Macro 2

23) Refer to Table 7-6. If the actual terms of trade are 1 belt for 1.5 swords and 70 belts are traded,

A) 5

7) Refer to Figure 7-1. Suppose the government allows imports of leather footwear into the

A) Q0

3) An asset is

A) anything of value owned by a person or a firm.

5) Macroeconomics, as opposed to microeconomics, includes the study of what determines the

A) average price levels of goods and services in the economy.

13) Disposable personal income equals personal income

A) minus personal tax payments.

15) Who controls a partnership?

A) the owners

12) GDP is not a perfect measure of well-being because

B) GDP is not adjusted for pollution.

16) National income is equal to

B) GDP minus depreciation.

13) Stockholders

B) are the owners of a corporation.

8) National income equals gross national product minus

B) depreciation.

2) Refer to Figure 7-1. Under autarky, the equilibrium price is

C) $30.

3) What takes place in the indirect finance market?

C) Deposits of savers are accepted and loans made to borrowers.

4) Refer to Table 7-1. Use the table above to select the statement that accurately interprets the

C) Rob has a greater opportunity cost than Bill for picking berries.

11) What does limited liability mean?

C) The personal assets of the owners cannot be claimed if the business is bankrupt.

19) If a German firm produces cars in the United States, that production should count towards

C) U.S. GDP.

1) Autarky is a situation in which a country

C) does not trade with other countries.

12) International trade

C) helps consumers but hurts firms that are less efficient than their foreign competitors.

10) Legalizing all forms of illegal activities

C) increases GDP and reduces the size of the underground economy.

10) Which of the following is not directly counted in GDP?

C) intermediate goods

1) Free trade refers to trade between countries

C) that is without restrictions.

8) Who controls a sole proprietorship?

C) the owner

5) Refer to Table 7-1. Use the table above to select the statement that accurately interprets the

D) Bill has a comparative advantage in picking berries.

12) Refer to Table 7-3. Select the statement that accurately interprets the data in the table.

D) Neither Mateo nor Celeste has an absolute advantage in making spurs.

8) Refer to Figure 7-1. Suppose the government allows imports of leather footwear into the

D) Q2 - Q0

9) Which of the following is a characteristic of stock?

D) Stock represents ownership in a firm.

10) Which of the following statements about the importance of trade to the U.S. economy is false?

D) The U.S. economy is highly dependent on international trade for growth in its gross domestic

9) Which of the following transactions represents the purchase of a final good?

D) Your father buys a new John Deere riding lawn mower.

2) Gross domestic product understates the total production of final goods and services because of

D) household production.

17) Nominal GDP will increase

D) if either the price level or the quantity of goods and services produced rises.

15) A tariff

D) makes domestic producers better off.

3) Who operates and controls a corporation in its day-to-day activities?

D) management

15) As a percentage of GDP, imports are greater than exports for which of the following

D) the United States

7) Gross domestic product is calculated by summing up

D) the total market value of final goods and services produced in the economy during a period of

2) Real GDP is GDP in a given year

D) valued in the prices of the base year.

4) Refer to Table 8-11. Nominal GDP for Tyrovia in 2013 equals

A) $1,140.

20) Refer to Table 8-30. Based on the table above, what is personal income for this economy?

A) $1,950 billion

20) Refer to Table 8-17. What is nominal GDP in 2006?

A) $3,320

7) Refer to Table 8-13. Nominal GDP for Vicuna for 2009 equals

A) $4,920.

11) Refer to Table 7-6. Prior to trade, what was the opportunity cost to produce 1 sword in

A) 1/2 of a belt

22) Refer to Table 7-6. If the actual terms of trade are 1 belt for 1.5 swords and 70 belts are traded,

A) 10

12) If a corporate bond with a face value of $5,000 pays yearly coupon payments of $100, what is the coupon rate?

A) 2%

13) Refer to Table 7-6. With trade, what is the total gain in belt production?

A) 30

14) Refer to Table 7-6. With trade, what is the total gain in sword production?

A) 50

6) Which of the following would explain why accounting profit might be greater than economic profit?

A) A firm has implicit costs as well as explicit costs.

