Macro: exams 1-2 questions

Which of the following is not a determinant of the long-run level of real GDP? a. Available stock of human capital b. The price level c. The amount of capital used by firms d. Available technology

b. The price level

Who gets scarce resources in a market economy? Whoever the government decides gets them b. Whoever is willing and able to pay the price c. Whoever wants them d. The government

b. Whoever is willing and able to pay the price

An example of a transfer payment is Military spending Social Security benefits Government debt Infrastructure spending

social security benefits

Which of the following is an example of a capital input? a. A share of stock b. An hour of a worker's time c. $50,000 d. A computer

a computer

A bank's reserve ratio is 8 percent and the bank has $1,000 in deposits. Its reserves amount to

$80

Suppose a basket of goods and services has been selected to calculate the CPI and Year 1 has been selected as the base year. In Year 1, the basket's cost was $50; in Year 2, the basket's cost was $52; and in Year 3, the basket's cost was $55. The value of the CPI in Year 3 was

110

Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2017. Suppose the price index was 17.6 in 1944 and 218.4 in the current year. Refer to Scenario 24-1. Sue Holloway's 1944 income in current year dollars is

148,909

Consider an economy that produces only chocolate bars. In year 1, the quantity produced is 2 bars and the price is $4. In year 2, the quantity produced is 4 bars and the price is $6. In year 3, the quantity produced is 6 bars and the price is $8. If year 1 is the base year, then what is the value of Real GDP in year 3?

24

If the reserve ratio is 4 percent, then the money multiplier is

25

The nominal interest rate is 5 percent and the inflation rate is 2 percent. What is the real interest rate?

3%

Suppose the banking system currently has $400 billion in reserves, the reserve requirement is 8 percent, and excess reserves amount to $5 billion. What is the level of deposits?

4,937.5 billion

If the MPC = 4/5, then the government purchases multiplier is

5

In a market economy, who makes the decisions that guide most economic activity?

Firms and households

Which of the following is an example of barter? a. A barber gives a plumber a haircut in exchange for the plumber fixing the barber's leaky faucet. b. A parent gives a teenager a $10 bill in exchange for her babysitting services. c. A doctor performs surgery on a patient whose insurance pays 100% of the bill. d. A homeowner gives an exterminator a check for $50 in exchange for extermination services.

a. A barber gives a plumber a haircut in exchange for the plumber fixing the barber's leaky faucet.

For which of the following individuals would the opportunity cost of going to college be highest?

a. A famous, highly paid actor who wants to take time away from show business to finish college and earn a degree

Which of the following is an example of crowding out? a. An increase in government spending increases interest rates, causing investment to fall. b. A decrease in private savings increases interest rates, causing investment to fall. c. A decrease in the money supply increases interest rates, causing investment to fall. d. An increase in taxes increases interest rates, causing investment to fall.

a. An increase in government spending increases interest rates, causing investment to fall.

Wanda quit her job because she was unhappy at work. Arnold was laid off from his landscaping job because his company was downsizing. Who is eligible for unemployment insurance benefits?

a. Arnold but not Wanda

Which of the following functions as both a store of value and a medium of exchange? a. Cash but not stocks b. Cash and stocks c. Neither cash nor stocks d. Stocks but not cash

a. Cash but not stocks

Octavia does not currently have a job, but she has applied for several jobs in the previous week. Eve is an unpaid stay-at-home mom who has not searched for work in recent years. Who does the Bureau of Labor Statistics count as "not in the labor force"?

a. Eve but not Octavia

Which of the following is an explanation for the existence of frictional unemployment? a. Job search b. Minimum-wage laws c. Unions d. Efficiency wages

a. Job search

If a decrease in income increases the demand for a good, then the good is a. an inferior good. b. a substitute good. c. a normal good. d. a complementary good.

a. an inferior good.

Economic expansions in Europe and China would cause the U.S. price level a. and real GDP to rise. b. and real GDP to fall. c. to fall and real GDP to rise. d. to rise and real GDP to fall.

a. and real GDP to rise.

