76% C)5.76% D)6.76%
4.76%
Refer to Figure 2-5 above. If the economy is currently producing at point W, what is the opportunity cost of moving to point X? A) 3 million tons of steel B) 19 million tons of steel C) 5 million tons of steel D) 9 million tons of steel
5 million tons of steel
Refer to figure above. A decrease in the price of the product would be represented by a movement from ___________ A) A to B B) B to A C) D1 to D2 D) D2 to D1
A to B
Refer to figure 11-4. Suppose the per-worker production function in the figure above represents the production function for the U.S. economy. If the United States decided to cut its support of university research in half, this would cause a movement from A) B to A B) B to E C) B to C D) B to D
B to E
Which of the following best describes how banks create money? A) Banks print and distribute currency via automatic teller machines B) Banks create checking account deposits when making loans from excess reserves C) Banks charge higher interest rates on loans than they pay on deposits D) Banks charge fees for providing financial advice
Banks create checking account deposits when making loans from excess reserves
Refer to Figure 15-5. Suppose the economy is in short-run equilibrium above potential GDP, the unemployment rate is very low, and wages and prices are rising. Using the statistic AD-AS model in the figure above, the correct Fed monetary policy for this situation would be depicted as a movement from _______ (Hint: What would return the economy to long-run equilibrium?) A) C to D B) A to E C) B to C D) A to B E) C to B
C to B
The substitution bias in the consumer price index (CPI) refers to the idea that consumers ________ the quantity of products they buy in response to price, and the CPI does not reflect this and ____ the cost of the market basket. A) do not change; over-estimates B) Change; over-estimates C) do not change; under-estimates D) change; under-estimates
Change; over-estimates
Which of the following can explain why some countries have not experienced relatively high growth rates in real GDP per capita despite relatively low initial levels of real GDP per capita (i.e. low-income countries)? A) Many of these developing countries do not have a functioning court system that can enforce laws B) Countries that are relatively poor are more likely to experience wars and revolution C) countries that are relatively poor are likely to have a lower quality health care D) all of the above
D) all of the above
For purpose of monetary policy, the Federal Reserve has targeted the interest rate known as the A) Prime rate B) Federal funds rate C) discount rate D) Treasury bill rate
Federal funds rate
GDP is not a perfect measure of well-being because A) the value of leisure (free time from work) is included in GDP B) GDP is not adjusted for pollution C) GDP is adjusted for changes in crime rate D) GDP is adjusted for increases in drug addiction
GDP is not adjusted for pollution
If Southwest Airlines borrows $20 million from a bank to finance the renovation of their corporate offices, this is an example of A) A bond market transaction B) indirect finance C) a stock market transaction D) direct finance
Indirect finance
Refer to figure 2-11 above. Which country has a comparative advantage in the production of cotton? A) Indonesia B) They have equal productive abilities C) Pakistan D) neither country
Indonesia
In a closed economy (NX=0), what is the relationship between saving (S) and investment (I)? A) Saving is greater than investment B) Investment is greater than saving C) Investment is equal to saving D) Investment may be greater or smaller than saving
Investment is equal to saving
according to the research, each of the following are relatively easy ways (only four) to improve learning except ( Doyle & Zakrajsek, 2018): A. Staying hydrated B. diet C. Exercise D. learning in a way that matches your own learning style E. Sleep
Learning in a way that matches your own learning style
Someone who is available for work but has not actively looked for work in the previous four weeks would be classified as A) employed B) unemployed C) Not in the labor force D) Not in the working-age population
Not in the labor force
Our textbook authors note three key economic ideas in studying how people make choices and interact in the market to include (1) people are rational, (2) people respond to economic incentives, and (3) _______ (Hubbard & O'Brien, 2021) A. Marginal benefits are minimized B. Optimal decisions are made at the margin C. Profits are maximized D. Supply and demand are in equilibrium E. People act selfishly
Optimal decisions are made at the margin
Economists Scott Carrell and James West evaluated the academic results of 10,534 U.S. Air Force Academy cadets taking introductory calculus classes from fall 2000 to spring 2007 and found that (Carrell & West, 2010) A. Overall, professors who promote the highest grades in the current term can harm their students' subsequent performance. B. Overall, less experienced instructors/professors produced the highest grades among their students in future courses. C. Overall, more experienced instructors/professor produced the highest grade D. Neither less experienced nor more experienced instructors/professor appear to affect their students' future grades.
