MACRO FINAL

A country purchases $110 billion of foreign-produced goods and services and sells $120 billion of domestically produced goods and services to foreign countries. It has imports of

$110 billion and a trade surplus of $10 billion

If the exchange rate is 7 Canadian dollars per US dollar and a drink form toronato costs 280 Canadian dollars then how many US dollars does it take to buy a drink in Rio?

$40 and your purchase will increase Canada's net exports

Suppose that you have received $650 as a birthday gift. You can spend it today or you can put the money in a savings account for a year and earn 2 percent interest. The opportunity cost of spending the money today, in terms of what you could have after one year is

$663

An increase in the expected price level shifts

...the SRAS to the left (but not the LRAS)

The nominal exchange rate is about 2 Aruban florin per dollar. If a basket of goods in the US cost $50, how many florins must a basket of goods in Aruba cost for purchasing power parity to hold?

100 florin

If a U.S. dollar purchases 4 Argentinean pesos, and a gallon of milk costs $3 in the U.S. and 6 pesos in Argentina what is the real exchange rate?

2 gallons of Argentinean milk/1 gallon of U.S. milk

If the CPI was 125 at the end of 2018 and 132.5 at year end 2019 inflation during 2019 was

6% (132.5-125/125)

As the US dollar appreciates against foreign currencies the US —- curve shifts —- resulting in an —— in the US price level and a—- in real GDP in the US

AD, leftward, decrease, decrease

Which of the following is not a factor that can shift the short run aggregate supply curve

Changes in price level

Specializing in the productions of a good or service in which one has CA enables a country to do which of the following

Consume a combination of goods that lies outside its own PPF

The initial impact of an increase in an investment tax credit is to shift aggregate

Demand right

Amount the ways to be classified as unemployed by the Bureau of Labor Statistics, a person must not be working

Have been actively looking for work within the last four weeks and currently be available for work

Teenagers ar emote frequent unemployed spells and spend more time searching for jobs. Other things the same, this means that teenagers have a

Higher unemployment rate. If a larger portion of the adult population were teenagers, the natural rate of unemployment would be higher

Aggregate demand includes

The quantity of goods and services the government, households, firms and customers want to buy

Which of the following would not increase in response to a decrease in the price of ironing boards?

The quantity of irons supplied at each possible price of irons

Which of the following could explain a decrease in the equilibrium interest rate and an increase in equilibrium quantity of loanable funds?

The supply of loanable funds shifted to the right.

Which of the following is not correct

The unemployment rate occasionally falls to zero.

When an economy is in a recession

The unemployment rate will rise above its natural rate

A person who argues that inflation "robs" is of the purchasing power of our pay checks should also consider that inflation

Will increase the size of paychecks as well as the prices of goods

Which of the following changes would not shift the demand curve for a good or service

a change in the price of the good or service

Which of the following changes would not shift the supply curve for a good or service

a change in the price of the good or service

Which of the following events would unambiguously cause a decrease in the equilibrium price of cotton shirts?

a decrease in the price of wool shirts and a decrease in the price of raw cotton

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 Bureau of Labor Statistics.

classical dichotomy and monetary neutrality are represented graphically by

a vertical long-run aggregate-supply curve.

Other things the same, which of the following would increase productivity

an increase in either human or physical capital

Which of the following would necessarily create a surplus at the original equilibrium interest rate in the loanable funds market

an increase in the supply of or a decrease in the demand for loanable funds

Which of the following includes everyone in the adult population that the Bureau of Labor Statistics counts as unemployed

anyone who is not employed, is available for work, has looked for work in the past four weeks, and anyone who is waiting to be recalled from a job from which they have been laid off.

Economists assume that individuals

are rational and respond to incentives

Suppose that a large number of people who used to work or seek work no longer do either. Other things the same, this makes

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

A Chinese company exchanges yuan (Chinese currency) for dollars. It uses these dollars to purchase scrap metal from a U.S. company. As a result of these transactions, Chinese net exports

decrease, and U.S. net capital outflow decreases.

If a country sells fewer goods and services abroad than it buys from other countries, it is said to have a trade

deficit and negative net exports.

If U.S. speculators gained greater confidence in foreign economies so that they wanted to move more of their wealth into foreign countries, the dollar would

depreciate which would cause aggregate demand to shift right.

Other things the same, if the exchange rate changes from 35 Thai bhat per dollar to 21 Thai bhat per dollar, then the dollar has

depreciated and so buys fewer Thai goods.