Suppose that a large number of people who used to work or seek work no longer do either. Other things the same, this makes a. both the number of people unemployed and in the labor force fall. b. the number of people unemployed rise but makes the labor force fall. c. the number of people unemployed fall but does not change the labor force. d. the number of people unemployed rise but does not change the labor force.

a. both the number of people unemployed and in the labor force fall.

In the United States, if the price of imported oil rises so that the prices of gasoline and heating oil rise, then the a. consumer price index rises much more than does the GDP deflator. b. GDP deflator rises much more than does the consumer price index. c. consumer price index rises slightly more than does the GDP deflator. d. GDP deflator and the consumer price index rise by about the same amount

a. consumer price index rises much more than does the GDP deflator.

Suppose you like to make, from scratch, pies filled with bananas and vanilla pudding. You notice that the price of bananas has increased. As a result, your demand for vanilla pudding would

a. decrease.

The labor force equals the

a. number of people employed plus the number of people unemployed.

Economists use the term inflation to describe a situation in which a. the economy's overall price level is rising. b. the economy's overall price level is high, but not necessarily rising. c. the economy's overall output of goods and services is rising faster than the economy's overall price level. d. some prices are rising faster than others.

a. the economy's overall price level is rising.

The unemployment rate is computed as (formula)

as the number of unemployed divided by the labor force, all times 100.

Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market? a. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. b. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous. c. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. d. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous

b. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

If Korea is capable of producing either shoes or soccer balls or some combination of the two, then a. it would be impossible for Korea to have an absolute advantage over another country in both products. b. Korea's opportunity cost of shoes is the inverse of its opportunity cost of soccer balls. c. it would be difficult for Korea to benefit from trade with another country if Korea is efficient in the production of both goods. d. Korea should specialize in the product in which it has an absolute advantage.

b. Korea's opportunity cost of shoes is the inverse of its opportunity cost of soccer balls.

You pay for cheese and bread from the deli with currency. Which function of money does this best illustrate? a. Unit of account b. Medium of exchange c. Liquidity d. Store of value

b. Medium of exchange

Which of the following is correct? a. The Federal Reserve has 12 regional banks. The Board of Governors has up to 12 members who serve 7-year terms. b. The Federal Reserve has 12 regional banks. The Board of Governors has up to 7 members who serve 14-year terms. c. The Federal Reserve has 14 regional banks. The Board of Governors has up to 12 members who serve 7-year terms. d. The Federal Reserve has 14 regional banks. The Board of Governors has up to 7 members who serve 14-year terms.

b. The Federal Reserve has 12 regional banks. The Board of Governors has up to 7 members who serve 14-year terms.

Which of the following would shift the supply of Green Bay Packers football jerseys to the left? a. The price of the jerseys increases by $15. b. The cost of the fabric used to make the jerseys increases. c. The technology of sewing machines used to make the jerseys improves. d. The Green Bay Packers make it to the Super Bowl.b. The cost of the fabric used to make the jerseys increases.

b. The cost of the fabric used to make the jerseys increases.

A bank loans Kellie's Print Shop $350,000 to remodel a building near campus to use as a new store. On their respective balance sheets, this loan is a. an asset for the bank and a liability for Kellie's Print Shop. The loan does not increase the money supply. b. an asset for the bank and a liability for Kellie's Print Shop. The loan increases the money supply. c. a liability for the bank and an asset for Kellie's Print Shop. The loan increases the money supply. d. a liability for the bank and an asset for Kellie's Print Shop. The loan does not increase the money supply.

b. an asset for the bank and a liability for Kellie's Print Shop. The loan increases the money supply.

For the purpose of calculating GDP, investment is spending on a. capital equipment, inventories, and structures, excluding household purchases of new housing. b. capital equipment, inventories, and structures, including household purchases of new housing. c. real estate and financial assets such as stocks and bonds. d. stocks, bonds, and other financial assets.

b. capital equipment, inventories, and structures, including household purchases of new housing.