1) ________ is the ability to produce more of a good or service than competitors when using the

A) Absolute advantage

15) Refer to Table 7-3. Select the statement that accurately interprets the data in the table.

A) Celeste has a comparative advantage in making saddles.

5) Refer to Table 7-6. Which country has an absolute advantage in producing swords?

A) Estonia

6) Refer to Table 7-6. Which country has an absolute advantage in producing belts?

A) Estonia

7) Refer to Table 7-6. Which country has a comparative advantage in producing swords?

A) Estonia

6) Suppose Bob works for Mary as a proofreader. Mary and Bob fall deeply in love, marry and

A) GDP will decrease.

11) Which of the following is an example of a trade restriction?

A) Japan places a tax on all Korean automobiles.

13) Refer to Table 7-3. Select the statement that accurately interprets the data in the table.

A) Mateo has a greater opportunity cost than Celeste for making saddles.

3) Refer to Figure 7-1. Under autarky, the consumer surplus is area

A) R.

6) Refer to Table 7-1. Use the table above to select the statement that accurately interprets the

A) Rob has a comparative advantage in catching fish.

4) Refer to Figure 7-1. Under autarky, the producer surplus is area

A) S + V.

18) If a U.S. firm produces cars in Mexico, that production should count towards

A) U.S. GNP.

13) A quota is

A) a limit placed on the quantity of goods that can be imported into a country.

10) The owners of a ________ have a separate legal distinction from the business.

A) corporation

14) Which type of businesses earns the majority of profits in the United States?

A) corporations

4) The size of the underground economy would tend to decrease if the government of a country

A) decreased government regulations on businesses.

13) As a business type, corporations ________ in the United States.

A) earn the majority of revenues

6) Macroeconomics seeks to understand

A) economic growth, business cycles, and inflation.

7) Domestically produced goods and services sold to other countries are referred to as

A) exports.

3) The output of U.S. citizens who work in Canada would be included in the

A) gross domestic product of Canada.

5) What is accounting profit?

A) gross revenue minus explicit costs

4) A corporation's board of directors

A) hire the managers of the corporation.

9) The existence of the principal-agent problem

A) increases the risk of buying stock in a corporation.

3) During a business cycle expansion, total production ________ and total employment ________.

A) increases; increases

16) A quota

A) makes domestic consumers worse off.

7) A normal rate of return refers to the ________ that investors must earn on the funds they invest in a firm, expressed as a percentage of the amount invested.

A) minimum amount

11) If real GDP in 2013 (using 2009 prices) is lower than nominal GDP of 2012, then

A) prices in 2013 are lower than prices in 2012.

2) Unlike firms that sell stock infinancial markets, which are known as ________ firms, companies which do not sell stock in financial markets are known as ________ firms.

A) public; private

12) To examine how the total production of an economy has changed over time, it would be

A) real GDP.

15) The profits a corporation keeps to finance future expansion are known as

A) retained earnings.

13) At the beginning of 2013, with the tariff on Chinese tires having expired, Goodyear's profits

A) rose; increased

5) Stockholders

A) select the board of directors of a corporation.

Which type of business has the least government rules and regulations affecting it?

A) sole proprietorship

14) A tax imposed by a government on imports of a good into a country is called a

A) tariff.

12) Who hires the managers of a corporation?

A) the board of directors

15) An example of an intermediate good would be

A) the bread that goes into a sub sandwich that is sold by Quiznos.

13) The interest payment on a bond is called

A) the coupon payment.

3) A sole proprietorship is

A) the easiest type of business to set up.

14) The "underground economy" is also referred to as

A) the informal sector.

3) Gross domestic product understates the total production of final goods and services because of

A) the underground economy.

5) Which of the following is included in both the U.S. GDP and U.S. GNP?

A) the value of all cars produced by General Motors in the United States

10) Depreciation is

A) the value of worn-out equipment, machinery, and buildings.

14) Refer to Table 8-27. What is the level of personal income for this economy?

B) $1,010 billion

11) Suppose that in 2013, the national income in the United States was $200 billion, depreciation

B) $215 billion.

11) Tanesha sells homemade candles over the Internet. Her annual revenue is $64,000 per year, the explicit costs of her business are $17,000, and the opportunity costs of her business are $22,000. What are the implicit costs of her business?

