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wealth effect

change in purchasing power of money when the price level changes, increasing price levels will decrease your purchasing power, which reduces spending and decreases the quantity of goods demanded

Macroeconomics is the study of

changes in national income

While comparative advantage is the biggest reason many nations engage in trade, two other important reasons are:

economies of scale and increased competition.

Amy can produce either 5,000 pounds of cheese or 20 houses per year. Jim can produce either 5,000 pounds of cheese or 10 houses per year. By the principle of comparative advantage, Jim should specialize in producing:

cheese

In 2001, the U.S. government engaged in _________ fiscal policy, and from 2003 to 2007, the government engaged in _________ fiscal policy.

expansionary; no

The sale of American-grown corn to China is included in the ________ category of GDP

export

The sale of American-grown corn to China is included in the ________ category of GDP.

export

When comparing Germany and the United Kingdom to the United States, we could say the United States has a comparative advantage in _______ and _______ could be realized from trade.

civilian aircraft; gains

An economy that does not trade with the rest of the world is a(n):

closed economy

If a society's consumption possibilities are identical to its production possibilities, that society has a(n):

closed economy

supply of loanable funds

comes from people saving money and interest rate = a reward for saving

To avoid double-counting when calculating GDP, it is best to

count the value added at each stage of production

Fiscal policy that seeks to counteract business-cycle fluctuations is:

countercyclical fiscal policy

For country A, an export is a good produced in:

country A and purchased by residents of country B.

For country A, an import is a good produced in:

country B and purchased by residents of country A.

When John buys new tires for his car it _______, and when Ford buys tires to put on new cars it ____________.

counts toward consumption; does not count toward GDP

Nominal GDP is GDP measured in

current prices

Nominal GDP increases if:

current prices or current quantities increase.

Nominal GDP is equal to

current prices x current output

Nominal GDP is equal to:

current prices x current output.

Real GDP increases if:

current quantities increase.

An economic downturn can lead to mainly which type of unemployment?

cyclical unemployment

there is a ______ relationship between ________ and __________. That is why the SRAS is ____________

direct, price levels, output, upsloping

Individuals who are not working but are willing to work and who have looked for a job in the past 12 months but have not sought employment in the past 4 weeks are defined as

discouraged workers

If St. John has a closed economy, it ________ with other countries

does not trade goods

Since 2000, world goods trade has:

doubled

when did per capita real GDP begin acceleration

during the industrial revolution

Unemployment caused by delays in matching available jobs and workers is called

frictional unemployment

Which of the following lists the three types of unemployment?

frictional, structural, and cyclical

Some individuals are unemployed because it takes time for them to find a job that fits their skill set. These individuals would be considered to be:

frictionally unemployed.

The chained consumer price index (CPI) is a/an:

geometric average of the prices of the typical consumer market basket.

Deflation is occurring in a nation; the implication(s) of this is/are:Deflation is occurring in a nation; the implication(s) of this is/are:

holding nominal wages constant, the real wage would rise.

If healthcare costs make up 8% of total expenditures and they rise by 15% while the other components in the consumer price index remain constant, by how much will the price index rise

1.2%

Assume the economy is operating below its full employment equilibrium by $100 billion. If the recessionary gap is closed with $25 billion in tax cuts, what is the spending multiplier?

What function of money is highlighted when I am depositing a portion of my paycheck into my savings account to pay for my child's future education?

Store of value

Which of the following can be responsible for a drop in the unemployment rate?

There is an increase in the number of discouraged workers.

In Bovania, cattle compose 48% of the consumer price index (CPI), housing composes 32%, and entertainment accounts for the remaining 20%. If, in a certain year, the price of cattle rises by 30% and the price of housing rises by 25%, then:

the CPI has increased, even if the entertainment in the next year is free.

Assuming the price level increased, if real GDP is less than nominal GDP for a given year, then

the given year is after the base year

Assuming the price level increased, if real GDP is less than nominal GDP for a given year, then:

the given year is after the base year.

Assuming the price level increased, if real GDP is greater than nominal GDP for a given year, then:

the given year is before the base year

Bureau of Labor Statistics (BLS)

the government agency that reports inflation and unemployment data. determines how much weight to put on certain consumer prices.

Contractionary fiscal policy occurs when:

the government decreases spending or increases taxes to slow economic expansion

Contractionary fiscal policy

the government decreases spending or increases taxes to slow the economy. used to pay off government debt. keep economy from expanding beyond long run capabilities.

An example of the multiplier effect is when:

the government increases government spending initially by $100 billion, and total income in the economy increases by more than $100 billion.

Expansionary fiscal policy occurs when:

the government increases spending or decreases taxes to stimulate the economy toward expansion.

If the unemployment rate falls below the natural rate of unemployment (u*):

the government will want to conduct contractionary fiscal policy.

middle age people's income is usually...

the highest because they are working full time

GDP is not a good measure of

the income inequality that exists between people in the country

GDP is not a good measure of:

the income inequality that exists between people in the country

Which of the following individuals would NOT be considered part of the labor force?

Thomas, who is unemployed but has given up searching for a job because he believes there are no jobs available for him

Which of the following statements about unemployment is true?

Unemployment rates vary widely across age and race.

In 2011, 60% of goods imported by the United States came from just seven nations. Which of the following nations was one of those seven?

United Kingdom

Which country has the world's biggest economy?

United States

The percent change in the overall level of prices in the economy is called:

the inflation rate

If a Hershey's chocolate bar cost $0.05 in 1921 when the price index was 18 and the same size and weight Hershey's chocolate bar cost $0.05 in 1955 when the price index was 27, then:

the inflation-adjusted price of the bar would be much higher than the actual price for both years.

Asking whether people are unemployed for short spells or whether the duration of joblessness is long term is:

a question that can be answered because the Bureau of Labor Statistics keeps an alternative measure of unemployment that tracks the length of time workers have been unemployed.

Supply-side fiscal policy will lead to:

a rightward shift of the long-run aggregate supply curve.

loanable funds market

a hypothetical market that illustrates the market outcome of the demand for funds generated by borrowers and the supply of funds provided by lenders

price ceiling

a legally established maximum price for a good or service

a unit of account

a means for comparing the values of goods and services

Frictional Unemployment

unemployment that occurs when people take time to find a job

excess reserves

the $ value of reserves a bank holds above the required reserves.

reserve requirement

the % of DD that may not be loaned, must be held in reserve. (example: 10%)

The agency that measures the consumer price index (CPI) in the United States is:

the Bureau of Labor Statistics

You know that the consumer price index (CPI) at the beginning of this year was 250 and the rate of inflation was 14%; this would mean:

the CPI at the end of the year was 285.

demand schedule

a table that shows the relationship between the price of a good and the quantity demanded

It is difficult to determine when the economy is turning up or down. This is because there is ___________ that delays the effects of changes in fiscal policy.

a time lag

Which of the following is a service

a visit to your doctor

In 1940 you could buy a "nickel Pepsi" for (oddly enough) a nickel. If the price index in 1940 was 14 and the 2011 price index was 221, then the inflation-adjusted price of a Pepsi would be

about 79 cents ($0.79)

actual rate of unemployment

If the economy is expanding beyond its long-run capabilities, we know that:

actual unemployment is less than its natural rate.

To determine a value for GDP, you would

add up the dollar value of the final goods and services produced

To determine a value for GDP, you would

add up the dollar value of the final goods and services produced.

Causes of economic growth

additional resources new technology strong institutions

Typical fiscal policy focuses squarely on:

aggregate demand.

The goal of expansionary fiscal policy is to shift the _________ curve to the _________.

aggregate demand; right

Typically the largest percentage category in the consumer price index (CPI) is

housing

Typically the largest percentage category in the consumer price index (CPI) is:

housing

According to the March 2012 consumer price index (CPI), the top three consumer expenditure categories are, respectively

housing, transportation, and food and beverages

According to the March 2012 consumer price index (CPI), the top three consumer expenditure categories are, respectively:

housing, transportation, and food and beverages.

balance sheet

how a bank accounts for its debits and credits under assets and liabilities.

The big difference between the Great Recession and the recession of 1982 was:

how the economy recovered after the recessions had officially ended.

Joanna was laid off from her job 11 months ago. After searching for a job for months, Joanna finds a job but is only offered part-time work. Joanna would rather be working full-time. Economists would classify Joanna as:

underemployed

Structural, frictional, and cyclical are all types of:

unemployment

Lower corporate profit tax rates:

increase the incentives for corporations to undertake activities that generate more profit.

Structural unemployment is:

unemployment caused by changes in the industrial makeup of an economy.

Frictional unemployment is:

unemployment caused by time delays in matching available jobs and workers.

Holding all else constant, if people who are currently discouraged workers decide to start looking for jobs again, you will see:

an increase the unemployment rate.

employed workers

people currently holding a job in the economy, either full time or part time

According to the principle of comparative advantage, trade between two countries will benefit:

both countries

A computer company builds a new factory. This is included in the ________ category of GDP

investment

Hollister Co. stocks up on T-shirts for the holiday season. This inventory is included in the _______ category of GDP

investment

Hollister Co. stocks up on T-shirts for the holiday season. This inventory is included in the _______ category of GDP.

investment

Economic growth occurs when...

investment goes up

Which of the following groups of individuals has the lowest unemployment rate?

people with a bachelor's degree or higher

To determine living standards for the average person, we calculate:

per capita GDP

When George buys a new computer for his business, it is included in GDP as _______, and when he buys a new computer for use at home, it counts as ________.

investment; consumption

Countercyclical fiscal policy:

is fiscal policy that seeks to counteract business-cycle fluctuations.

Joe owns a crab shack. When he produces and sells ________ meals in a given day, his income earned will ________.

more, increase

Joe owns a crab shack. When he produces and sells ________ meals in a given day, his income earned will ________.

more; increase

To convert a current price of a product to its price in the past, we would take the current price of a product and:

multiply by the ratio of the previous price index to the current price index.

efficient points on PPF

points on the PPF curve (a,b,c)

Unattainable points on PPF

points outside the PPF (E)

A rich nation will trade with a poor nation (and vice versa) because the:

poor nation has a comparative advantage in a product.

Data on the natural rate of unemployment and actual employment are provided in the table below. Natural rate of unemployment: 5% Actual unemployment: 8% Based on these numbers, the amount of cyclical unemployment in the economy is

positive

The government can assist in reducing the level of structural unemployment by:

providing job-training programs

The investment spending category of GDP does NOT include

purchases of stocks and bonds

The investment spending category of GDP does NOT include:

purchases of stocks and bonds

According to the textbook, the fully completed house that one could buy from the Sears catalog in 1924 would be

quite a good deal, even when adjusting for inflation

Many goods and services are illegally sold or legally sold but not reported to the government. If we increased efforts to count those goods and services, GDP would _____________

rise

Between 1979 and 2012, service industries employment in the United States has:

risen by almost 72%.

If the price of a typical market basket of goods increased from about $20 in 1960 to $200 in early 2012, then it

rose by 10-fold from 1960 until early 2012.

If the price of a typical market basket of goods increased from about $20 in 1960 to $200 in early 2012, then it:

rose by 10-fold from 1960 until early 2012.

