Macroeconomics Practice

A(n) _____ in government spending, a _____ domestic currency, and _____ interest rates will shift the aggregate demand curve to the left.

decrease; stronger; higher

If the cost of a typical market basket is 400 in 2018, 450 in 2019, and 550 in 2020, then during this period the economy is undergoing

inflation.

If the price of used plug-in electric cars is expected to rise in six months, the reaction in the supply of those cars in the market today would likely be a(n)

shift of the supply curve to the left.

If the reserve requirement changes from 10% to 15%, what happens to the money multiplier?

It goes down.

If AD shifts right as the economy booms, and then SRAS shifts left, what happens to inflation?

It increases

In 2017, President Trump considered imposing a tariff on automobiles assembled by U.S. manufacturers in Mexico that were to be sold in the United States. If this tariff was imposed and as a result, some of these manufacturers moved their automobile assembly from Mexico back to the United States, these firms would be reacting to which of the three key economic ideas?

People respond to economic incentives.

Which factor would MOST likely shift the SRAS curve to the right?

an increase in the use of truck panels and tails to improve fuel efficiency

Figure 2-4 shows various points on three different production possibilities frontiers for a nation.9. Refer to Figure 2-4. Consider the following events: a.a decrease in the unemployment rate b.an increase in technology with respect to both food and plastic production c.a war that kills a significant portion of a nation's population Which of the events listed above could cause a movement from W to Y?

b only

If opportunity costs are ________, the production possibilities frontier would be graphed as a negatively sloped straight line.

constant

Suppose a cigar manufacturer currently sells 1,500 cigars per week and makes a profit of $3,000 per week. The plant foreman observes, "Although the last 500 cigars we produced and sold increased our revenue by $7,500 and our costs by $7,000, we are only making an overall profit of $3,000 per week so I think we need to cut back on production.Refer to Scenario 1-2. Using marginal analysis terminology, what is another economic term for the incremental revenue received from the sale of the last 500 cigars?

marginal revenue

The development of solar panels for home installation has improved due to technological advances and subsidies. These factors shift the supply curve to the _____ and result in the equilibrium price of solar panel installations to _____.

right; fall

Tightening monetary policy causes interest rates to _____ and aggregate _____ to _____.

rise; demand; decrease

If saving falls during booming times in the economy, then the equilibrium real interest rate _____ and the quantity of loanable funds _____.

rises; falls

Technological advancements in mobile banking (such as electronic check deposits and mobile money transfers) are expected to reduce the number of bank teller jobs by around 8% over the next decade. What type of unemployment will this create?

structural

The "wealth effect" refers to the fact that when aggregate price levels rise

the real value of savings accounts, bonds, and cash declines

Suppose an economy has historically grown at a rate of 1.25%. Economic activity decreased every quarter over the past year, but the decline stopped this quarter. The economy is expected to grow at a rate of 1.4% in the near future, but monetary authorities are concerned that inflation may increase. This economy is probably in the _____ stage of the business cycle.

trough

(Table) According to the table, nominal GDP for 2013 is approximately

$5,050 billion.

If the government reports an annualized GDP growth rate of 4% in the first quarter, which statement is TRUE?

**NOT GDP increased by 4% from January 1 to March 31.

Which statement about the pet goods market is CORRECT? I. The market for pet goods has grown in recent years due to the lower costs of producing pet goods. II. One reason for the growth of the pet goods market has been the increase in the number and availability of goods and services for pets III. Like other markets, the pet goods market typically contracts when there are downturns in the economy.

**NOT I, II, and III

Which statement correctly describes the sequence that explains how a contractionary monetary policy impacts an economy?

**NOT The policy lowers interest rates; lower interest rates increase investment; and higher investment increases aggregate demand, which impacts output and the price level.

Which factor might cause the unemployment rate to rise despite an increase in the number of people employed?

**NOT a tight labor market in which employers are having difficulty filling open positions

When the interest rate falls, the value of the U.S. dollar in foreign exchange markets tends to _____ and net exports tend to _____.

**NOT fall; decrease

The table shows the amount of cherries or apples that Chile and Argentina can produce using one day of labor. The opportunity cost of producing 1 cherry is _____ in Chile and _____ in Argentina. _____ has a comparative advantage in cherry production

0.5 apple; 0.33 apple; Argentina

Suppose the ZZZ Corporation sells a perpetuity coupon bond for $1,000 and its coupon payment is $100. In this example, the yield is _____. If the company sells the bond for $500 instead, the yield is _____.

10%; 20%

If a bank has a total of $80,000 in deposits and has made three loans in the amounts of $10,000; $20,000; and $30,000, what is this bank's reserve ratio (assuming it has no other deposits or has not made any other loans)?

25%

The Taylor rule is 2 + inflation rate + 1/2 output gap + 1/2 inflation gap. If inflation is 3%, the output gap is 1%, and the inflation gap is 1%, the target interest rate is

6%.