Overall, professors who promote the highest grades in the current term can harm their students' subsequent performance.
which of the following is normative economic statement? A. rising global demand for coal has led to increases in the price of coal. B. With rising mortgage rates and rising unemployment rates, the number of unsold homes has increased. C. the state of texas is considering increasing funds for light-rail development to promote the use of public transportation D. Pharmaceutical manufacturers should not be allowed to patent their products so prescription drugs would be more affordable.
Pharmaceutical manufacturers should not be allowed to patent their products so prescription drugs would be more affordable.
According to 1986 Nobel prize winning economist James Buchanan (1919-2013) What is "The principle that exposure to economics should convey"? (emphasis original; Buchanan, 1979, p. 81; One phrase/ sentence is all that is required)
Spontaneous coordination
The research on sleep indicates all of the following are true except (Ro, 2018) A. Adults (college students) need 7+ to 9 hours of sleep each night B. Scientists have found evidence that a key purpose of sleep is to recalibrate the brain cells responsible for learning & memory C. Staying up all night right before an exam, in the hope of stuffing in as much knowledge as you can improves learning. D. Long term memory is critical for spotting patterns and finding connections with other ideas for creative problem-solving
Staying up all night right before an exam, in the hope of stuffing in as much knowledge as you can improves learning.
Refer to Figure 10-1. Which of the following is consistent with the graph depicted above? A) an expected recession decreases the profitability of new investment B) Technological change increases the profitability of new investment C) The government runs a budget surplus D) Household become spendthrifts and begin to save less
Technological change increases the profitability of new investment
Which of the following is an example of U.S. foreign direct investment in China? A) U.S. auto entrepreneur Elon Musk buys a stock in Alibaba Group Holding Limited of Hangzhou, China B) Chinese Shenzhen Airlines company buys a small U.S. midwest airline company, Air Chicago C) The U.S. company Wal-Mart buys a warehouse in Shanghai D) The bank of China purchases U.S. Treasury bonds E) A U.S. foreign exchange speculator buys $200,000 worth of the chinese currency the yuan
The U.S. company Wal-Mart buys a warehouse in Shanghai
Shrimp is an increasingly popular part of the American diet. Louisiana shrimpers who represents the bulk of the U.S. industry were almost all put out of business by Hurricane Katrina in August 2005. How did the hurricane affect the equilibrium price (P) and quantity (Q) of Shrimp? Indicate the change in price and quantity in the graph below.
The supply decreased (Q) so the price had to increase
Which of the following is a problem inherent in centrally planned economies? A. Households and firms make poor decisions in choosing how resources are allocated. B. There is too little production of low-cost, high-quality goods and services. C. Production managers are more concerned with satisfying consumer wants than with satisfying government's order D. Exports tend to exceed imports.
There is too little production of low-cost, high-quality goods and services.
what did psychologist Pam A. Mueller (Princeton University) and marketing professor Daniel M. Oppenheimer (UCLA) find when they studied 67 Princeton University students taking notes by hand and on their laptops while watching TED talks? A. They did not find any difference between the groups taking notes and their performance on tests. B. They found that using laptops were more likely to take verbatim notes and perform worse on tests. C. They found that longhand notes were more inclined to take verbatim notes and performed worse on tests. D. none of the above are correct
They found that using laptops were more likely to take verbatim notes and perform worse on tests.