Let`s say a bottle of Dr. Wells (an actual soft drink still available but hard to obtain) cost $0.15 in 1970. If the consumer price index (CPI) in 1970 was 37.8 and the current CPI is 240, then the inflation-adjusted price of Dr. Wells would be (rounded to the nearest penny):

$0.95

The movie Jaws grossed $260 million in 1975. What were the gross receipts for Jaws in 2012 dollars

$1,196,000,000

The movie Jaws grossed $260 million in 1975. What were the gross receipts for Jaws in 2012 dollars?

$1,196,000,000

If a bank has a required reserve ratio of 15% and has required reserves of $225,000,000, how much does the bank hold in deposits

$1,500,000,000 (225,000,000 / 0.15)

Assume there is a 35% tariff on bananas imported in the US. Also, assume that the market competition is at its beginning and the law of one price is not in effect. If the domestic market price of Hawaiian bananas is one dollar per bunch, imported bananas will sell for:

$1.35/bunch (1+0.35)

A loaf of bread cost $0.18 in 1955 and the CPI was 26.8. The CPI in 2013 was 233. The cost of a loaf of bread in 1955 using 2013 dollars would be

$1.56

The Coppock Bank began the day with $10,000,000 in its reserve account and ended the day with the same amount. If loans, other assets, and Treasury securities were $3,000,000 and owner's equity was $2,000,000, what is the bank's total amount of assets?

$13,000,000 (reserve account + loans/other assets/treasury securities)

The table below shows nominal GDP and the price level in the two years 2005 and 2011. (Year- 2005, Nominal GDP- 12,623, Price Level- 100) (Year- 2011, Nominal GDP- 15,076, Price Level- 113) GDP in 2011, measured in 2005 dollars was

$13,342

Let's say you plan to retire 40 years from now, and you decide you could live on $40,000 per year if you retired today. If the inflation rate is 3% between now and your retirement date, how much money per year would you need to have saved

$130,400

Joe sells the house he has lived in for 10 years to the Smith family for $300,000. He receives $50,000 more than his original purchase price 10 years ago. Joe pays his real estate agent a 5% sales commission. This transaction will increase GDP by

$15,000

Company X sells sugar to company Y for $50,000. Company Y uses the sugar to make chocolate bars, selling them to consumers for $150,000. The total contribution to GDP is

$150,000

Company X sells sugar to company Y for $50,000. Company Y uses the sugar to make chocolate bars, selling them to consumers for $150,000. The total contribution to GDP is:

$150,000

What was real GDP in 2011 if the price level was 100?

$150.75

Company X sells leather to company Y for $60,000. Company Y uses the leather to make shoes, selling them to consumers for $180,000. The total contribution to GDP is:

$180,000

You bought stock in 2010 for $100 and you sold it in 2012 for $200. You used a broker to sell the stock for you, and he charged you $20. This transaction contributed ________ to GDP

$20

Suppose that Country B has consumption, investment, government spending, imports, and exports as follows, calculate Country B's GDP

$200

Suppose that Country A has consumption, investment, government spending, imports, and exports as in the table. Calculate country A's GDP

$210

The table shown here gives a cost-of-living index for 14 different cities. If you are living and working in Phoenix and earning $100,700 per year, to have the same standard of living in Manhattan you would need

$216,700

You work for the Committee for Economic Evaluation in the small nation of Kinsdale. Your current job is to determine the country's gross domestic product in the past year. Being a very small country, the people only produce three things, which are listed in the table below

$290,000

Suppose the United States is trading with a new country, Muffinville. The amount of imported and exported goods and services from the United States to Muffinville is shown below.

$3 billion

Donna Newton made $0.30 per hour in 1946 at a small restaurant in Clearfield, Pennsylvania. If the consumer price index (CPI) was 18.3 in 1946 and 202.4 in 2011, then Donna`s inflation-adjusted wage would be:

$3.32

McDonald's charged $4.33 for its Big Mac burger in 2012. If the CPI in 2012 was 229 and the CPI in 2002 was 180, then how much would you have paid for the Big Mac back in 2002

$3.40

McDonald's charged $4.33 for its Big Mac burger in 2012. If the CPI in 2012 was 229 and the CPI in 2002 was 180, then how much would you have paid for the Big Mac back in 2002?

$3.40

You bought a popular video game last year for $75 and sold it to a store this year for $20. The store sells the used game to a consumer for $50. This adds _____ to GDP when the store sells the game to the consumer.

$30

If your marginal propensity to consume is 0.75 and you get an additional $400 in income, you would spend ___________ on consumption.

$300.00

Farmer John produces oranges. He sells half of his inventory to people at his roadside stand for $20,000 and sells the other half to Tropicali for $15,000. Tropicali uses the oranges to make orange juice, which it sells to consumers for $25,000. The impact of these transactions on GDP is

$45,000

A doctor receives $50,000 per month from her patients (and their insurance companies) as payment for her services. Each month she buys medical supplies for $10,000 and she pays a lab $15,000 for analyzing slides. The total contribution to GDP this month is

$50,000

A company produces a computer. They pay $100 for the keyboard and outer case, $200 for the internal hardware, and $100 for the software. They sell it to a consumer for $500. The contribution to GDP is

$500

Bob sells his car to Stan's Used Car Lot for $5,000. Stan's Used Car Lot sells the car to Bill for $5,500. This transaction contributes ________ to GDP

$500

During a recession, the government spends $100 million to stimulate the economy. If the marginal propensity to consume is 0.8, what will be the potential increase in income in the economy as a result of the government's increase in the spending level?

$500 million

Company X sells paper to company Y for $100,000. Company Y uses the paper to make textbooks, selling them to consumers for $500,000. The total contribution to GDP is

$500,000

Company X sells paper to company Y for $100,000. Company Y uses the paper to make textbooks, selling them to consumers for $500,000. The total contribution to GDP is:

$500,000

How much (in dollars) did the government spend on education in 2011

$789.43 billion

Farmer Bill grows wheat and sells it to the miller for $50,000. The miller turns it into flour and sells it to the bakery for $75,000. The bakery uses the flour in the bread that it sells to people for $90,000. The total contribution to GDP is:

$90,000

labor force participation rate formula

(#labor force/# of working age population)100

unemployment rate formula

(#unemployed/#labor force)100

The percentage change in any economic variable, including the consumer price index (CPI), is measured by which equation

((Current Year - Previous Year) / Previous Year) x 100

The percentage change in any economic variable, including the consumer price index (CPI), is measured by which equation?

(Current Year Previous Year / Previous Year) 100.

LFM as a flow chart

(SAVERS) households and foreign entities ---> (LOANABLE FUNDS MARKET) banks, bonds, and stocks, (BORROWERS) firms and governments,

Which of the following equations represents the labor force participation rate?

(labor force / relevant population) x 100

Real GDP can be calculated as:

(nominal GDP / the GDP deflator) x 100.

Which of the following equations represents the unemployment rate?

(number of unemployed / labor force) x 100

why treasury securities?

- Funds go directly into the market for loanable funds. - Can buy and sell large volumes daily ($500 billion)

What was the United States' trade balance among major trading partners in 2011?

-$516.8 billion

If real GDP grew by 4% and nominal GDP grew by 3%, then the inflation rate was

-1%

If real GDP grew by 4% and nominal GDP grew by 3%, then the inflation rate was:

-1%

Importance of the quantity of money

-Affects the ease of making purchases -Affects price level

Role of interest rate on Supply of Loanable Funds

-Comes from people saving money and interest rates = a reward for saving

Describe chain of borrowing.

-GDP (output, production) requires inverstment -investment requires borrowing -borrowing requires saving -loanable funds process makes this efficient

why are financial intermediaries and baks important?

-banks are at the center of financial market -banks connect borrowers (demanders) with savers

financial tools

-bonds -stocks -treasury securities -home mortgages -private sectors security

decreases in time preferences means

-can wait (lots of patience) -high savings

demands shift for loanable funds

-changes in prod. in capital -changes in investor confidence -changes in government borrowing

Role of interest rate for Demands for Loanable Funds

-comes from people wanting to borrow money -interest rate is cost of borrowing

what is direct finance?

-firms sell a security (stock or bond) directly to the public in exchange for funds -getting money directly from someone -security pays for future income & gives part ownership of the firm

increases in time preferences means...

-higher time preferences -people want things now (no patience) -low savings

investor confidence

-if a firm thinks the economy will grow in the future, it will be more comfortable borrowing more today -changes in capital & investors cofidence will shift the demand for loanable funds -gut feelings

productivity of capital

-if capital becomes more productive, the demand for loans will increase -return to investment will be greater ex: internet makes companies more productive

What shifts the AD curve?

-increase in C+Ig+G+Xn shift the AD curve to the right -decrease in C+Ig+G+Xn shift the AD curve to the -left

Changes in income and weath:

-increases in income generally increase savings -this can be graphed as a shift in the supply of loanable funds -high income people save more than low income people at the same time -When people save they also want to save where the interest rate is highest -this is why many foreign investors interest savings in the

what information is on every bond?

-name of borrower -prepayment date -amount due at repayment

what is long run equilibrium?

-occurs after all prices have fully adjusted -the economy will move toward this point at any point in time -short-run with actual price level -economy operation at full employment -LRAS=SRAS=AD -U=U* @ Y* & P*

What is indirect finance?

-occurs when savers deposit funds into banks, then banks loan these to borrowers -banks pay lower interest rates to saver than they change borrowers

list the institutions required for growth in the economy

-political stability and rule of law -private property rights -stable money and prices -competitive markets -efficient taxes -international trade -flow of funds across the borders

according to the solow growth model the sources of growth are ...

-resources -technology -institutions

institution

-significant practice, relationships or organizations -incudes laws, regulations and governments -work habits, expectations and political behaviors

reasons for the up sloping aggregate supply curve

-sticky input prices -menu cost -money illusion

reasons why some governments are behind

-technology -missing good government

marginal product is..

-the change in output attained by change in input -as more capital is added, greater output is created -more input = higher GDP

What is Interest?

-the price of loanable funds -rises and falls -affected by supply and demand **Savers=Reward & Borrowers=Cost**

aggregate demand

-total demand for final goods and services in the economy or demand for everything

aggregate supply

-total supply of final goods and services in economy -expressed as inflation rate or price index

long run aggregate supply

-vertical (infinite) slope -causes of growth are resources, technology and institutions

what are secondary market?

-where securities are treaded after their first sale -analogous to used car markets -often sold to investors through broker

foreign purchases / international trade effect

-with lower us prices, both americans and foreigners buy more american goods -change in DPL leads to an inverse change in the quantity demanded for domestic goods

A member of the labor force is defined as:

. someone already employed or actively seeking work.

If an initial increase in government spending of $100 billion leads to a total increase of $400 billion in income, the marginal propensity to consume in the economy is:

0.75

If the spending multiplier is 5, what is the marginal propensity to consume in the economy?

0.8

Esther and Albert produce hamburgers and hot dogs. Esther can produce six hamburgers per hour or four hot dogs per hour. Albert can produce three hamburgers per hour or one hot dog per hour. Based on the scenario, Esther's opportunity cost of one hot dog is:

1 1/2 hamburgers

Suppose a basket of goods and services has been selected to calculate the consumer price index (CPI) and 2002 has been selected as the base year. In 2002, the basket's cost was $600; in 2004, the basket's cost was $650; and in 2006, the basket's cost was $700. The value of the CPI in 2004 was (round to one decimal place)

108.3

Suppose a basket of goods and services has been selected to calculate the consumer price index (CPI) and 2002 has been selected as the base year. In 2002, the basket`s cost was $600; in 2004, the basket`s cost was $650; and in 2006, the basket`s cost was $700. The value of the CPI in 2004 was (round to one decimal place):

108.3

If the CPI today is 230, then the inflation rate since the base year is

130%

The Great Depression lasted most of which decade?