B) $22,000

5) Refer to Figure 7-1. Suppose the government allows imports of leather footwear into the

B) $24

12) Tanesha sells homemade candles over the Internet. Her annual revenue is $64,000 per year, the explicit costs of her business are $17,000, and the opportunity costs of her business are $22,000. What is her economic profit?

B) $25,000

8) Laura's Pizza Place incurs $800,000 per year in explicit costs and $100,000 in implicit costs. The restaurant earns $1.3 million in revenues and has $5 million in net worth. Based on this information, what is economic profit for Laura's Pizza Place?

B) $400,000

12) Refer to Table 8-2. Suppose that a simple economy produces only four goods and services:

B) $6,400.

18) Refer to Table 8-15. Consider the following data on nominal GDP and real GDP (values are

B) 105.1.

21) Refer to Table 7-6. If the actual terms of trade are 1 belt for 1.5 swords and 70 belts are traded,

B) 20

5) Refer to Table 8-12. Consider the following data on nominal GDP and real GDP (values are in

B) 2009.

12) Refer to Table 7-6. Prior to trade, what was the opportunity cost to produce 1 sword in

B) 4/5 of a belt

24) Refer to Table 7-6. If the actual terms of trade are 1 belt for 1.5 swords and 70 belts are traded,

B) 45

18) Refer to Table 7-6. If the actual terms of trade are 1 belt for 1.5 swords and 70 belts are traded,

B) 50

17) Refer to Table 7-6. If the actual terms of trade are 1 belt for 1.5 swords and 70 belts are traded,

B) 70

9) Recent estimates put the size of the underground economy in the United States at ________ of

B) 8 percent

20) Refer to Table 7-6. If the actual terms of trade are 1 belt for 1.5 swords and 70 belts are traded,

B) 95

3) Refer to Table 7-1. Use the table above to select the statement that accurately interprets the

B) Bill has an absolute advantage in picking berries and Rob has an absolute advantage in

6) A country in which a significant fraction of domestic production takes place in foreign-owned

B) GDP is much larger than GNP.

7) The value of what a U.S.-owned McDonald's produces in South Korea is included in the U.S.

B) GNP; GDP

8) Refer to Table 7-2. Select the statement that accurately interprets the data in the table.

B) Madison's opportunity cost for making tacos is less than Austin's.

14) Refer to Table 7-3. Select the statement that accurately interprets the data in the table.

B) Mateo has a comparative advantage in making spurs.

8) Refer to Table 7-6. Which country has a comparative advantage in producing belts?

B) Morocco

9) Refer to Figure 7-1. Suppose the government allows imports of leather footwear into the

B) R + S + T + U

9) Which of the following could cause nominal GDP to decrease, but real GDP to increase?

B) The price level falls and the quantity of final goods and services produced rises.

10) Which of the following could cause nominal GDP to increase, but real GDP to decrease?

B) The price level rises and the quantity of final goods and services produced falls.

10) Refer to Figure 7-1. Suppose the government allows imports of leather footwear into the

B) V

9) When Tesla, a U.S. company, purchases Italian-made Pirelli tires for its automobiles, the

B) a U.S. import and an Italian export.

4) Over the past several decades there has been a rapid growth in international trade. This growth has been due to all except one of the following factors. Which factor has not contributed to the growth of international trade?

B) a change in the tariffs charged on many goods

1) What is an inside director?

B) a member of a corporate board of directors that is also a manager of the business

1) In 2013, Ford Motor Company's sales were rising. These events were caused by

B) an economic expansion.

10) A member of a corporate board of directors that is also a manager of the business is known as

B) an inside director.

1) What are liabilities?

B) anything a person or a business owes to entities outside the business

6) Imports are goods and services bought domestically

B) but produced in other countries.

7) The person hired by a corporation's board of directors to run the day-to-day operations of the corporation is known as the

B) chief executive officer.

12) The best measure of the income households actually have available to spend is

B) disposable personal income.

4) Macroeconomics, as opposed to microeconomics, includes the study of what determines the

B) employment in the economy.

3) Protection in the form of tariffs create winners and losers. Winners include ________ and losers include ________.