Which of the following would shift a nations PPF outward?

discovering a cheap way to convert sunshine into electricity

When the government implements programs such as progressive income tax rates, which of the following is likely to occur?

equality is increased and efficiency is decreased

Suppose the economy is in a long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in taxes then in short run real GDP will

fall and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be lower.

If the exchange rate is expressed as euros/dollar the dollar is said to depreciate against the euro if the exchange rate

falls. Other things the same, it will cost fewer euros to buy U.S. goods.

If the exchange rate is expressed as euros/dollar, the dollar is said to depreciate against the euro if the exchange rate

falls. Other things the same, it will cost fewer euros to buy U.S. goods.

An increase in the exchange rate value of the USD relative to the Japanese Yen, will cause US imports from Japan to

increase and exports to Japan to decrease

If muffins and bagels are substitutes, a higher price for bagels would result in a(n)

increase in the demand for muffins

efficiency wages

increase productivity but increase unemployment

In a closed economy if Y, C and T remained the same, a decrease in G would

increase public saving but not private saving.

Currently you purchase ten frozen pizza per month. You will graduate from college in December, and you will start a new job in January. You have no plans to purchase frozen pizzas in January. For you, frozen pizzas are a(n)

inferior good

Net capital outflow

is always equal to net exports.

If society decides it wants more of one good and all resources are fully utilized, then

it has to give up some of another good and incur some opportunity costs.

The catch up effect refers to the idea that

it is easier for a country to grow fast and so catch-up if it starts out relatively poor.

Purchasing-power parity theory does not hold at all times because

many goods are not easily transported. the same goods produced in different countries may be imperfect substitutes for each other.

A depreciation of the US real exchange rate induces US consumers to buy

more domestic goods and fewer foreign goods

You are planning a graduation trip to Mexico. Other things the same, if the dollar appreciates relative to the peso, then the dollar buys

more pesos. Your hotel room in Mexico will require fewer dollars.

Suppose that real interest rates in the U.S. rise relative to real interest rates in other countries. This increase would make foreigners

more willing to purchase U.S. bonds, so U.S. net capital outflow would fall.

Educated people may generate ideas that increase production. These ideas

produce a return to society from education that is greater than the return to the individual.

One variable responsible for most significant explanation of variations in living standards around the world is

productivity

Assume MPC is .8. Assume there is a multiplier effect and the total crowding out effect is $14 B. An increase in government purchases of $90B will shift AD to the

right by $436B

The dollar is said to appreciate against the Euro if the exchange rate

rises. Other things the same, it will cost more euros to buy U.S. goods.

Long term bonds are

riskier than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds.

Alana decides to spend 2 hours working overtime rather than going shopping with her friends. She earns $11 per hour for overtime work. Her opportunity cost of working is

the enjoyment she would have received had she gone shopping.

Ahmet decided to increase the number of stocks in his portfolio. In doing so, Ahmet reduced

the firm-specific risk, but not the market risk of his portfolio.

Of the following groups, who is eligible for unemployment insurance benefits

the unemployed who were laid off because their previous employers no longer needed their skills

The points outside the PPF are

unattainable

Your boss gives you an increase in the number of dollars you earn per hour. This increase in pay makes

your nominal wage increase. If your nominal wage rose by a greater percentage than the price level, then your real wage also increased.

Suppose that a country imports $120 million worth of goods and services and exports $160 million worth of goods and services. What is the value of net exports

40 million

Suppose that the adult population in the country of Atlantis is 140 million. If 90 million people are employed and 10 million and unemployed

40 million are not in the labor force

Which of the following would increase US GDP

A German auto producer begins to produce and sell cars in Mississippi

Which of the following is an example of of a capital output 1) a computer 2) the finances necessary for firms to produce their products 3) a share of stock 4) the money households use to purchase firms output

A computer

For an oil-importing country, the immediate effect of a supply shock caused by an increase in the price of imported oil would tend to be

A decrease in real output and an increase in the general level of prices

Which of the following properly describes the interest rate effect of AD

A lower price level leads to lower money demand, lower money demand leads to lower interest rates,

You lose your job and as a result you buy fewer ITunes music downloads. This shows that you consider ITunes music downloads to be

A normal good

If the consumer sentiment index turns down sharply over a period of several months, which of the following is most likely to occur in the near future

A reduction in AD and contraction in real output

If there is an unanticipated decrease in AD, which of the following is most likely to occur

A reduction in employment

Investment is:

A small part of real GDP, yet it accounts for a large share of the fluctuation in real GDP

When society requires that firms reduce pollution, there is

A trade off because of reduced incomes to the firms owners and workers

When the economy is operating at an output rate below its full-employment level the

Actual level of unemployment will exceed the natural rate on unemployment

Which of the following causes stagflation

Aggregate supply shifts left

An important difference between the GDP deflator and the consumer price index is that the GDP deflator reflects the prices of

All final goods and services produced domestically , whereas the consumer price index reflects the prices of the typical bundle of goods and services bought by consumers

Which of the following events shifts AD rightward

An increase in government expenditures, but not a change in the price level

Which of the following demonstrates the law of demand?