1930s

What year did the labor force participation rate of black women become greater than 60%?

1996

Based on the figure, and if we define inflation as being under control at rates less than 10%, when was inflation under control?

1997-2003, 2005-2011

The average inflation rate in the United States from 2000-2012 was about

GDP increases if prices decrease by ________ and quantities produced increase by ________.

2%; 4%

Nominal GDP increased from $15.62 trillion to $16.09 trillion, and the price level increased from 120.0 to 122.4. The rate of inflation was: (Round to the nearest first decimal.)

2.0%

What was the growth rate of real GDP in 2011, if the price level was 113 and and nominal GDP was $14,499 billion in 2010; and the price level was 115 in 2011?

2.2%

What was the growth rate in real GDP from 1967 to 2011?

2.38%

Suppose that the consumer price index of a country was 160 at Year X and 164 at the end of Year Y. What was the country`s inflation rate during Year Y?

2.5%

2/3 hot dog

Which of the following recessions saw the highest unemployment rate changes among men?

2007-09

In which year did deflation occur

2009

It is rare when prices fall in modern times. However, it is likely that they would fall during severe recessions. What year is the most likely for this to have occurred

2009

It is rare when prices fall in modern times. However, it is likely that they would fall during severe recessions. What year is the most likely for this to have occurred?

2009

As presented in the table, the approximate rate of inflation (or deflation) from 2000-2001 was (rounded to the nearest percent):

21%

If the unemployment rate is 5.8% and the number of unemployed persons is 15 million, the number of people who are employed is approximately:

243 million

Amy can produce either 5,000 pounds of cheese or 20 houses per year. Jim can produce either 5,000 pounds of cheese or 10 houses per year. Amy's opportunity cost of producing one house is ____________ pound(s) of cheese.

250

If the unemployment rate is 5.8% and the number of unemployed persons is 15 million, the labor force is approximately:

258 million

You have been hired to determine if unemployment is running too high. First, you must determine the natural state of unemployment. You have been provided the data in the table below. Frictional unemployment-2% Structural unemployment-2% Cyclical unemployment-1% Using the data above, determine the natural rate of unemployment

full employment

4-6% unemployment (includes only frictional and structural)

If the marginal propensity to consume is equal to 0.75, the spending multiplier is equal to:

4.0.

Amy can produce either 5,000 pounds of cheese or 20 houses per year. Jim can produce either 5,000 pounds of cheese or 10 houses per year. If both Amy and Jim produce the good for which each has a comparative advantage, total output of this economy will be:

5,000 pounds of cheese and 20 houses.

What percentage of consumers' income was spent on fuels and utilities in December 2012?

5.3%

What was the rate of inflation from 1985 to 1995

50%

Amy can produce either 5,000 pounds of cheese or 20 houses per year. Jim can produce either 5,000 pounds of cheese or 10 houses per year. Jim's opportunity cost of producing one house is _____________ pound(s) of cheese.

500

If the relevant population is 268 million people and the number of people in the labor force is 148 million, the labor force participation rate is:

55.2%

Between 1960 and 2012, the average unemployment rate in the United States was about:

As presented in the table, the rate of inflation (or deflation) from 2001-2002 was (rounded to two decimal places):

6.67%

Suppose the country Inflatistan had a nominal GDP of $48 billion in 2007 and a nominal GDP of $114 billion in 2013. If the price level was 100 in 2007 and 190 in 2013, what was the real GDP in 2013 (using 2007 dollars)?

60.0 billion

Refer to the table below. Calculate the labor force participation rate for this economy. Institutionalized: 14 Full-time workers: 113 Less than 16 years of age: 40 Armed forces (non-civilian): 20 Part-time workers: 27 Population: 314 Looking for work: 14

64.17%

Since 1967, the U.S. economy has experienced how many economic contractions?

Medical care typically composes ____ of the typical consumer price index (CPI)

Medical care typically composes ____ of the typical consumer price index (CPI).

Consumption is approximately ________ of GDP

70%

Refer to the table below. This country produces only two goods CDs and books. You are told that the CPI for this country in 2012 was 141. If the base year is 2011, how many books should be present in the basket of goods and services that was used to calculate the CPI of 2012

How much (in dollars) did the government spend on education in 2011?

789.43 billion

As presented in the table, the rate of inflation from 1999-2000 (i.e., during the year 2000) was (rounded to two decimal places):

8.75%

Refer to the following table below. Calculate the unemployment rate for this economy based on the data provided. Institutionalized: 14 Full-time workers: 113 Less than 16 years of age: 40 Armed forces (non-civilian): 20 Part-time workers: 27 Population: 314 Looking for work: 14

9.1%

The Bureau of Labor Statistics reported the consumer price index as 211.4 in December 2007, and 231.1 in December 2012. By what percentage did the index increase from the end of 2007 to the end of 2012 (rounded to one decimal place)

9.3%

Using the data provided in the table below, calculate the labor force participation rate. Number unemployed: 2,000 Working-age population: 40,000 Labor force: 36,000 The labor force participation rate is

90%

In 1962, the marginal tax rates were as high as:

91%

A has a comparative advantage over B in producing a good if:

A has a lower opportunity cost of producing the good than does B.

Money eliminated the need for the double coincidence of wants through its role as:

A medium of exchange

A budget is:

A plan for spending and earning money

Which of the following situations would be considered frictional unemployment?

A recent college graduate takes a month off to travel while deciding between two job offers. A worker with ten years of experience in finance gets laid off. He has rejected three job offers because they are below his skill level. A software development firm finds the perfect employee, but waits to hire her because government regulations require them to consider other candidates before they make an offer.

An example of fiscal policy is: a) lowering taxes b) increasing taxes on everyone in the economy c) decreasing the number of weeks an individual can receive unemployment d) increasing taxes only on the top earnings in the economy e) increasing minimum wage

A) Lowering Taxes

Central banks can use monetary policy to: a) reduce interest rates b) decrease taxes c) increase government spending d) steer the economy out of every recession e) prevent recessions

A) Reduce interest rates

Budget deficits tend to: a) increase during expansions b) increase during wars c) decrease during recessions d) increase over time e) decrease over time

B) Increase during wars

The U.S. government could reduce its budget deficit by: a) borrowing funds from abroad b) raising the eligible retirement age to receive social security benefits c) expanding the income assistance programs d) lowering income rates e) decreasing the level of means-testing for medicare eligibility

B) Raising the eligible retirement age to receive Social Security benefits

Supply-side fiscal policy: a) has been proven not to work b) takes time to affect aggregate supply c) has immediate effects on aggregate supply d) includes increases in government employee's pay and individual tax breaks e) is emphasized as a short-run solution to growth problems

B) Takes time to affect aggregate supply

people are worried about inflation which means

AD curve shifts to the right

During the Great Recession, government outlays were _______ and government revenues were ________ their long-run averages over the period of 1960-2012

Above; below

The ability of one person or nation to produce more of a good while using the same quantity of resources as another is called a(n):

Absolute Advantage

The strategic use of monetary policy to counteract macroeconomic expansions and contractions is known as:

Active Monetary Policy

An example of the multiplier effect is when: a) the gov increases gov spending initially by $100 billion, and total income increases by less than $100 billion b) an increase in the price level leads to shift in the aggregate demand curve c) the gov increases gov spending initially by $100 billion, and total income increases by more than $100 billion d) an increase in gov spending leads to a decrease is private investment e) short-run aggregate supply shifts in a response to fiscal policy

C) The government increases government spending initially by $100 billion, and total income in the economy increases by more than $100 billion

aggregate demand is made up of these things

C+Ig+G+Xn

According to the consumer price index (CPI), in a particular year, the price of gasoline rises in the United States by 22%; simultaneously, the price of all food items falls by 8%. Which statement is correct?

Based solely on the information given, we cannot conclude what happened to the CPI.

For something to be considered money, it must:

Be generally accepted as a medium of exchange

Which demographic experienced the highest peak unemployment rate during the 1980's?

Black men

Which of the following lags associated with fiscal policy are expected to be alleviated by automatic stabilizers such as unemployment benefits?

Both A and B; (recognition lags and implementation lags)

We pay higher prices for TVs today than people used to pay 10 years ago. This is due to

Both a and b (a) inflation (b) a premium that we have to pay for the improved quality of the TVs that we buy today

Which of the following is an expansionary fiscal policy?

Both an increase in government spending and decrease in taxes

Jennifer earns $50,000 in her first job today while her mom used to make $15,000 in her first job in 1975. Jennifer is of the opinion that she makes more than her mom would have made if she started working today, while her mom thinks Jennifer would have earned less than she did had she started working in 1975. If the CPI today is 212 and the CPI in 1975 was 82, then

Both b and d.

Both b and d. (b)Jennifer is correct because her mom's salary in today's dollars would be $38,780. (d)Jennifer's mom is wrong because Jennifer's salary in 1975 dollar would have been $19,340.

Which of the following diagrams shows what supply-side fiscal policy initiatives try to do to the long-run aggregate supply curve?

The major components of a country's economy are consumption (C), investment (I), government spending (G), exports, and imports. Which of the following is the correct equation for determining GDP

C + I + G + exports - imports

The major components of a country's economy are consumption (C), investment (I), government spending (G), exports, and imports. Which of the following is the correct equation for determining GDP?

C + I + G + exports - imports

Which of the following would NOT be an asset for a commercial bank? a) loans b) cash in the vault c) borrowings d) deposits at the federal reserve e) u.s. treasury securities

C) Borrowings

In 2010, which three countries had the largest GDP? Select all that apply

Canada China United States

Which of the major trading partners of the United States are members of NAFTA?

Canada and Mexico

Which two countries buy the most U.S. exports?

Canada and Mexico

In 2010, which three countries had the largest GDP? Select all that apply.

Canada, China, United States

Of the countries listed in the graphic,In 2011, the United States' largest trading partner was _______ and the smallest trading partner was _______.

Canada; South Korea

Which of the following is an example of frictional unemployment

Chad graduates with his master's degree in economics and is searching for an analyst job

Which of the following is an example of frictional unemployment?

Chad graduates with his master's degree in economics and is searching for an analyst job.

Long-run aggregate supply shifts are caused by:

Changes in resources, technology, and institutions

Which of the following best explains why the United States has shifted from an agricultural economy to a service-based economy

Changes in the nature of agricultural production mean that fewer farm workers are needed

Which of the following best explains why the United States has shifted from an agricultural economy to a service-based economy?

Changes in the nature of agricultural production mean that fewer farm workers are needed.

From which of the major trading partners did the United States import the most goods and services in 2011?

China

In 2011, with which country did the United States run the largest trade deficit?

China

what nation is the largest holder of U.S debt owed to foreigners?

China

Which of the following would not be counted in the calculation of GDP? Select all that apply.

Cleaning your own house. Buying a counterfeit designer purse from a guy in an alley. Government spending on social security. Cleaning your own house.