What does economist and EconTalk host Russ Roberts think is "single deepest contribution of economics" (Roberts, 2014)? A. Thinking clearly about the complex interaction of individual action leading to unintended patterns of predictable and orderly outcomes. B. Thinking clearly about how the government can best design policies that will maximize household incomes and corporate profits. C. Thinking clearly about how we can maximize consumer welfare through the use of various price controls to benefit certain aspects of the market D. none of the above are correct.
Thinking clearly about the complex interaction of individual action leading to unintended patterns of predictable and orderly outcomes.
Research says the medium (print vs. digital) did not matter for general questions (like understanding the main idea; Alexander & singer, 2017) True False
True
Why does the short-run aggregate supply curve shift to the right in the long run, following a decrease in aggregate demand? A) Workers and firms adjust their expectations wages and prices downward and they accept lower wages and prices B) Workers and firms adjust their expectations wages and prices downward and they push for higher wages and prices C) Workers and firms adjust their expectations wages and prices upward and they push for higher wages and prices D) Workers and firms adjust their expectations wages and prices upward and they accept lower wages and prices
Workers and firms adjust their expectations wages and prices downward and they accept lower wages and prices
Which of the following goods is directly counted in gross domestic product (GDP) A) the plastic bags at Subway purchases to wrap its sandwiches B) the lettuce that Subway purchases for its sandwiches C) a 12-inch Subway sandwich by a student D) the bread that Subway purchases for its sandwiches
a 12-inch Subway sandwich by a student
The National Bureau of Economic Research's (NBER's) Business Cycle Dating Committee defines a recession as ________ A) two consecutive quarters of declining real GDP B) two consecutive quarters of declining nominal GDP C) a significant decline in activity visible in industrial production, employment, real income, and wholesale/retail trade lasting more than a few months. D) a significant decline in inflation and unemployment lasting more than a few months
a significant decline in activity visible in industrial production, employment, real income, and wholesale/retail trade lasting more than a few months.
Interest rates in the economy have fallen. How will this affect aggregate demand (AD) and equilibrium in the short run? (Hint: is this movement along or a shift in the AD curve? Draw out your AD-SRAS graph) A) aggregate demand will rise, the equilibrium price level will rise, and the equilibrium level of GDP will rise B) aggregate demand will rise, the equilibrium price level will fall, and the equilibrium level of GDP will rise C)aggregate demand will fall, the equilibrium price level will rise, and the equilibrium level of GDP will fall D)aggregate demand will fall, the equilibrium price level will fall, and the equilibrium level of GDP will fall
aggregate demand will rise, the equilibrium price level will rise, and the equilibrium level of GDP will rise
Which of the following policies would reduce frictional unemployment? A) a decrease in minimum wage B) implementing an unemployment insurance policy C) building online job database that helps workers find jobs D) A job retraining program
building online job database that helps workers find jobs
When mortgage loans are securitized, they are A) issued to borrowers who fail to document their income B) issued to borrowers with flawed credit histories c) guaranteed by the federal government D) bundled together by financial institution and sold to investors
bundled together by financial institution and sold to investors
Which of the following generates productive efficiency? A. competition among sellers B. competition among buyers C. government inspectors D. government production rules and regulations
competition among sellers
Suppose a medical study reveals new benefits to consuming beef and at the same time a bumper corn crop reduces the cost of feeding steers (male cow/ox). The equilibrium price of beef will _______ A) stay the same B) definitely decrease C) definitely increase D) perhaps increase, decrease, or stay the same, but more information is needed to determine which it does
definitely increase
Refer 11-4. The movement from A to B to C (production function) illustrates _________ A) an improvement in technology B) a decline in capital per worker C) diminishing returns to capital D) diminishing returns to labor
diminishing returns to capital
The primary purpose of patents is to A) provide owners with larger profit forever B) protect firms from being taken advantage of by competing firms C) protect domestic firms from foreign competition D) encourage the expenditure of funds on research and development to create new products
encourage the expenditure of funds on research and development to create new products