When two variables move in opposite directions, the curve relating them is _______ and the variables are ______ related

b. downward sloping, and we say the variables are negatively related.

The CPI differs from the GDP deflator in that a. the CPI is a price index, while the GDP deflator is an inflation index. b. increases in the prices of foreign produced goods that are sold to U.S. consumers show up in the CPI but not in the GDP deflator. c. increases in the prices of domestically produced goods that are sold to the U.S. government show up in the CPI but not in the GDP deflator. d. substitution bias is not a problem with the CPI, but it is a problem with the GDP deflator.

b. increases in the prices of foreign produced goods that are sold to U.S. consumers show up in the CPI but not in the GDP deflator.

If the reserve requirement is 10 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $500, it a. must increase required reserves by $100. b. must increase required reserves by $50. c. will initially see reserves decrease by $500. d. will be able to use this deposit to make new loans amounting to $500.

b. must increase required reserves by $50.

Consider a small economy in which consumers buy only two goods: pretzels and cookies. In order to compute the consumer price index for this economy for two or more consecutive years, we assume that a. the number of pretzels bought by the typical consumer is equal to the number of cookies bought by the typical consumer in each year. b. neither the number of pretzels nor the number of cookies bought by the typical consumer changes from year to year. c. neither the price of pretzels nor the price of cookies changes from year to year. d. the percentage change in the price of pretzels is equal to the percentage change in the price of cookies from year to year.

b. neither the number of pretzels nor the number of cookies bought by the typical consumer changes from year to year.

You saved $500 in currency in your piggy bank to purchase a new laptop. The $500 you kept in your piggy bank illustrates money's function as a _______. The laptop's price is posted as $500. The $500 price illustrates money's function as a _____. You use the $500 to purchase the laptop. This transaction illustrates money's function as a ______. a. store of value, medium of exchange, unit of account b. store of value, unit of account, medium of exchange c. medium of exchange, store of value, unit of account d. medium of exchange, unit of account, store of value

b. store of value, unit of account, medium of exchange

Which of the following would cause stagflation? a. Aggregate supply shifts right. b. Aggregate demand shifts right. c. Aggregate supply shifts left. d. Aggregate demand shifts left.

c. Aggregate supply shifts left.

A bank has an 8 percent reserve requirement, $10,000 in deposits, and has loaned out all it can, given the reserve requirement. a. It has $1,250 in reserves and $8,750 in loans. b. It has $8,000 in reserves and $2,000 in loans. c. It has $800 in reserves and $9,200 in loans. d. It has $80 in reserves and $9,920 in loans.

c. It has $800 in reserves and $9,200 in loans.

Which of the following is included in M2? a. Credit cards b. Corporate bonds c. Money market mutual funds d. Large time deposits

c. Money market mutual funds

Which of the following groups meets to discuss changes in the economy and determine monetary policy? a. The President of the United States b. Congress c. The Federal Open Market Committee d. The Board of Directors from each of the 12 regional Federal Reserve Banks

c. The Federal Open Market Committee

What basket of goods and services is used to construct the CPI? . The least expensive and the most expensive goods and services in each major category of consumer expenditures b. Only food, clothing, transportation, entertainment, and education c. The goods and services that are typically bought by consumers as determined by government surveys d. A random sample of all goods and services produced in the economy

c. The goods and services that are typically bought by consumers as determined by government surveys

Other things the same, if reserve requirements are increased, the reserve ratio a. decreases, the money multiplier increases, and the money supply increases. b. decreases, the money multiplier decreases, and the money supply increases. c. increases, the money multiplier decreases, and the money supply decreases. d. increases, the money multiplier increases, and the money supply increases.

c. increases, the money multiplier decreases, and the money supply decreases.

The federal funds rate is the a. interest rate at which the Federal Reserve makes short-term loans to banks. b. percentage of deposits that banks must hold as reserves. c. interest rate at which banks lend reserves to each other overnight. d. percentage of face value that the Federal Reserve is willing to pay for Treasury Securities.

c. interest rate at which banks lend reserves to each other overnight.