An economy that does not trade with the rest of the world is a(n):

Closed Economy

currency

Coins and paper bills used to buy services

C+Ig+G+(X-M)=GDP

Consumption spending Investment spending (purchase of capital) Government purchases Exports Imports

___________ is when a central bank acts to decrease the money supply in an effort to control an economy that is expanding too quickly

Contractionary Monetary Policy

The wealthiest 20% of households in the United States:

Contribute the vast majority of all federal income taxes

For country A, an export is a good produced in:

Country A and purchased by residents of country B

For country A, an import is a good produced in:

Country B and purchased by residents of country A

In Country Z, the prices of goods are measured on an annual basis on the last day of the year. In Country Y, the prices of goods are measured on a weekly basis every Wednesday. Comparing the two countries based on this information

Country Y more accurately combats the upward bias of its price index by using a chained index

Money does NOT function as: a) a unit of account b) a medium of exchange c) a means to buy goods and services d) an item to barter e) a store of value

D) An item to barter

Expectations: a) have no effect on monetary policy b) have no effect on consumers' spending habits c) play a role in fiscal policy but not in monetary policy d) can dampen the effects of monetary policy e) are easily studied in economics

D) Can dampen the effects of monetary policy

_________ is/are considered a liability on a bank's balance sheet a) cash in the vault b) u.s. treasury securities c) property owned by the bank d) deposits e) loans

D) Deposits

The long-run Philips curve is: a) upward sloping b) downward sloping c) horizontal d) vertical e) U-shaped

D) Vertical

Consider a nation in which the price index was 150 last year and this year it is 130. Which statement is correct

Deflation was 13.33% this year

Consider a nation in which the price index was 150 last year and this year it is 130. Which statement is correct?

Deflation was 13.33% this year.

If St. John has a closed economy, it ________ with other countries

Does not trade goods

Donna Newton made $0.30 per hour in 1946 at a small restaurant in Clearfield, Pennsylvania. If the consumer price index (CPI) was 18.3 in 1946 and 202.4 in 2011 and the legal minimum wage in 2011 was $7.25, then:

Donna`s inflation-adjusted wage would be less than the legal minimum wage in 2011.

To increase the money supply, the Federal Reserve could do which of the following? a) increase the discount rate b) increase the RR ratio c) conduct an open market sale of u.s. treasury securities d) discourage banks from lending money to borrowers e) conduct an open market purchase of u.s. treasury securities

E) Conduct an open market purchase of U.S. Treasury securities

According to adaptive expectations theory, when inflation decelerates: a) people underestimate inflation b) people correctly estimate inflation c) people change to rational expectations d) unemployment must decrease e) people overestimate inflation

E) People overestimate inflation

Free trade is __________, because it _________ the size of the pie available to the economy

Efficient; increases

The World Trade Organization (WTO):

Enforces international trade agreements

examples of microeconomics

Individual choosing to take a job in Florida or California. Couple decides to start a family. Firm choosing to open another factory. Effect of government intervention on a single market.

Consider a nation in which the price index last year was 130 and this year it is 150. Which statement is correct

Inflation was 38% this year

examples of macroeconomics

Inflation, economic growth and productivity, unemployment, interest rates, aggregate demand and supply.

A company sells 100 boxes of chocolate, yet it only produced 90 boxes of chocolate during the year. Which of the following is true?

Inventory investment must be negative

Which of the following is true of Gross Domestic Product?

It can give us guidance on the living standards of a nation

Which of the following is true of gross domestic product?

It can give us guidance on the living standards of a nation.

Why would a government want to use expansionary fiscal policy to help stimulate aggregate demand if, in the long run, we would expect prices to adjust and the economy to return to its long-run equilibrium on its own?

It could take a long time for prices to adjust by market forces alone.

Which of the following reflects a practical example of the price confusion problem?

It is difficult for you to determine whether the long lines at your coffee shop are due to increased demand or because inflation has created too many dollars chasing too few goods.

A recognition lag happens because:

It is difficult to determine when the economy is turning up or down

A society could achieve a higher level of productivity if:

It takes advantage of each individual's comparative advantage

An impact lag happens because:

It takes time for the complete effects of monetary and fiscal policy to materialize

What are federal funds?

Federal funds are private bank deposits at the Federal Reserve

Which of the following is an example of structural unemployment

Jasmine loses her job as a newspaper editor because the publication has gone digital

Which of the following is an example of structural unemployment?

Jasmine loses her job as a newspaper editor because the publication has gone digital.

Residents of several European countries spend less time working and more time on leisure activities than do people in the U.S. How is this great leisure time accounted for in Gross Domestic Product measurements

Leisure time doesn't factor in a country's GDP

A U.S. federal government budget deficit occurs when:

Government outlays exceed revenue

Supply-side fiscal policy involves the use of:

Government spending and taxes to affect the production side of the economy

The "crowding-out" critique is based on the idea that:

Government spending may be a substitute for private spending

Adaptive Expectations Theory:

Holds that people's expectations of future inflation are based on their most recent experience

Your bank offers to pay you a 3% interest rate on a one-year fixed-deposit saving account. The inflation rate is expected to be 2% by the end of the year. Which of the following will be true if you decide to keep the money in the bank and the inflation rate turns out to be 4% by the end of the year?

I will be hurt.

What is the difference between the consumer price index (CPI) and the gross domestic product (GDP) deflator?

If we want to examine how price changes affect the overall economy, the GDP deflator is the better measure.

Your nominal wage increases by 10%, and the overall price level increases by 12%. Which statement is correct?

If you feel richer, you are experiencing money illusion.

Which of the following situations will arise in the domestic market following the imposition of an import quota?

Imports decrease, domestic production increases, and prices increase

An implementation lag happens because:

In most nations, one or more governing bodies must approve government spending or new tax policies

The members of NAFTA are the United States, Canada, and:

Mexico

The North American Free Trade Agreement (NAFTA) was intended to increase U.S. trade with which other countries?

Mexico and Canada

Michael Chang buys only tennis rackets during a particular year. During the year in question, the price of all goods rises by 10% on average, but the price of tennis rackets remains the same. Michael also receives a pay increase based on inflation. Which statement is correct

Michael benefits from inflation

Michael does not experience inflation because he only buys tennis racquets.

The idea that the money supply does not affect real economic variables is called:

Monetary neutrality

When the economy falters, people often look to the government to help push the economy forward again. In fact, the government uses many different tools to try to affect the economy. Economists classify these tools on the basis of two different types of policy:

Monetary policy and Fiscal policy

responsibilities of Fed

Monetary policy:controls the size of the M. Central banking: is a banks bank Bank regulation: ensures the health of the banking system

Which of these statements about GDP is/are true

Money received for services is included in GDP and GDP is calculated using market values.

Which of these statements about GDP is/are true

Money received for services is included in GDP and GDP is calculated using market values.

Joe has a full-time construction job and also does odd jobs for people on the weekends. You have purchased the materials needed to construct a fence at your house and you pay Joe $500 to build the fence. Does the payment to Joe count toward the value of GDP

No, if this income is not likely to be reported to the government

What does NAFTA stand for?

North American Fair Trade Agreement

A rich nation will trade with a poor nation (and vice versa) because the:

Poor nation has a comparative advantage in a product

______________ holds that people form expectations on the basis of all available information

Rational Expectations Theory

An example of a voluntary quota is:

South Korean electronics manufacturers agreeing to limit exports to New Zealand

In general, a nation can enjoy a higher standard of living by ___________ than by being self-sufficient

Specializing and Trading

Suppose that the comparative-cost ratios of two products—mangoes and sardines—are as follows in the hypothetical nations of Mangolia and Sardinia: Mangolia: 1 mango = 2 cans of sardines Sardinia: 1 mango = 4 cans of sardines In this scenario, ______________ should specialize in mangoes and ______________ should specialize in sardines. Would a trade of 2 mangoes = 3 cans of sardines be acceptable to both nations?

Mangolia; Sardinia; No

How do you convert a price of a good from an earlier time into today`s price?

Take the earlier price and multiply by the ration of today's CPI to the earlier CPI.

A tax on imports is known as a(n):

Tariff

There is a 5% average tax on imported goods in the United States. This tax is known as a(n):

Tariff

Which of the following scenarios are macroeconomic in nature? Select all that apply

The GDP of France has fallen to an inflation adjusted low. The U.S. unemployment rate falls to 8.5% in December. The central bank of the United States increased interest rates by 0.5%.

shifts in the SRPC and SRAS

The SRPC and LRPC are not static, they can shift left or right. SRPC is MARRIED to the SRAS curve on our AD/AS Model of the Economy. (Think mirrors) WHATEVER shifts the SRAS curve [RAP] causes the SRPC to shift as well. However they shift in OPPOSITE directions!!!

Suppose that the United States and Canada each produce only two products, televisions and food. The United States can produce 100 televisions a day, 150 pounds of food a day, or any combination in between. (For example, it could choose 100 televisions and no food, 50 televisions and 75 pounds of food, or 150 pounds of food and no televisions.) Canada can produce 300 televisions a day, 330 pounds of food a day, or any combination in between. Would trade between the United States and Canada occur? If so, how?

The United States would trade food to Canada and Canada would trade televisions to the United States.

A graph shows a decrease in the price level due to a decrease in aggregate demand. Real GDP, however, does not change. The best explanation for the events is that:

The economy quickly adjusts to changes in aggregate demand and remains at full employment

If current savings increase the same amount as the federal stimulus:

The effects of the stimulus are negated

If government revenues in 2011 were $2.2 trillion and government outlays were $3.8 trillion:

The federal budget deficit was $1.6 trillion (Deficit when gov outlays > gov revenue) (3.8-2.2=1.6)

If government revenues in 2000 were $2.0 trillion and government outlays were $1.8 trillion, this means that:

The federal budget surplus was $200 billion (Surplus when gov revenue > gov outlays) (2.0-1.8=0.2 = 200)

In January 2008, the U.S. unemployment rate dropped to 4.9%. Oddly, employment also fell from the prior month. How was this possible?

The labor force decreased.

Which statement best represents the purpose for measuring annual inflation (or deflation)?

The main purpose is to find out whether the overall cost of living has changed.

Monetary Policy is:

The use of the money supply to influence the economy

Country A has a GDP of $200,000 and a population of 1,000. Country B has a GDP of $400,000 and a population of 4,000. Which of the following is true

The value of GDP per capita is higher in country A

country A has a GDP of $200,000 and a population of 1,000. Country B has a GDP of $400,000 and a population of 4,000. Which of the following is true

The value of GDP per capita is higher in country A

During the Great Depression, the U.S. aggregate demand curve shifted to the left, in part, because:

There was a sevare decline in stock prices & the U.S. government decreased the supply of money & a decrease in wealth

During the Great Recession, the U.S. long-run aggregate supply curve shifted to the left, in part, because:

There was an institutional breakdown in financial markets

As credit card balances increase, what will be the consequence for M1 and M2?

There will no no effect on M1 and M2

You own a store and have not raised prices recently—and now your store has more customers. Which statement is correct?

This can be troublesome because you face a price confusion problem: You don't know if the extra business means that you should open another store, or if the crowds are a result of inflation, which has caused all consumers to buy at a faster rate.

You own a store and have not raised prices recently and now your store has more customers. Which statement is correct?

This can be troublesome because you face a price confusion problem: You don`t know if the extra business means that you should open another store, or if the crowds are a result of inflation, which has caused all consumers to buy at a faster rate.

You bought a popular video game last year for $75 and sold it to a store this year for $20. The store sells the used game to a consumer for $40. When you sell your game to the store, how is this included in GDP

This does not count in GDP

Which of the following individuals would NOT be considered part of the labor force

Thomas, who is unemployed but has given up searching for a job because he believes there are no jobs available for him

Which of the following groups of countries are members of NAFTA?