Ashlyn buys more donut holes at $0.25 per donut hole than at $0.50 per donut hole, other things equal.

Comparative advantage means the ability to produce a good or service

At a lower OC than any other producer

Consider two people who are currently out of work. Tim is not looking for work because there have been many job cuts where he lives, and he doesn't think it likely that he will find work. Bev is not currently looking for work, but she would like a job, and she has looked for work in the past. The Bureau of Labor Statistics considers

Both Tim and Bev to be marginally attached workers

Other things the same, as the price level decreases it induces greater spending on

Both net exports and investment

Which of the following provide benefits to society at large and not just to the person(a) who pursues it?

Both technological knowledge that is a public good and education

If consumers often purchase croissants to eat while they drink their cappuccinos at local coffee shops, what would happen to the equilibrium price and quantity of cappuccinos if the price of croissants rises?

Both the equilibrium price and quantity would decrease.

In 2009, Congress passed legislation proving states with funds to build roads and bridges. It also instituted tax cuts. Which of these shifts AD right?

Both the increased funding for states and the tax cuts

Suppose there is a flood in St Louis Missouri, that destroys several beer bottling facilities. Which of the following would not be a direct result of this event

Buyers would not be willing to buy as much as before at each relevant price.

If Alan were risk-averse then he will always

Choose not to play a game when he has a 50 perfect chance of winning $5 and a 50 percent change of losing $5

Which of the following statements about comparative advantage is not true

Comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resources.

Your professor loves her work, teaching math. She has been offered other positions in he corporate world that would increase her income by 15%, but she has decided to continue working as a professor . Her decision would not change unless the marginal...

Cost of teaching increased

Accurate measurement of GDP is important to business decision makers because this information will help them better determine the

Course of the economy and the direction of demand for their products

If the price level in the US and in the UK are unchanged, but the nominal exchange rate (Pounds sterling per USD) falls, then the US dollar

Depreciates and so US net exports falls

Suppose a country's net capital outflow does not change, but it's investment declines by $420 billion. It's savings most have

Fallen by 420 billion, but it's net exports are unchanged

Other things the same a decrease in the Australian real interest rate induces

Foreigners to buy fewer Australian assets, which increases Australian net capital outflow

Which of the following statements represents a correct and sequentially accurate economic explanation

Good X is an inferior food and food Y is a substitute for X. Income rises, the demand for X falls, the price of X falls, and the demand for Y falls

The invisible hands ability to coordinate the decision of the firms and households in the economy can be hindered by

Government actions they distort prices

Suppose that the real return from operating factories in France rises relative to the real rate of return in the US. Other things the same, this will

Increase US net capital outflow and decrease French net capital outflow

With the AD-AS model, an unanticipated increase in SRAS will cause real output to

Increase and general level of prices to fall

When Microsoft, a US company, establishes a distribution center in Canada, US net capital outflow

Increase because Microsoft makes a foreign direct investment in Canada

When tax decrease, interest rates

Increase, making the change in AD smaller

As women's wages have risen relative to men's wages, the opportunity cost to women of doing housework has ________ than has the opportunity cost to men.

Increased more

A decrease in taxes

Increases AD in the short run and increases the price level in the long run

Prices direct economy activity in a market economy by 1) reducing scarcity of the goods and services produced 2) influencing the actions of buyers and sellers 3) allocating goods and services in the most equitable way 4) reducing OC of goods and services produced

Influencing the actions of buys and sellers

Which of the following best illustrates diversification?

Instead of holding only the stocks of companies engaged in the banking business, a person decides to hold stock in a number of different companies producing different goods and services.

Which of the following statements about the term of a bond is correct?

Interest rates on long term bonds are usually higher than interest rates on short term bonds

Recessions come at

Irregular intervals, during recessions investment spending falls relatively more than consumption spending

A gardener has the ability to grow either apples or pears or some combination of the two. Given no other information, it follows that the gardener's opportunity cost of a pound of apples multiplied by his opportunity cost of a pound of pears

Is equal to 1

Suppose that political instability in other countries make people fear for the value of their assets in these countries so that they desire to purchase more US assets. What could happen to the dollar?