The Taylor rule helps explain the relationship between the Fed's_____ and ____ A) money supply target; economic conditions B) Money supply target; the federal funds target C) federal funds target; the monetary growth rule D) federal funds target; economic conditions
federal funds target; economic conditions
Which of the following explains why the unemployment rate may continue to increase at the end of a recession? A) firm are hesitant to rehire laid off workers as they continue to operate below capacity B) firms rapidly hire new workers at the first sign of an increase in demand for their goods C) discouraged workers return to the labor force, and this makes the unemployment rate fall D) Discourage workers leave the labor force, and this makes the unemployment rate rise
firm are hesitant to rehire laid off workers as they continue to operate below capacity
Gross Domestic Product (GDP) understates the total production of final goods and services because of the omission of ________ A) exports B) household production C) intermediate goods D) inflation
household production
All of the following policies are ways for a country to promote long-run economic growth except: A) increasing vaccinations against infectious diseases B) undergoing political reform to decrease corruption C) enacting stronger laws to protect property rights D) imposing stricter regulations to limit foreign direct investment
imposing stricter regulations to limit foreign direct investment
If the federal reserve (A.k.a the fed) buys U.S. Treasury securities, thn this A) increases reserves, encourages banks to make more loans, and increases the money supply B) ) decreases reserves, causes banks to reduce their loans, and decreases the money supply C) decreases reserves, causes banks to reduce their loans, and increases the money supply D) increases reserves, causes banks to reduce their loans, and increases the money supply
increases reserves, encourages banks to make more loans, and increases the money supply
Figure 10-2 because______ in the government budget deficit increase the real interest rate, budget deficits can ____ firm investment. This is the crowding out effect and is represented by movement from___ A) increases; increase; B to A B) decreases; increase; C to B C) decreases; decrease; B to C D) increases; decrease; A to B
increases; decrease; A to B
During a business cycle expansion, total production ________ and total employment ________. A) increases; decreases B) increases; increases C) decreases; increases D) decreases; decreases
increases; increases
A production possibilities frontier (PPF) with a bowed-outward curve shape indicates ___________. A. the possibility of inefficient production B. Constant opportunity costs as more and more of one good is produced. C. increasing opportunity costs as more and more of one good is produced. D. decreasing opportunity costs as more and more of one good is produced.
increasing opportunity costs as more and more of one good is produced.
University of Chicago economist and 1995 Nobel prize winner Robert Lucas argues that there are _____ returns to human capital, and these productivity increases are not completely captured by individuals as they decide how much education to purchase. As a result, the market produces ______ education and training A) increasing; too much B) decreasing; too much C) increasing; too little D) decreasing; too little
increasing; too little
Abercrombie & Fitch wants to raise $8 million to finance the construction of a new store, and the company wishes to raise the funds through direct finance. Which of the following methods could it use? A) it could sell $8 million in bonds B) it could borrow $8 million from a bank C) it could issue $8 million in stock D) it could choose either A or C
it could choose either A or C
New growth theory, as stated by 2018 Nobel Prize winner and New York University economist paul romer, maintain that increases in _____ capital will result in _____ at the ________ level. A) Knowledge; increasing returns to scale; firm B) physical; decreasing return to scale; firm C) Knowledge; decreasing returns to scale; economy D) knowledge; increasing returns to scale; economy
knowledge; increasing returns to scale; economy
which of the following is a solution to the principal-agent problem? A) threaten to liquidate the firm B) link top manager salaries to the profits of the firm or the price of the firm's stock C) have the CEO be a rotating position D) forbid managers from owning any company stock
link top manager salaries to the profits of the firm or the price of the firm's stock
One explanation for recent productivity growth rates appearing worse than they actually are in the U.S. is __________ A) measurement problems B) creative destruction C) a decline in oil prices D) an increase in labor quality
measurement problems
The quantity theory of money predicts that, in the long run, inflation results from the A) money supply growing at a lower rate than real GDP B) money supply growing at a faster rate than real GDP C) velocity of money growing at a faster rate than real GDP D) velocity of money growing at a lower rate than real GDP
money supply growing at a faster rate than real GDP