United States, Canada, and Mexico

open market operations

The purchase or sale of bonds by a central bank. Fed buys securities to increase money supply, and sells securities to decrease the money supply. BUYING=BIGGER selling = smaller Fed typically buys and sells U.S. Treasury securities.

Countercyclical fiscal policy consists of:

Using expansionary fiscal policy during times of recession and contractionary fiscal policy during times of expansion

If your boss calls you into her office and offers you a promotion, which will include a 5% pay increase, how would you evaluate the value of your raise?

Very good, since the rate of inflation is 1%.

Which of the following organizations has over 130 member nations and oversees the General Agreement on Trade and Tariffs (GATT)?

World Trade Organization (WTO)

What does the X axis and Y axis of the Laffer curve represent?

X axis = the tax rate Y axis = the tax revenue

Are demographics an important factor when planning the federal budget?

Yes, because many governments benefits are received by the fast-growing elderly population, causing implications for future levels of taxation and government benefits for everyone

Should average citizens be concerned with the government's budget?

Yes, because the government's yearly budget decisions have immediate and future implications for levels of taxation and the provisions of pubic goods

In a bid to be re-elected, you promise both a lower tax rate and greater tax revenue. Would you be able to back up this promise with economic reasoning? Use the Laffer curve, shown here, to support your answer.

Yes, but only if the current tax rate is in Region II of the Laffer curve.

Does the value of cleaning your house count toward the value of GDP

Yes, if you pay a person or company to clean your house

Does the value of cleaning your house count toward the value of GDP?

Yes, if you pay a person or company to clean your house.

Gas prices typically rise every summer as more people travel during the summer months. If the economy is in a recession and your friend tells you that gas prices are still rising during the summer months, which of the following is true

Your friend is correct, since gas prices can be increasing due to inflation

Your friend is correct, since gas prices can be increasing due to inflation.

The chained consumer price index (CPI) tends to be:

a better measure of prices than the traditional CPI, no matter what the circumstances.

The price of a McDonald's hamburger in 1955 was $0.15 when the price index was 27; if in 2011, it was $0.89 when the price index was 220, then the inflation-adjusted price of a McDonald's hamburger in 2011 was

a bit higher than 2011's actual price (1-1.99 times as much)

The price of a McDonald`s hamburger in 1955 was $0.15 when the price index was 27; if in 2011, it was $0.89 when the price index was 220, then the inflation-adjusted price of a McDonald`s hamburger in 2011 was:

a bit higher than 2011`s actual price (1-1.99 times as much).

If the price index in 1922 was 17 and a unit of Nabisco Oreo cookies cost $0.32, and if the price index today is 220 and a unit of Nabisco Oreo cookies costs $2.99, then the inflation-adjusted price of Oreos is

a bit higher than today's actual price (1-1.99 times as much)

Government budgets

a budget must have plans for both incoming and outgoing funds. government budget is a plan for both and spending and raising funds for the government.

demand change

a change or a shift in a markets total demand

what is an IOU?

a contract specifiying who owes how much and a date for payment

PPF (Production Possibilities Frontier)

a curve that shows the maximum quantity of one good that can be produced for each possible quantity of another good produced

The phillips curve

a curve that shows the short-run trade-off between inflation and unemployment

During the 2007-2009 Great Recession, the United States witnessed:

a decrease in the labor force participation rate.

If a large group of U.S. workers begins to retire, you can expect:

a decrease in the labor force participation rate.

disinflation

a decrease in the rate of inflation. example, inflation going from 3% one year to 1.5% the next year. still inflation just less of it.

Holding all else constant, if people who are currently unemployed become discouraged workers, you will see:

a decrease the labor force participation rate

Katherine was laid off from her job 11 months ago. After searching for a job for months, Katherine gives up her job search because she feels there are no jobs available for her. Economists would classify Katherine as:

a discouraged worker

The spending multiplier is:

a formula to determine the total impact on spending from an initial change of a given amount.

fractional reserve banking system

a fraction of deposits are held in reserve, the rest is loaned out.

deflation

a general decrease in price level. our economy hadn't experienced deflation in over 60 years until 2008-2009.

inflation

a general increase in price level. expressed as a percentage change in the previous years price level.

demand curve

a graph of the relationship between the price of a good and the quantity demanded

Consumer Price Index (CPI)

a measure of the price level based on the consumption pattern of a typical consumer. Goal: include everything purchased by a typical consumer to get a measure of the cost of living.

An initial increase in government spending of $100 billion can create more than $100 billion through what economists call:

a multiplier effect

Which of the following is a service?

a visit to your doctor

Official unemployment is identified as when:

a worker who is not currently employed is searching for a job unsuccessfully.

In 1940 you could buy a ``nickel Pepsi`` for (oddly enough) a nickel. If the price index in 1940 was 14 and the 2011 price index was 221, then the inflation-adjusted price of a Pepsi would be:

about 79 cents ($0.79)

In 1940 you could buy a "nickel Pepsi" for (oddly enough) a nickel. If the price index in 1940 was 14 and the 2011 price index was 221, then the inflation-adjusted price of a Pepsi would be:

about 79 cents ($0.79).

The ability of one person or nation to produce more of a good while using the same quantity of resources as another is called a(n):

absolute advantage

What is a benefit of international trade?

all of these

Which of the following would be studied by a macroeconomist?

all of these (a country's gross domestic product; a country's inflation rate; why exchange rates fluctuate)

Which of the following would be included in the U.S. GDP

all of these (commissions paid to E*TRADE because they facilitated a stock trade; money earned by Las Vegas casinos for providing services to gamblers; money that's paid to a local pharmacy for a flu shot)

Which of the following would be included in the U.S. GDP?

Which of the following are components of Gross Domestic Product?

all of these (investment; consumption; net exports)

What are some uses of GDP data?

all of these (measuring economic growth; measuring living standards; measuring business cycles)

Based on the weight of the consumer price index (CPI), the price of rental housing increases by 15% and that of owned housing by 5%. During the same year, the price of gasoline falls by 22%. We can say that:

all other factors being constant, it is likely the CPI would rise during the year in question.

Law of Demand

all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will decrease, and vice versa.

Law of Supply

all other things equal there is a direct relationship between price and quantity supplied. direct: Two variables move in the same direction

The consumption category includes

all purchases of final goods and services made by consumers except new houses

The consumption category includes:

all purchases of final goods and services made by consumers except new houses.

Research and development (R&D) tax credits:

allow firms to spend resources to develop new technology, which in turn can lead to future production.

money multiplier

also called the 'deposit expansion multiplier'. It is found by dividing 1 by the reserve ratio. (1/.RR)

The phase of the business cycle where the economy is growing slower than usual is called

an economic contraction

What phrase describes the situation that's occurring when the economy is growing more slowly than usual—or perhaps even shrinking

an economic contraction

What phrase describes the situation that's occurring when the economy is growing more slowly than usual—or perhaps even shrinking?

an economic contraction

The phase of the business cycle where the economy is growing faster than usual is called:

an economic expansion.

In most nations, one or more governing bodies must approve government spending or new tax policies. This causes ___________ between setting fiscal policy and seeing its effects.

an implementation lag

Since 1967, the citizens of the United States have had _________ in their standard of living

an increase

A shortcoming of nominal GDP is that

an increase in nominal GDP can be caused by changes in either price or quantity

A shortcoming of nominal GDP is that:

an increase in nominal GDP can be caused by changes in either price or quantity

medium of exchange

an item that buyers give to sellers when they want to purchase goods and services

Say consumers buy two kinds of meat, beef and pork. If the price of pork doesn't change and the price of beef rises over time, then consumers will typically buy more pork and less beef. If the Bureau of Labor Statistics fails to capture such substitution between goods in the CPI calculation, then this will result in

an overestimation of both the CPI and the inflation rate

Quality changes:

are at least partially adjusted for in the CPI.

Menu costs of inflation:

are best described as the costs firms incur by having to change prices either on paper or in the computer.

All three types of unemployment:

are difficult on households

Automatic stabilizers:

are government programs that automatically implement countercyclical fiscal policy in response to economic conditions.

Ford produces 100,000 cars this year and only sells 95,000. The 5,000 cars that are not sold _______ listed in ________ category of GDP

are; the investment

One misconception that people often have about unemployment is that:

as a nation, we should aim for zero unemployment

When the unemployment rate is equal to its natural rate—that is, no cyclical unemployment exists—the output level produced in the economy is:

at full-employment output

price controls

attempt to set or manipulate prices through government involvement in the market. meant to ease perceived burdens of the population.

Government programs that automatically implement countercyclical fiscal policy in response to economic conditions are called:

automatic stabilizers.

Real GDP is GDP measured in:

base year prices

The chained consumer price index (CPI) is a better measure of prices than the traditional CPI:

because it adjusts for price changes more often, especially when new goods are introduced, which is important because new products' prices tend to fall soon after introduction.

Assuming the price level increased, real GDP is greater than nominal GDP if the current year is ________ the base year, and real GDP is less than nominal GDP if the current year is ________ the base year

before; after

By approximately how much more did the unemployment rate increase for black men than white men during the 2007-2009 recession?

between 2 and 3%

what's the main difference between stocks and bonds?

bonds represent debt while stocks represent ownership

Depending on how fiscal policy is implemented, it can affect:

both aggregate demand and aggregate supply

Suppose that Canada, an industrialized nation, and Mexico, a developing nation, both produce clothes and cars. The real wage in Mexico is lower than in Canada. The countries have a free trade agreement. Each nation will find a comparative advantage. Which country benefits from this free trade agreement?

both of them

how are stocks and bonds similar

both used to raise money

The short-run fluctuations in economic activity that can cause output to be above or below the long-run trend are called:

business cycles

Lowering marginal income tax rates for individuals:

creates incentives for individuals to work harder and produce more.

absolute advantage (inputs)

can produce absolutely faster with the same inputs

absolute advantage (outputs)

can produce absolutely more with the same inputs (more efficient)

Arguably, the increases in housing prices in 2005-2006:

caused a price confusion problem for producers.

movement along the supply curve

caused by a change in the price of the good, direct relationship between price and quantity supplied

shift in supply

caused by non price factors, entire supply curve will shift to the left or right.

resource cost

change due to change in amount of resources available

direct of indirect, you go on shark tank and mark cuban loans you money

direct

direct or indirect, you borrow money from your father in-law

direct

direct or indirect, you sell bonds to people in your econ class

direct

bond buyers seek the...

highest possible interest rate when they purchase bonds

An example of expansionary fiscal policy is:

lowering taxes.

bond sellers seek the..

lowest possible interest rate when they issue bonds

"A" has a comparative advantage over "B" in producing a good if:

"A" has a lower opportunity cost of producing the good than does "B"

If a Keynesian economist were asked to make a statement about the relationship between the government and the economy, what might he say?

"Government intervention in the economy is sometimes necessary"

In the past decade, companies like Nike and Under Armour have set up manufacturing centers in Nicaragua in part due to the country's establishment of _____________, allowing these companies to avoid standard corporate tax rates.