It would appreciate in foreign exchange markets making US goods more expensive compared to foreign goods

One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than exports.

It's trade deficit rose

The sticky price theory of the SRAS curve says that if the price level rises by 5% while firms were expecting it to rise by 2% then some firms with high menu costs will have

Lower than desired prices which leads to an increase in the aggregate quantity of goods and services supplied

Suppose that political instability in other countries makes people fear for the value of their asserts in these countries so that they desire to purchase more US assets. What would the change in the interest rate created by foreigners wanting to buy more US assets due to investment spending in the US

Make it fall, which by itself would increase AD

Maria and Michael are both US citizens. Maria opens a cafe in Spain. Michael builds a US based factory using equipment from Jason. Whose actions is an example of US foreign direct investment

Maria but not Michael

You hold currency from a foreign country. If that country has a lower rate of inflation than the United States, then over time the foreign currency will buy

More goods in that country and buy more dollars

The sticky wage theory of the SRAS curve says that when the price level rises more than expected, production is

More profitable and employment and output rises

If the actual price level exceeds the expected price level reflected in the long-term contracts, many firms will find production

More profitable than they had expected and will increase the quantity of output supplied

If US net exports are negative then net capital outflow is

Negative, so American assets bought by foreigners are greater than foreign assets bought by Americans

Suppose that the political instability in other countries makes people fear for the value of their assets in these countries so that they desire to purchase more US assets. What would the change in the exchange rate make happen to US net exports and US aggregate demand?

Net exports would fall which by itself would decrease US AD

Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time. Which of the following explanations would be most consistent with this observation?

New medical evidence has been released that indicates a negative correlation between a person's beef consumption and life expectancy.

Suppose exchange rates are defined as foreign currency per dollar and foreign goods per US goods. According to the PPP if the price of a basket of goods in the US from from 1500 to 2000 and the price of the same basket of goods rose from 600 currency to 1000 currency then the

Nominal exchange rate would appreciate

Other things the same, if technology increases, then in the long run

Output is higher and prices are lower

Candice is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that

People face trade offs

An increase in the governments budget surplus means public saving is

Positive and increasing

If a country has positive net capital outflows, then it's exports are

Positive and it's savings is larger than its domestic investment

If the value of goods and services that Mexico purchases from the United States is greater than the value of goods and services that the United States purchases from Mexico, then the United States has

Positive net exports and a trade surplus with Mexico

Which of the following is not held constant in a demand schedule

Price

___ is the number of units that individuals are ___ to buy at a particular price during some time period

Quantity demanded; willing and able

Which of the following would be most likely to cause an increase in current AD in the US

Rapid growth of real income in Canada and West Europe

In countries that have high minimum wages and require a lengthy and costly process to get permission to open a business

Reducing the minimum wage and the time and cost to open a business would both shift the long-run aggregate supply curve to the right.

Assume Ren buys coffee beans in a competitive market. It follows that

Ren cannot influence the price of coffee beans even if he buys a large quantity of them.

Suppose the economy is in long run equilibrium. If the government increases its expenditures , eventually the increase in AD causes price expectations to

Rise. This rise in price expectations shifts the short-run aggregate supply curve to the left

If exchange rate is expressed as euros/dollar, the dollar is said to depreciate against the euro if the exchange rate

Rises. Other things the same, it will cost fewer euros to buy US goods

Which of the following actions bests illustrates moral hazard?

Roberto buys home owners insurance and then is less careful to make sure he puts out his cigarettes

As a student, Jennifer spends 40 hours per week writing term papers and completing homework assignments . On one axis of her PPF is measured the # of hw assignments completed per week. Jordyn's PPF is a straight line if

She can switch between writing term papers and completing HW assignments at a constant rate

When Bill, a Mexican citizen, sells dresses he designs to Spain, the sale is

Spain's import and Mexico's export.

Workers at a bicycle assembly plant earn the mandatory minimum wage. If the federal government increases the minimum wage by $1.00 per hour then it is likely that

Supply of buckets will shift to the left

For each watch that Switzerland produces, it gives up the opportunity to make 50 pounds of chocolate. Germany can produce 1 watch for every 100 pounds of chocolate it produces. Which of the following is true about the comparative advantage between the two countries?

Switzerland has the comparative advantage in watches.