In 2010 the U.S. government was running a large deficit. Some were concerned that pressures might be put on the Federal Reserve to purchase government bonds to help the government finance this deficit. If the Fed were to buy government bonds to help the government finance its expenditures, then the price level would a. fall, so the value of money would fall. b. fall, so the value of money would rise. c. rise, so the value of money would fall. d. rise, so the value of money would rise.

c. rise, so the value of money would fall.

Cyclical unemployment refers to a. the portion of unemployment created by wages set above the equilibrium level. b. the portion of unemployment created by job search. c. short-run fluctuations around the natural rate of unemployment. d. changes in unemployment due to changes in the natural rate of unemployment.

c. short-run fluctuations around the natural rate of unemployment.

Suppose there are only two people in the world. Each person's production possibilities frontier also represents his or her consumption possibilities when a. neither person faces trade-off. b. the frontiers are bowed out. c. they choose not to trade with one another. d. the frontiers are straight lines.

c. they choose not to trade with one another.

In order to maintain stable prices, a central bank must a. sell indexed bonds. b. keep unemployment low. c. tightly control the money supply. d. maintain low interest rates.

c. tightly control the money supply.

A steel company sells some steel to a bicycle company for $150. The bicycle company uses the steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute a. $150 to GDP. b. $400 to GDP. c. between $250 and $400 to GDP, depending on the profit earned by the bicycle company when it sold the bicycle. d. $250 to GDP.

d. $250 to GDP.

Which of the following events would unambiguously cause a decrease in the equilibrium price of cotton shirts? a. A decrease in the price of wool shirts and an increase in the price of raw cotton b. An increase in the price of wool shirts and a decrease in the price of raw cotton c. An increase in the price of wool shirts and an increase in the price of raw cotton d. A decrease in the price of wool shirts and a decrease in the price of raw cotton

d. A decrease in the price of wool shirts and a decrease in the price of raw cotton

Which of the following policies would be advocated by someone who wants the government to follow an active stabilization policy when the economy is experiencing severe unemployment? a. Decrease the money supply b. Increase taxes c. Increase interest rates d. Increase government expenditures

d. Increase government expenditures

If the money multiplier is 3 and the Fed buys $50,000 worth of bonds, what happens to the money supply?

d. It increases by $150,000.

Martin, a U.S. citizen, travels to Mexico and buys a newly manufactured motorcycle made there. His purchase is included in a. U.S. GDP, but it is not included in Mexican GDP. b. both Mexican GDP and U.S. GDP. c. neither Mexican GDP nor U.S. GDP. d. Mexican GDP, but it is not included in U.S. GDP

d. Mexican GDP, but it is not included in U.S. GDP.

On a given morning, Franco sold 40 pairs of shoes for a total of $800 at his shoe store. a. Both the $800 and the quantity of shoes are real variables. b. The $800 is a real variable. The quantity of shoes is a nominal variable. c. Both the $800 and the quantity of shoes are nominal variables. d. The $800 is a nominal variable. The quantity of shoes is a real variable.

d. The $800 is a nominal variable. The quantity of shoes is a real variable.

The CPI is a measure of the overall cost of the goods and services bought by a typical consumer, and the CPI is computed and reported by the Department of the Treasury. b. typical consumers and typical business firms, and the CPI is computed and reported by the Department of the Treasury. c. typical consumers and typical business firms, and the CPI is computed and reported by the Bureau of Labor Statistics. d. a typical consumer, and the CPI is computed and reported by the Bureau of Labor Statistics.

d. a typical consumer, and the CPI is computed and reported by the Bureau of Labor Statistics.

The "invisible hand" refers to

d. how the decisions of households and firms lead to desirable market outcomes.

The consumer price index is used to

d. monitor changes in the cost of living over time.

Frictional unemployment is thought to explain relatively a. long spells of unemployment, as is structural unemployment. b. long spells of unemployment, while structural unemployment is thought to explain relatively short spells of unemployment. c. short spells of unemployment, as is structural unemployment. d. short spells of unemployment, while structural unemployment is thought to explain relatively long spells of unemployment.

d. short spells of unemployment, while structural unemployment is thought to explain relatively long spells of unemployment.