B) firms sheltered from foreign competition; U.S. consumers and taxpayers

2) The output of Mexican citizens who work in Texas would be included in the

B) gross national product of Mexico.

14) A nonmonetary opportunity cost is called a(n) ________, while a cost that involves spending money is called a(n) ________.

B) implicit cost; explicit cost

5) The size of the underground economy would tend to increase if the government of a country

B) increased income tax rates.

5) If Southwest Airlines borrows $20 million from a bank to finance the renovation of their corporate offices, this is an example of

B) indirect finance.

12) Today, ________ of Goodyear's tire sales are in the North America.

B) less than 40 percent

12) Which is the least common type of business?

B) partnership

9) A corporation is owned by its

B) stockholders.

8) Suppose that nominal GDP in 2013 was less than real GDP in 2013. Given this information, we

B) the price level in 2013 was less than the price level in the base year.

2) The terms of trade refers to

B) the ratio at which a country can trade its exports for imports from other countries.

14) If a corporation earns a profit, how do owners of the firm share in the profit?

B) through dividend payments on shares of that firm's stock

10) Tanesha sells homemade candles over the Internet. Her annual revenue is $64,000 per year, the explicit costs of her business are $17,000, and the opportunity costs of her business are $22,000. What is her accounting profit?

C) $47,000

6) Refer to Table 8-13. Real GDP for Vicuna for 2009 using 2011 as the base year equals

C) $5,650.

Laura's Pizza Place incurs $800,000 per year in explicit costs and $100,000 in implicit costs. The restaurant earns $1.3 million in revenues. Based on this information, what is accounting profit for Laura's Pizza Place?

C) $500,000

21) Refer to Table 8-17. What is real GDP in 2013, using 2006 as the base year?

C) $6,360

3) Refer to Table 8-11. Real GDP for Tyrovia for 2013 using 2005 as the base year equals

C) $690.

11) Refer to Table 8-1. Suppose that a simple economy produces only four goods and services:

C) $8,750.

11) If a corporate bond with face value of $1,000 has an interest rate of eight percent paid once a year for a term of 30 years, what is the size of the coupon payment?

C) $80

15) Refer to Table 8-27. What is the level of disposable personal income for this economy?

C) $980 billion

10) Refer to Table 7-6. Prior to trade, what was the opportunity cost to produce 1 belt in

C) 1.25 swords

19) Refer to Table 7-6. If the actual terms of trade are 1 belt for 1.5 swords and 70 belts are traded,

C) 105

15) If nominal GDP is $5 trillion and real GDP is $4 trillion, the GDP deflator is

C) 125.

10) Refer to Table 7-2. Select the statement that accurately interprets the data in the table.

C) Austin has a comparative advantage in making empanadas.

7) Which of the following statements about the underground economy is true?

C) Excluding underground economy production from measured GDP causes errors in GDP

16) Which of the following equations correctly measures GDP in an economy?

C) GDP = C + I + G + NX

11) Which of the following statements is true?

C) GDP accounting rules do not adjust for production that pollutes the economy.

7) Refer to Table 7-2. Select the statement that accurately interprets the data in the table.

C) Madison has an absolute advantage in making empanadas and tacos.

4) Which of the following takes place in the direct finance market?

C) Ownership in corporations is sold in the form of preferred stock.

6) Refer to Figure 7-1. Suppose the government allows imports of leather footwear into the

C) Q2

11) Which of the following countries is not one of the top three exporting countries in the world?

C) South Korea

8) Which of the following goods is directly counted in GDP?

C) a 12-inch Subway sandwich purchased by a student

8) When Sophie, a French citizen, purchases a Dell computer in Paris that was produced in Texas,

C) a U.S. export and an French import.

3) Countries gain from specializing in producing goods in which they have ________ and trading

C) a comparative advantage; a comparative advantage

2) An explicit cost is

C) a cost that involves spending money.

15) All of the following would be considered explicit costs of operating a business except

C) a normal rate of return for investors.

6) What do economists call the situation where a hired manager does not have the same interests as the owners of the business?

C) a principal-agent problem

15) Economists refer to the conflict between the interests of shareholders and the interests of top management as

C) a principal-agent problem.