"free zones"

labor force formula

# of employed + # of unemployed

Let's say a bottle of Dr. Wells (an actual soft drink still available but hard to obtain) cost $0.15 in 1970. If the consumer price index (CPI) in 1970 was 37.8 and the current CPI is 240, then the inflation-adjusted price of Dr. Wells would be (rounded to the nearest penny)

$0.95

Assume you earned $30,000 in 2012, and the CPI in 2013 was 238. How much of a raise did you need, in dollars, to keep up with the change in the inflation rate

$1,044

What was real GDP in 2011 if the price level was 100

$15,075.7

A movie ticket cost $0.75 in 1960. If movie tickets increased at the same rate as overall inflation, how much would the same movie ticket cost in 2012 dollars, if the CPI was 30 in 1960 and 230 in 2012

$5.75

Suppose South Korea imports $4 billion in goods and services, and exports $2.5 billion in goods and services. South Korea's trade balance is ____________. This trade balance is called a ____________.

-$1.5 billion; trade surplus

Interest rate on demand side

-interest rate: cost of borrowing -higher interest means a firm pays more to borrow

what shifts the LRAS

-more resources -new tech -strong institutions

Nominal GDP increased from $15.62 trillion to $16.09 trillion, and the price level increased from 120.0 to 122.4. The growth rate of real GDP was approximately: (Round to the nearest second decimal

1.00%

If the relevant population is 268 million people and the number of people in the labor force is 148 million, the number of people NOT in the labor force is equal to:

120 million

The 2007-2009 recession lasted for:

19 months.

3 hamburgers

The long run average growth rate of real GDP in the U.S. economy is about:

Education typically composes about

3% of the CPI

Education typically composes about:

3% of the CPI

If a jobless person has not sought a job in ____________ weeks, that person is not counted in the unemployment statistics

If real GDP grew by 2% and the inflation rate was 2%, then nominal GDP grew by:

What was the cyclical unemployment rate for white men in 2010

What percentage of consumers' income was spent on fuels and utilities in December 2012

5.3%

Which of the following people would be considered unemployed?

A 17-year-old offers to pet-sit, but no one hires her. A worker is temporarily laid off from his job as a construction worker, but he expects to be recalled soon.

Florida's nice beaches and subtropical climate give the state ________ in tourism

A Comparative Advantage

The traditional short-run Philips curve implies that:

A central bank can choose higher or lower unemployment rates simply by adjusting the rate of inflation in an economy

The spending multiplier is:

A formula to determine the total impact on spending from an initial change of a given amount

Which of the following best summarizes the main causes of the Great Depression?

A stock market crash led to a decrease in expected income and tight monetary policy. Higher tax rates and a banking crisis then drove the economy into a depression

A major advantage of money over barter is that it is: a) a medium of exchange b) fiat money c) a unit of account d) a store of value e) currency

A) A medium of exchange

People are worried about losing their jobs which means

AD curve shifts to the left

decrease in consumer wealth means

AD curve shifts to the left

increase consumer wealth means

AD curve shifts to the right

Holding all else constant, in the short run, an increase in the money supply can cause:

An increase in real GDP

Which of the following can lower the level of frictional unemployment over time?

An increase in the number of online job search engines

Which of the following statements best describes the trends in the USA and the world regarding international trade?

As a percentage of GDP, the United States has been trading more internationally, and the rest of the world has also been trading more.

Which components of GDP were the largest in 1967 and 2011

Consumption and Consumption

Which components of GDP were the largest in 1967 and 2011?

Consumption and Consumption

Bans on imports, import quotas, voluntary quotas, and tariffs on goods:

Decrease equilibrium quantities but increase prices

As the prices of goods and services increase, the value of money:

Decreases

During a financial crisis hit hard by bank failures, the money supply:

Decreases because people start withdrawing their money from banks

Why is a budget deficit not necessarily a bad thing?

Deficits may allow for tax rate stability during recessions

Payroll taxes:

Generate revenues earmarked for mandatory spending purposes

According to the textbook, the top-grossing movie of all time (adjusted for inflation) is

Gone with the Wind

According to the textbook, the top-grossing movie of all time (adjusted for inflation) is:

Gone with the Wind.

M2 money supply

Includes all of M1 money supply plus most savings accounts, money market accounts, and certificates of deposit. = M1 + saving accounts.

Since 1972, labor force participation among women has generally ___________ while labor force participation among men has generally ___________

Increased/Decreased

Injecting new money into the economy eventually causes:

Inflation

A company sells 100 boxes of chocolate, yet it only produced 90 boxes of chocolate during the year. Which of the following is true

Inventory investment must be negative

current chairman of the Fed

Jerome H. Powell

Scarcity

Limited quantities of resources to meet unlimited wants

In Nation A, the price index rises from 110 to 120 in a particular year. In the same year, the price level rises from 120 to 130 in Nation B. This means

Nation A is experiencing inflation of less than 9.3% and Nation B is experiencing inflation of less than 8.5%

Unemployed workers

Out of work but actively seeking work.

Nominal GDP increased from $15.76 trillion to $16.39 trillion, and the price level increased from 112.6 to 114.8. Which of the following is true?

Output grew faster than the price level.

LRAS corresponds to

PPC

Classical economists believe that government intervention in the economy is unnecessary because:

Prices are flexible and, therefore, the economy will adjust back to full employment on its own

If nominal GDP is increasing, which of the following is true?

Production of final goods and services is increasing at a faster rate than prices are falling

Contractionary monetary policy: (effect on aggregate demand)

Raises interest rates, causing aggregate demand to shift to the left

The Great Recession was similar to other recessions since World War II in that:

Real gross domestic product (GDP) initially declined and then recovered sometimes later

The three time lags that accompany policy decisions are:

Recognition lag, implementation lag, and impact lag

If Robert was earning $10,000 and now earns $11,500, then:

Robert could suffer from money illusion if prices increase by 15% or more.

Which of the following economic statements would a Keynesian economists tend to support?

Savings is a drain on demand

why are we unable to produce certain combinations

Scarcity and limited resources

Which of the following statements about the composition of the labor force is correct

Since 1948, the labor force participation gap between males and females has decreased

Which of the following statements about the composition of the labor force is correct?

Since 1948, the percentage of men participating in the labor force has decreased.

Which of the following statements about the composition of the labor force is correct?

Since 1948, the percentage of women participating in the labor force has increased

supply shifters (stores)

Size of the market (#sellers) Technology Other goods (output alternatives Resource costs Exceptions of future price Subsidies, taxes and regulations

Which of the following statements is true about the natural rate of unemployment?

Sometimes the actual unemployment rate is below the natural rate

formulas for reserves

TR= RR+ER PMC= Mn x ER TMS= PMC + DD MM= 1/.RR

What is the consumer price index (CPI)

The CPI is a measure of the price level based on the consumption patterns of a typical consumer

What is the consumer price index (CPI)?

The CPI is a measure of the price level based on the consumption patterns of a typical consumer.

The Great Recession was different from other recessions since World War II in that:

The decline in Real GDP was much larger and lasted longer

During the Great Recession, a major financial crisis followed the collapse of housing prices, which led to:

The decline in the health of many financial firms and banks

Based on the belief that prices are sticky and inflexible, Keynesian economists conclude that:

The economy is not self-correcting and can become stuck below full employment

If the effect of contractionary fiscal policy hit when the economy is already contracting:

The effects could lead to even deeper recession

Assume that the government is currently balancing the national debt so they outlays equal tax revenue. Then the economy slips into recession, and the government decides to increase government spending by $50 billion. The government must pay for this by borrowing: it must sell $50 billion worth of Treasury bonds. As a result:

The federal budget will be in deficit by at least $50 billion

Expansionary fiscal policy occurs when:

The government increases spending or decreases taxes to stimulate the economy toward expansion

opportunity cost

The highest-valued alternative that must be given up to engage in an activity.

The price level was 110 in 2009 and 115 in 2011. Nominal GDP in 2009 was $13,974 billion. Which of the following is NOT correct?

The inflation rate was 5.0% from 2009 to 2011.

Why do Social Security and Medicare pose problems for the federal government budget?

The number of retirees is increasing

Suppose that the president has decided to increase government spending by building more libraries. The legislation was rushed through Congress and enacted without any delay. From here, the libraries will take 10 months to plan and 2 years to build.

The planning and building of the libraries represents an impact lag of this policy.

Expansionary monetary policy can have immediate real short-run effects; initially, no prices have adjusted. But as prices adjust in the long run:

The real impact of monetary policy dissipates completely

Macroeconomics

The study of the broader economy.

Which of the following is true when the economy is at full employment?

The unemployment rate is equal to the natural rate of unemployment.

When aggregate demand is high enough to drive unemployment below the natural rate:

There is upward pressure on the price level and the government may want to conduct contractionary fiscal policy

If Hong Kong has an open economy, it _________ with other countries

Trades both services and goods

During the Great Recession, the U.S. aggregate demand curve shifted to the left, in part, because:

U.S. housing prices fell & there was a decrease in expected income

___________ is an example of an automatic stabilizer.

Unemployment compensation

Which of the following statements about unemployment is true?

Unemployment rates vary widely across age and race

Which of the following questions does the official unemployment rate answer?

What percentage of the labor force is classified as unemployed?

Passive monetary policy is:

When central banks purposefully choose to only stabilize money and price levels through monetary policy

From 1960 until 2012, the long-run average rate of inflation in the United States was

about 4%

Which of the following would be studied by a macroeconomist?

all of the above (a country's gross domestic product; a country's inflation rate; why exchange rates fluctuate)

In 1982, which types of unemployment were present for all demographics?

all of these

discount rate

banks borrow from the fed

Real GDP is GDP measured in

base year prices

Daniel, Steven, and Chris work as engineers in Connecticut. The demand for engineers starts to decline as their company's profits start to decrease during a recession. As a result, Daniel and Steven are laid off from their jobs. Daniel and Steven would be classified as:

cyclically unemployed.

Free trade is _____________, because it _____________ the size of the pie available to the economy.

efficient; increases

Lower income tax rates will affect

either AD or LRAS (or both).

ASK AB INTEREST RATE

good or bad???

It has been shown that increases in the money supply are directly related to the rate of inflation. If the previous statement is true, then:

hyperinflation will normally be associated with large increases in the money supply.

What is convergence?

idea that overtime, GDP levels across nations equalize

Knowing the length of unemployment is important because:

if most unemployment is short term, we might not be as concerned with a higher unemployment rate, because this indicates that the unemployment is a temporary situation, rather than a long-term problem.

Since 1972, labor force participation among women has generally ___________ while labor force participation among men has generally ___________.

increased/decreased

Since 1967, exported services have _______ and imported goods have ________

increased; increased

Fiscal policy includes:

increases and decreases to both taxes and government spending.

Anything that lengthens the job search process:

increases frictional unemployment.

When GDP increases, national income ________ and national output __________

increases, increases

Economists refer to full-employment output as:

potential GDP

The GDP deflator is a measure of:

price level

The government has decided to give governmental grants to community colleges that offer job training for individuals who have recently been laid off due to their outmoded skills. The government is trying to reduce the level of:

structural unemployment.

Jamal works in a factory in Lake Zurich, Illinois, assembling toy trains. The factory owner updates the current equipment and installs new robots that can do Jamal's job. As a result, Jamal is laid off and is now unemployed. Jamal would be considered

structurally unemployed

Some jobs in the economy are no longer needed after an advancement in technology. A person who loses his job this way would be considered:

structurally unemployed

If a Hershey`s chocolate bar cost $0.05 in 1921 when the price index was 18 and the same size and weight Hershey`s chocolate bar cost $0.05 in 1955 when the price index was 27, then:

the inflation-adjusted price of the bar would be much higher than the actual price for both years.

what is per unit cost?

total costs of input/real output

cyclical unemployment

unemployment that rises during economic downturns and falls when the economy improves

If your nominal wage rises but you think that it automatically means your real wage rose, then:

you are suffering from money illusion.