Minimum wages create unemployment in markets where they create a a. surplus of labor. Unemployment of this type is called frictional. b. shortage of labor. Unemployment of this type is called frictional. c. shortage of labor. Unemployment of this type is called structural. d. surplus of labor. Unemployment of this type is called structural.

d. surplus of labor. Unemployment of this type is called structural.

Money is a. the most liquid asset and a perfect store of value. b. not the most liquid asset but a perfect store of value. c. neither the most liquid asset and nor a perfect store of value. d. the most liquid asset but an imperfect store of value.

d. the most liquid asset but an imperfect store of value.

Aggregate demand includes a. the quantity of goods and service the government wants to buy, but not the quantity of goods and services households, firms, or customers abroad want to buy. b. the quantity of goods and services households and firms want to buy, but not the quantity of goods and services the government wants to buy. c. neither the quantity of goods and services the government, households, nor firms want to buy nor the quantity of goods and services customers abroad want to buy. d. the quantity of goods and services the government, households, firms, and customers abroad want to buy.

d. the quantity of goods and services the government, households, firms, and customers abroad want to buy.

When a country has a comparative advantage in producing a certain good, a. the country should produce just enough of that good for its own consumption. b. the country's opportunity cost of that good is high relative to other countries' opportunity costs of that same good. c. the country should import that good. d. then specializing in the production of that good and trading for other goods could allow that country to consume at a point beyond its production possibilities frontier .

d. then specializing in the production of that good and trading for other goods could allow that country to consume at a point beyond its production possibilities frontier .

(T/F) A movement along a supply curve is called a change in supply while a shift of the supply curve is called a change in quantity supplied.

false

(T/F) A production possibilities frontier has a bowed shape if the opportunity cost is constant at all levels of output.

false

(T/F) As the price level falls, the value of money falls.

false

(T/F) Economics is the study of how society allocates its unlimited resources.

false

(T/F) GDP is adjusted to reflect changes in the quality of the environment such as changes in air and water quality.

false

(T/F) Harry is a computer company executive, earning $200 per hour managing the company and promoting its products. His daughter Quinn is a high school student, earning $6 per hour helping her grandmother on the farm. Harry's computer is broken. He can repair it himself in one hour. Quinn can repair it in 10 hours. Harry's opportunity cost of repairing the computer is lower than Quinn's.

false

(T/F) Surpluses drive price up, while shortages drive price down.

false

(T/F) The content of the basket of goods and services used to compute the CPI changes every month.

false

(T/F) U.S. GDP includes estimates of the value of items that are produced and consumed at home, such as housework and car maintenance.

false

(T/F) When the value of money is on the vertical axis, the money supply curve slopes upward because an increase in the value of money induces banks to create more money.

false

(T/F) An economy's natural rate of unemployment refers to the amount of unemployment that the economy normally experiences.

true

(T/F) GDP adds together many different kinds of products into a single measure of the value of economic activity by using market prices.

true

(T/F) Hyperinflations are associated with governments printing money to finance expenditures.

true

(T/F) If exports are $500, GDP is $8000, government purchases are $1200, imports are $700, and investment is $800, then consumption is $6200.

true

(T/F) If nominal GDP is $10,000 and real GDP is $8,000, then the GDP deflator is 125.

true

(T/F) If the GDP Deflator is 100 in year1, 110 in year2 and 125 in year 3, then the inflation rate between years 2 and 3 is 13.6%.

true

(T/F) If the GDP deflator in 2009 was 160 and the GDP deflator in 2010 was 180, then the inflation rate in 2010 was 12.5%.

true

(T/F) In a market, the price of any good adjusts until quantity demanded equals quantity supplied.

true

(T/F) Net Exports = Value of Country's exports - Value of country's imports.

true

(T/F) The opportunity cost of working out for one hour is the value of the next-best activity that you could have done in that hour.​

true