5) A tax imposed by a government on imports of a good into a country is called

C) a tariff.

13) A firm's net income is also its

C) accounting profit.

As a form of business, a partnership

C) cannot issue stock.

Which type of business is the most difficult to se

C) corporation

1) When the U.S. government places a tariff on a product, such as the tariff on tires imported from China, the quantity of the product imported will generally ________ and the price paid by consumers for the product will generally ________

C) decrease; increase

8) The informal sector can be a significant drag on the economies of developing countries because

C) do not pay taxes to the government.

2) The central role of ________ in a market economy is bringing together savers and borrowers.

C) financial intermediaries

4) If an American firm opens a production facility in India, the total value of the production will

C) gross domestic product of India.

9) National income equals gross domestic product

C) minus the consumption of fixed capital.

14) Real GDP will increase

C) only if the quantity of final goods and services produced rises.

1) Gross national product, GNP, of the United States is the market value of all final goods and

C) produced by citizens of the United States anywhere in the world.

2) Trade restrictions tend to preserve ________ in the protected industries and lead to ________ in other industries.

C) relatively few jobs; job losses

14) Who selects the board of directors of a corporation?

C) stockholders

2) In 2013, the U.S. auto industry experienced rising sales. The automobile industry was

C) the business cycle.

8) By tying the salaries of top corporate managers to the price of the corporation's stock, corporations hope to avoid

C) the principal-agent problem.

13) If prices in the economy rise, then

C) the purchasing power of a dollar declines.

4) Which of the following is an example of an implicit cost a firm might incur?

C) the rental value of the office space the company owns and uses for itself

17) Gross national product is defined as

C) the value of final goods and services produced by residents of the United States even if the

1) Nominal GDP is GDP in a given year

C) valued in the prices of that year.

13) Refer to Table 8-3. Consider the data above (in billions of dollars) for an economy: Gross

D) $1,200.

19) Refer to Table 8-17. What is nominal GDP in 2013?

D) $7,035

15) Refer to Table 7-6. All of the following are terms of trade that could possibly benefit both

D) 1 belt : 2.25 swords

16) Refer to Table 7-6. All of the following are terms of trade that could possibly benefit both

D) 1/4 of a belt : 1 sword

9) Refer to Table 7-6. Prior to trade, what was the opportunity cost to produce 1 belt in Estonia?

D) 2 swords

How do a sole proprietorship and a corporation differ?

D) All of these are differences between the two types of businesses.

8) What is different about buying stocks and buying bonds?

D) All these are differences between stocks and bonds.

1) How can a proprietorship or partnership raise funds for expansion?

D) Any of these would generate funds for expansion.

14) Which of the following statements is false?

D) Because the cost of labor used on farms is so high, the United States exports very little of its

11) Refer to Table 7-3. Select the statement that accurately interprets the data in the table.

D) Celeste has an absolute advantage in making saddles.

4) The first discussion of comparative advantage appears in a book written by

D) David Ricardo.

6) Southwest Airlines wants to raise $20 million to finance the renovation of their corporate offices, and the company wishes to raise the funds through direct finance. Which of the following methods could it use?

D) It could choose either A or B.

9) Refer to Table 7-2. Select the statement that accurately interprets the data in the table.

D) Madison has a comparative advantage in making tacos.

1) Which of the following must a firm in a market economy do today to succeed?

D) Market firms today must do all of these things.

2) Corporate governance involves the way in which

D) a corporation is structured.

7) A bond is a financial security that represents

D) a promise to repay a fixed amount of funds.

2) Trade that is within a country or between countries is based on the principle of

D) comparative advantage.

11) The way in which a corporation is structured and the impact a corporation's structure has on the firm's behavior is referred to as

D) corporate governance.

10) Payments by a corporation to its shareholders are known as

D) dividends.

13) "Household production" refers to

D) goods and services people produce for themselves.

14) A final good is one that

D) is purchased by its final user.

1) The Philippines and Vietnam have roughly the same size population. Suppose the GDP of the

D) it is not possible to make a good comparison of the economic well being of a typical individual

16) The GDP deflator is the

D) ratio of nominal GDP to real GDP multiplied by 100.