You are offered two jobs, one in Chicago paying $67,000 and one in Dallas paying $58,000. The price index in Chicago is 110.8, and in Dallas it is 91.5. If real wages are the only consideration, then:

you would definitely take the job in Dallas because the real wage is higher there.

Usually in the United States and other advanced economies

your nominal wage is more than your real wage

Suppose the U.S. economy was operating at t* (see Figure 16.9) on the Laffer Curve in 2000. Tax revenues would ______ in 2001 as a result of the fiscal policies enacted.

decrease

higher interest rates (increase or decrease) overall spending in the economy

decrease (more borrowers than savers)

Bans on imports, import quotas, voluntary quotas, and tariffs on goods:

decrease equilibrium quantities but increase prices.

Refer to the table below. If 4 million of those who are currently unemployed become discouraged workers, the unemployment rate will _______________.

decrease to 6.7%

Assume you received a 4% raise in 2013. In addition, the CPI in 2013 was 240. Your real wage in 2013 ___________

decreased

Assume you received a 4% raise in 2013. In addition, the CPI in 2013 was 240. Your real wage in 2013 ___________.

decreased

The labor force participation rate for white men has _________ since 1972.

decreased

The rate of inflation ______ between 1980 and 1983

decreased

The rate of inflation ______ between 1980 and 1983.

decreased

Typically during a recession, the percentage of the total unemployed that are classified under short-term unemployment ____________ and the percentage classified as long-term unemployment ____________.

decreases; increases

what are some specific things that will increase exports of decrease imports and therefore shift the AD curve to the right

depreciation of the dollar/appreciation of foreign currency, quality, higher income abroad

producer surplus

difference between willingness to sell and the price actually received for that good.

are bonds direct of indirect finance

direct

willingness to sell determined by:

direct costs and opportunity costs

Which of the following is considered mandatory government spending? a) funding the Environmental Protection Agency b) payments to active military personnel c) infrastructure maintenance spending d) international aid to poor countries e) payments to social security recipients

e) payments to social security recipients

Which of the following is an example of something that contains an excise tax? a) property b) income c) clothing made and sold in Oregon (where the sales tax rate is 0%) d) clothing imported from China and sold in Oregon e) tobacco products

e) tobacco products

When a smaller country with fewer resources specializes its production and gains access to larger, international markets, this can create:

economies of scale

real GDP

economy's output of goods and services, corrects the growth in economy for prices (adj. for inflation)

If an economy is experiencing an unemployment rate less than the natural rate, which of the fiscal policies would you suggest in order to restore the economy to full employment?

either A or B (increase taxes; decrease government spending)

Intrest rate will either...

encourage or discourage borrowing

The World Trade Organization (WTO):

enforces international trade agreements.

who are the demanders of loanable funds?

entities who want to borrow money

A shortcoming of using real GDP as a measure of economic well-being is that it does not measure changes in:

environmental quality

GDP is an important indicator because it is used as a measure of all of the following except

environmental quality

GDP is an important indicator because it is used as a measure of all of the following except:

environmental quality

the federal reserve

established in 1913 as central bank of U.S

The Economic Stimulus Act of 2008 and the American Recovery and Reinvestment Act of 2009 are both examples of:

expansionary fiscal policy

When the government increases spending or decreases taxes to stimulate the economy toward expansion, the government is conducting:

expansionary fiscal policy

If the economy begins to fall into a recession, one would expect Congress and the president to conduct:

expansionary fiscal policy.

From 2001 to 2002 and 2007 to 2009, the U.S. government was likely to engage in _______ fiscal policy, which would cause aggregate demand to _______.

expansionary; increase

In recent years, the United States has:

exported more services abroad than it has imported.

Net exports can be defined as

exports minus importS

Between 1979 and 2012, manufacturing employment in the United States has

fallen by almost 50%

During healthy economic periods, cyclical unemployment:

falls toward zero.

The government purchases category of GDP includes spending by

federal, state, and local government

The government purchases category of GDP includes spending by

federal, state, and local government.

GDP is best defined as the total market value of all

final goods and services produced within a country within a given time

GDP is best defined as the total market value of all:

final goods and services produced within a country within a given time.

what are financial intermediaries?

firms that help channel funds from saver to borrowers ex: banks

resource/input prices are sticky

fixed interest rates, yearly wage contacts

A marginal tax rate of 91% means that:

for each additional dollar earned, only 9 cents can be used toward consumption.

The invention of the Internet has reduced ____________ unemployment because it allows for workers and employers to find each other more quickly

frictional

Which of the following two types of unemployment occur even when the economy is healthy and growing?

frictional and structural

JTKB is an accounting firm in South Orange County, Florida. Company policy is that whenever JTKB decides to open up a new accounting position, the hiring manager must conduct at least five interviews over a two-week span. Because of this process, JTKB is increasing ____________ in South Orange County, Florida.

frictional unemployment

Nina has a part-time job as she finishes her degree in fashion design. After obtaining her degree she decides to quit her part-time job to search for a job that better fits her now-improved skill set. Nina has a few interviews, but it is taking time to find the job that suits her best. Nina would be considered:

frictionally unemployed

The signing of long-term wage and price agreements and the relationship to inflation most likely raises the issue of

future price uncertainty

The signing of long-term wage and price agreements and the relationship to inflation most likely raises the issue of:

future price uncertainty.

You have to pay costs for your business now but you also have to enter into long-term contracts to repay loans in the future. If inflation occurs, the best term for the problem that occurs in this case is:

future price uncertainty.

macroeconomics and GDP

gives us a measurement that we can use to analyze economic growth. can compare regions or nations. not perfectly straightforward, come qualities of life not easily captured by numbers.

expansionary fiscal policy

government increases spending or decreases taxes to stimulate or expand economy.

Government salaries paid to soldiers in the military are included in the ________ category of GDP

government purchases

Government salaries paid to soldiers in the military are included in the ________ category of GDP.

government purchases

The state of Florida spends $3 million to repave highways. This is included in the ______ category of GDP

government purchases

The "crowding-out" critique is based on the idea that:

government spending may be a substitute for private spending.

The difference between the official unemployment rate and the alternate measure of unemployment that includes discouraged workers and underemployed workers:

grows when the economy enters a recession

Below is data on the natural rate of unemployment and actual unemployment. Natural rate of unemployment: 5% Actual unemployment: 5% The information provided above reflects an economy that is

healthy

what are some specific things that will increase government purchases of goods and services and therefore shifting the AD curve to the right

high unemployment causes gov to increase spending, war, infrastructure, pretty much anything

At ___________ tax rates, ___________ in those tax rates lead to ___________ in total tax revenue.

high; decreases; increases

Government policies such as unemployment compensation and government regulations related to hiring and firing employees result in:

higher frictional unemployment

During normal economic times, unemployment in France and Germany tends to be ____________ than in the United States mainly because of ____________.

higher; labor market regulations

Inflation is occurring in a nation; the implication(s) of this is/are:

holding nominal wages constant, the real wage would fall.

Deflation is occurring in a nation; the implication(s) of this is/are

holding nominal wages constant, the real wage would rise

Amy can produce either 5,000 pounds of cheese or 20 houses per year. Jim can produce either 5,000 pounds of cheese or 10 houses per year. Amy has a comparative advantage in the production of ___________, and Jim has a comparative advantage in the production of _____________.

houses; cheese

Which of the following are NOT counted toward GDP

housework you do around your home - products sold illegally on a black market - quality of the environment ALL OF THESE

Typically the largest percentage category in the consumer price index (CPI) is:

housing.

In Felixania, cat food constitutes 45% of the typical basket of goods for a typical consumer, dog food constitutes 3%, and all other goods constitute the remaining 52%. Assume the price of cat food rises by 4%, the price of dog food falls by 10%, and the prices for all other goods remain constant. Based on the information given, we can definitely say:

if consumers get at 4% pay raise, they are better off in terms of their real income compared to inflation as measured by the Felixanian CPI.

If mustard now costs $0.75 when today's price index is 225, and if the price index in 1970 was 38, we would most accurately say that:

if mustard cost $0.10 in 1970, it was relatively cheap as an inflation-adjusted price.

what is a disadvantage of stocks from a business perspective?

if the business fails, you go down with it

International trade and the associated increase in international competition has forced American businesses to:

improve productivity

A shortcoming of using real GDP as a measure of economic well-being is that it does not measure changes

in environmental quality

An implementation lag happens because:

in most nations, one or more governing bodies must approve government spending or new tax policies.

According to the figure, deflation was occurring:

in none of the years shown

The American Recovery and Reinvestment Act introduced a large amount of government spending into the economy: $789 billion. With a marginal propensity to consume of 0.75, how much should the program change aggregate demand?

increase aggregate demand by $3,156 billion

Policies that focus on education:

increase effective labor resources and thus increase aggregate supply over time.

Expansionary fiscal policy leads to:

increases in budget deficits and the national debt during economic downturns.

When GDP increases, national income ________ and national output __________

increases; increases

Calculating Inflation Rate

index 2 - index 1/ index 1 x100

direct or indirect, you take out a loan from the local bank.

indirect

Microeconomics

individual units that comprise the economy.

Discouraged workers are defined as:

individuals who are not working but are willing to work and who have looked for a job in the past 12 months but have not sought employment in the past 4 weeks.

Underemployed workers are:

individuals who are working part-time but would prefer to be working full-time.

If 51% of all goods in the consumer price index (CPI) became more expensive and 49% became cheaper

inflation or deflation could occur, depending on the weight of these goods in the basket of goods and the actual percent changes

The percent change in the overall level of prices in the economy is called the

inflation rate

Referring to the figure, we can observe that:

inflation seemes to stabalize in the early years, 1996 and 1999, but it then spiked between 2002 and 2004

why did the acceleration take place

innovation

nominal interest rate

interest rate before corrected for inflation equation: real interest rate + inflation rate

real interest rate

interest rate corrected for inflation equation: nom. interest rate - inflation

Goods that firms repackage with other goods for sale at a later stage are

intermediate goods

A company sells 100 boxes of chocolate, yet it only produced 90 boxes of chocolate during the year. Which of the following is true Inventory

investment must be negative

When George buys a new computer for his business, it is included in GDP as _______, and when he buys a new computer for use at home, it counts as ________

investment; consumption

money given to borrowers...

is money from saver

Zero unemployment

is not possible

Zero unemployment:

is not possible

Bob wins the lottery. This ________ included in ________ category of GDP.

is not, any

Bob wins the lottery. This ________ included in ________ category of GDP

is not; any

The relationship between tax rates and tax revenue:

is one of the most highly controversial in politics

short run aggregate supply

is positively sloped, and depends on price level

A shortcoming of real GDP is

it does not include the underground economy

A shortcoming of real GDP is:

it does not include the underground economy

One shortcoming of the official unemployment rate is that:

it includes only workers who have no job and are actively seeking work.

A recognition lag happens because:

it is difficult to determine when the economy is turning up or down.

If everyone buys the same goods every year and the price of housing rises by 38%:

it is not possible to tell what happened to the CPI because other than for housing, we do not know what happened to the prices of any of the other goods.