Under which of the following conditions will a change in government purchases have the greatest effect on the economy in the short run

The SRAS curve is relatively flat

Which of the following would be counted in the calculation OF GDP

The brokerage commission from the sale of 100 shares of Microsoft stock

When a country has a comparative advantage in producing a certain good,

The country's OC of that good is low relative to the other countries OC of that same good

What will happen in the market for a shotgun-shell ammunition now if the buyer expects higher shotgun-shell prices in the near future

The demand for a shotgun-shell ammunition will increase

What could happen to the equilibrium price and quantity of lattes if the cost of producing steamed milk, which is used to make lattes, rises?

The equilibrium price would increase, and the equilibrium quantity would decrease

Which of the following is not correct?

The gains from specialization and trade are based not on comparative advantage but on absolute advantage.

Visitors to a country hosting a world soccer tournament purchase food, souvenirs, and accommodations while attending the tournament. Which of the following should these expenditures raise?

The host country's net exports and its net capital outflow.

Which of the following events could cause an increase in the supply chain of ceiling fans?

The number of sellers of ceiling fans increase

The attainable production points on a production possibility frontier are

The points along and inside the PPF

Some poor countries appear to be falling behind rather than catching up with rich countries. Which of the following could explain the failure of a poor county to catch up?

The poor country has a health epidemic such as the Zika virus

Which of the following is not a determinant of the long rub level of real GDP

The price level

The law of one price states that

a good must sell at the same price at all locations

The best definition of inflation is

a persistent increase in the general level of prices as measured by a price index

Esmerelda worked part-time for her mother's business without pay. Tabitha was absent from work because she had strep throat. Who is counted as "employed" by the Bureau of Labor Statistics?

both Esmerelda and Tabitha

Economists usually assume that people act in a rational, self-interested way. In explaining how consumers make choices this means that economists believe

consumers make choices that will leave them as satisfied as possible given their incomes, tastes, and the prices of goods and services available to them.

Which of the following statements does not apply to a market economy

d. Government policies are the primary forces that guide the decisions of firms and households.

If an American based firm opens and operates a new clothing factory in Honduras, then it is engaging in

foreign direct investment

Sandy has graduated from college and is devoting her time to searching for a job. She has seen plenty of openings but has not yet been offered one that best suits her tastes and skills. Sandy is

frictionally unemployed. Frictional unemployment can exist even in the long run.

Over the past several decades, the difference between the labor-force participation rates of men and women in the U.S. has

gradually decreased

Other things the same, a country that increases its savings rate will have

higher future capital and higher future real GDP per person.

gross private domestic investment

includes business expenditures on new factories, tools, and machinery.

Suppose that Thom experiences a greater loss in utility if he loses $50 than he would gain in utility if he wins $50. This implies that Thoms

marginal utility diminishes as wealth rises, so he must be risk averse.

Holding all other personal characteristics-such as age, gender, and income-constant, economists would expect that

people with health insurance are more likely to be overweight than people without health insurance.

The civilian non-institutional population can be broken down into two groups:

persons not in the labor force and persons in the labor force.

Suppose that foreign citizens decide to purchase more US Pharmaceuticals and US citizens decide to buy more stock in foreign corporations. Other things the same, these actions

raise both U.S. net exports and U.S. net capital outflows.

Suppose that foreign citizens decide to purchase more US pharmaceuticals and US citizens decide to buy stock in foreign corporations. Other things the same these actions

raise both U.S. net exports and U.S. net capital outflows.

If purchasing-power parity holds, then the value of the

real exchange rate is equal to one

Liquidity preference theory is most relevant to the

short run and supposes that the interest rate adjusts to bring money supply and money demand into balance.

Cyclical unemployment refers to

short-run fluctuations around the natural rate of unemployment

Increasing opportunity cost along a bowed out PPF occurs because

some factors of production are not equally suited to producing both goods or services.

If the best surgeon in town is also the best at cleaning swimming pools, then according to economic reasoning, this person should

specialize in being a surgeon because its opportunity cost is lower.

If the fed increases money supply

the interest rate decreases, which tends to raise stock prices

For a risk averse person,

the pain of losing $1000 on a bet exceeds the pleasure of winning $1000 on a bet

When computing the opportunity cost of attending a professional football game as a spectator, you should include

the price you pay for the ticket and the value of your time

collective bargaining refers to

the process by which unions and firms agree on the terms of employment

Which of the following can be measured by the level of real GDP per person

the standard of living but not productivity

Which of the following is an example of human capital

the things you have learned this semester

Aiden and Zaria charge people to park on their lawn while attending a nearby craft fair. At the current price of $10, six people park on their lawn. If they raise the price to $15, they know that only five people will want to park on their lawn. Whether they have six or five cars parked on their lawn does not affect their costs. From this information it follows that

they would do better charging $15 than $10.