An economy has a population of 226,500 people, of whom 12,500 are unemployed and actively seeking work, and 35,000 have given up looking for a job. Also, 28,000 people work part-time, and 151,000 people work full-time. This economy's unemployment rate is

6.5%.

If the reserve requirement is 1.25%, the potential money multiplier is

80

In the following PPF, between which two points would short-run growth be represented?

B to C

In the market for running shoes, suppose the cost of rubber used in their production rises, while at the same time the popularity of running as a sport increases. If the latter effect is stronger in magnitude, what is the change in equilibrium price and quantity?

***NOT Equilibrium price rises and equilibrium quantity is indeterminate

Refer to Figure 2-10. In the circular flow diagram, market K represents

***NOT households.

Which policy is MOST likely to contribute to improved standards of living over time?

Adding after-school art and music programs to promote creativity

Which headline would be LEAST likely to be studied in macroeconomics?

GM Expands Car Sales in China

During a recession, how do inflation and unemployment typically change?

Inflation falls and unemployment raises.

The official unemployment rate (U-3) includes which person as unemployed?

Logan, who was laid off from a cybersecurity firm and is actively seeking a similar job

Which statement is NOT true when a market is in equilibrium?

Sellers have enough inventory to satisfy all buyers and some left over for future demand.

the country of Chile is much richer than its neighbor Bolivia. Which statement is TRUE with regards to economic growth in these countries?

The difference in growth rates may be small but compounding made Chile richer over time.

Refer to Table 2-1. Assume Dina's Diner only produces sliders and hot wings. A combination of 60 sliders and 25 hot wings would appear

along Dina's production possibilities frontier.

(Figure: Shifts in SRAS and AD) If the economy is at short-run equilibrium point b because of a negative supply shock, the Federal Reserve could enact an expansionary monetary policy, thus shifting the new equilibrium to point _____. As a result of this, the price level would _____ and real output would _____.

c; further increase; increase

Tim woke up this morning with a stomachache and decided to skip class so he could get more rest. What is the opportunity cost of Tim's decision to sleep in?

the value of attending the class he decided to miss

Peter received news that she is getting a 4.5% raise. However, the Bureau of Labor Statistics just reported that prices are rising by 8.5%. Based on the given information, which of these statements is TRUE?

Peter's purchasing power will decline by 4%.

Economics promotes which of the following as the way to make the best decision?

Continue an enjoyable activity up to the point where its marginal benefit equals its marginal cost

To avoid double-counting output in GDP measures, _____ are excluded in GDP.

raw materials

Assume that Empathy State Bank begins with the balance sheet shown and is fully loaned-up. Vanessa has a checking account at Empathy State Bank. If she writes a check for $5,000 to pay for her new car and if the bank has a reserve requirement of 5%, this bank's excess reserves will be

$250

(Table) When you look at the table, which government purchases do you see that represent a larger share of economic activity in which country?

***NOT It is equal because G/population is the same across both countries.

If a person borrows $3,000 at 8% annual interest and never makes any payments, how much will the loan balance be after three years?

**NOT $3,720

If the country of Capitalania has 5 million units of physical capital, what amount of labor would generate the highest capital-to-labor ratio?

**NOT 1 million workers

The demand curve for loanable funds represents _____ and is _____.

**NOT savers; downward sloping

Figure 2-8 shows the production possibilities frontiers for Costa Rica and Guatemala. Each country produces two goods, pineapples and coconuts.Refer to Figure 2-8. What is the opportunity cost of producing 1 ton of pineapples in Costa Rica?

1 1/2 tons of coconuts

(Table) Suppose the Bureau of Labor Statistics collects the data presented in the following table...If 2010 is the base year, then the consumer price index for 2012 is

125

(Figure: Individual and Market Demand Curves) According to the graph, the market quantity demanded at $10 is

15 units.

Suppose in 2010 the cost of purchasing a basket of goods was $100. That same basket cost $150 in 2011. If 2010 is the base year, the consumer price index for 2011 is

150.

Suppose the town of Treeville has a population of 200, of which 120 are in the labor force. Of those in the labor force, 100 are employed and 20 are unemployed. The unemployment rate in Treeville is

17%.

Suppose that Costa Rica is able to produce 50,000 pounds of coffee or 10,000 medical devices per day; Vietnam is able to produce 40,000 pounds of coffee or 5,000 medical devices per day. Which statement is TRUE?

Costa Rica has a comparative advantage in the production of medical devices, while Vietnam has a comparative advantage in coffee production.

Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D1 and S1 (point A). If there is an increase in the wages of motorcycle workers and an increase in the price of motorcycle insurance, a complement to motorcycles, the equilibrium could move to which point?

E

Which statement is NOT true regarding the informal economy?

Informal market activities do not contribute to citizens' standard of living

When the Federal Reserve increases the money supply, how and why does it do it?

buys bonds to reduce the interest rate