Joe Kowalski invents a new product, and this new product becomes cheaper over time. This can be problematic because

it is unlikely the CPI will include Joe's new product immediately, even if it is a consumer good

Joe Kowalski invents a new product, and this new product becomes cheaper over time. This can be problematic because:

it is unlikely the CPI will include Joe's new product immediately, even if it is a consumer good.

Joe Kowalski invents a new product, and this new product becomes cheaper over time. This can be problematic because:

it is unlikely the CPI will include Joe`s new product immediately, even if it is a consumer good.

If the effects of expansionary fiscal policy hit when the economy is already expanding:

it may lead to excessive aggregate demand and inflation.

A society could achieve a higher level of productivity if:

it takes advantage of each individual's comparative advantage

discouraged workers

jobless individuals who have given up looking for work.

fiscal policy complications

lag times crowding out negative net export effect savings shifts

price floor

legally established minimum price for a good or service

Real GDP would be a better measure of economic well-being if it included the value of

leisure time

The multiplier effect of fiscal policy predicts that an increase in government spending by $100 billion will increase total income by $400 billion if the marginal propensity to consume is 0.75. If we account for PARTIAL crowding out, then the increase in income will be

less than $400 billion.

why is a graph of real per capita GDP over time, called a "hockey stick"

little growth and then it shoots up

Supply-side fiscal policy explains how taxes and government spending can affect:

long-run aggregate supply.

what is meant by "steady state"

long-run equilibrium where there is no new investment bc no change in capital

The definition of long-term unemployment is unemployment that lasts:

longer than 14 weeks.

At ___________ tax rates, ___________ in those tax rates lead to ___________ in total tax revenue.

low; decreases; decreases

At ___________ tax rates, ___________ in those tax rates lead to ___________ in total tax revenue.

low; increases; increases

younger peoples income is usually...

lower because not really working

elderly aged people's income is usually...

lower because they are living off their savings

what are some specific things that will cause consumers to increase their spending

lower taxes, low unemployment, high income, lower interest rates

An example of an intermediate good would be:

lumber used by a contractor to build a fence in a customer's yard.

An example of an intermediate good would be

lumber used by a contractor to build a fence in their customer's yard

if the expected return on investment is bigger than the interest rate on the loan....

make an investment

The portion of additional income that is spent on consumption is:

marginal propensity to consume (MPC).

An individual or country that has a comparative advantage in the production of one good:

may or may not have an absolute advantage in the good's production.

What is a "closed economy"?

means there is no foreign involvement (no exports)

What is a "private economy"?

means there is no government involvment

As a business owner, you find that your resource prices are increasing often. Because these costs are rising, you find it necessary to change your prices frequently. This best describes

menu costs

As a business owner, you find that your resource prices are increasing often. Because these costs are rising, you find it necessary to change your prices frequently. This best describes:

menu costs.

commodity-backed money

money that can be exchanged for a commodity at a fixed rat. silver certificates, first half of the 20th century.

commodity money

money that is an actual physical commodity, such as gold, silver, or tobacco

The Bureau of Labor Statistics releases consumer price index (CPI) data

monthly

The chained consumer price index (CPI) tends to more accurately reflect prices by updating the consumer basket of goods:

monthly

The Bureau of Labor Statistics releases consumer price index (CPI) data:

monthly.

product/output prices arent sticky which means they're...

more flexible

Employment data is released ___________ gross domestic product (GDP) data.

more frequently than

Y*=

natural rate of output

U*=

natural rate of unemployment

Since 1967, exported services have _______ and imported goods have ________ i

ncreased; increased

The consumption category of GDP includes all purchases of final goods and services by households except

new houses

Your friend currently works as an accountant in a public accounting firm in a small town called Stillwater in Minnesota. He is offered a job in New York City with a salary of $95,000. Your friend calls you and tells you that he is excited about the new job offer, which gives him a raise from his current salary of $50,000. Based on your knowledge of economics, you think that your friend has

no reason to be excited unless his real salary in New York City is higher than that in Stillwater.

fiat money

no value except as the medium of exchange. no intrinsic value.

If real income increases, then:

nominal income rises faster than prices.

price level

nominal variable that reflects current price change without adjusting for inflation

Consider the largest trading partners of the United States. Suppose the United States imposed quotas on each of its top goods. Which one(s) would generate revenue for the United States?

none of these

Which of the following would be included in the U.S. GDP?

none of these (the sale of services (for example a hair cut) by an American citizen who is living in France - the sale of a used Chevy convertible - cocaine that is sold (illegally) by a drug gang)

what is meant by sticky prices?

not as flexible

Bonnie Austin, age 30, used to work part time in a local restaurant. This year she quit her job to take care of her five-month-old daughter. She is currently not looking for a job. The survey conducted by the Bureau of Labor Statistics today will count Bonnie as

not in labor force

When an unemployed worker receives a payment from the government as a result of being unemployed, it is

not included in any of the expenditure categories

budget deficit

occurs when outlays exceed revenues, more funds flowing out than in.

crowding out

occurs when private spending falls in response to increases in government spending. Implications: overall spending may not increase, government now has higher deficit and debt.

budget surplus

occurs when revenues exceed outlays. more funds flowing in than out.

Milton Friedman, who won the Nobel Prize in Economics, characterized inflation as being "high and variable." These characteristics of inflation create problems because

of future price uncertainty

Total world exports of goods and services are now about ____________ the size of world gross domestic product (GDP).

one-fourth

During healthy economic periods:

only frictional and structural unemployment exist.

Which of the following represents frictional unemployment? i. The demand for refrigerators falls when the economy enters a recession and refrigerator manufacturers lay off some of their workers. ii. General Motors decides to close its U.S. factories and relocate its car manufacturing division to Mexico. iii. After quitting your job in Ohio to be closer to your family in California, you are now looking for a new job. iv. Carla's boss recently fired her for doing a poor job and she hasn't yet found a new one.

only iii and iv

An economy that trades with the rest of the world is a(n):

open economy

Citizens can consume the largest quantities of goods and services in which of the following situations?

open economy

During recessionary periods:

outlays increase and tax revenue falls

In macroeconomics

output and income are essentially identical

In macroeconomics:

output and income are essentially identical.

Real GDP is GDP adjusted for changes in:

overall price levels

what is an advantage of issuing stocks instead of bonds from a business's perspective?

ownership shares in firm and you can inlfuence the buisness

Which of the following is included in the government purchases category of GDP?

payments to people in the military

calculating price index

price index = current basket price/basket price in base year x 100

what does it mean when default risk is high?

price of bond goes down and interest rate goes up

what does it mean when default risk is low?

price of bond goes up and interest rate goes down

If nominal GDP is declining, then it must be the case that

prices are falling at a greater rate than production is rising

If nominal GDP is declining, then it must be the case that:

prices are falling at a greater rate than production is rising

Between two given years, if real GDP and nominal GDP grow at the same rate, then:

prices must have remained constant between the two years.

The textbook shows that the inflation-adjusted movie receipts for Star Wars (released 1977) were $1,410,707,000 and the original receipts were $460,998,000. The implication is that:

prices today are about 33% of what they were in 1977.

The textbook shows that the inflation-adjusted movie receipts for Star Wars (released 1977) were $1,410,707,000 and the original receipts were $460,998,000. The implication is that

prices today are about three times what they were in 1977

what are banks?

private firms that accept deposits and extend loans

A technological advancement allows for:

production of a greater quantity of output using the same or fewer inputs

Inflation in Zimbabwe in 2008:

reached the rate of 80 billion percent per month.

Economic growth is best measured by changes in:

real GDP

To evaluate the change in average living standards over time, it is best to use

real GDP per capita

To evaluate the change in average living standards over time, it is best to use:

real GDP per capita

If nominal income increases, then:

real income increases if the price index falls.

Inflation creates uncertainty because:

real interest rates, prices, and wages are unknown.

If you wanted to compare economic well-being over time and across countries, the data you would use is:

real per capita GDP

Automatic stabilizers try to solve the problem of:

recognition lags and implementation lags.

productivity

refers to how much can be produces from the inputs used in production.... prod=real output/inputs

Fischer Equation

relaties inflation to the real interest rate and nominal interest rates

When actual unemployment is less than its natural rate:

resources are employed at levels that are not sustainable in the long run.

Since 1948, female labor force participation has __________ and male labor force participation has __________.

risen; fallen

Which of the following represents the largest share of U.S. GDP

services

Which of the following represents the largest share of U.S. GDP?

services

The business cycle measures

short-run fluctuations in economic activity

Countercyclical fiscal policy attempts to:

smooth out expansions and recessions in the business cycle.

All else being equal, people generally prefer __________ in their financial affairs.

smoothness and predictability

a store of value

something that keeps its value if it is stored rather than used

In general, a nation can enjoy a higher standard of living by ___________ than by being self-sufficient.

specializing and trading

Technological advancements in online banking, have led to its widespread use. As a result, many bank tellers have become unemployed. This is an example of __________ unemployment.

structural

Workers who lose their jobs because the skill set they possess is no longer required in the economy are considered to be:

structurally unemployed

The government can assist in reducing the level of structural unemployment by:

subsidizing the relocation of workers who lose their jobs.

Three accuracy problems with the consumer price index (CPI) are:

substitution, quality changes, and the availability of new goods and services.

Which of the following best describes the relationship between imports and exports? Import spending is _____________ GDP and export spending is _______________ GDP.

subtracted from; added to

Among major trade partners in 2011, a trade ______ occurred only with _____. The United States also had the largest trade _____ with ______.

surplus; the United Kingdom; deficit; China

Income tax revenue is calculated by:

tax rate mc111-1.jpg income.

what are specific things that might make businesses increase their investment spending, therefore shifting AD to the right

technological progress, low interest rate, high income, competitive markets, low taxes

The Great Recession was most similar to which of the following downturns?

the 1982 recession

The agency that measures the consumer price index (CPI) in the United States is

the Bureau of Labor Statistics

the CPI has increased, even if the entertainment in the next year is free

In Bovania, milk constitutes 56% of the typical basket of goods for a typical consumer. Let's say the price of milk rises by 4% and the prices of all other goods fall by 10%. Based on the information given, we can definitely say

the CPI in Bovania is less than in the previous year

the CPI in Bovania is less than in the previous year.

In Felixania, cat food constitutes 45% of the typical basket of goods for a typical consumer, dog food constitutes 3%, and all other goods constitute the remaining 52%. Assume the price of cat food rises by 4%, the price of dog food falls by 10%, and prices remain constant for all other goods. Based on the information given, we can definitely say

the CPI in Felixania is more than in the previous year

Chicken becomes more expensive in 2008 at Wegmans in State College, Pennsylvania. This means

the CPI might rise or fall and the price of chicken at Wegmans could make a very small difference in the CPI if chicken at Wegmans is included in the index. However, chicken would be a relatively small portion of the entire CPI if it is included at all

Chicken becomes more expensive in 2008 at Wegmans in State College, Pennsylvania. This means:

Oranges become more expensive in 2008 at Ukrop's in Charlottesville, Virginia. This means

the CPI might rise or fall and the price of oranges at Ukrop's could make a very small difference in the CPI if oranges at Ukrop's are included. However, oranges would be a relatively small portion of the entire CPI, if they are included in it at all

If cheeseburgers become more expensive and consumers switch their purchases away from cheeseburgers but the consumer price index (CPI) still assumes they buy the same amount, then:

the CPI will reflect upward bias.

If the price of industrial plastic injection molding machines rose by 20% and the price of oranges fell by 20%, then:

the CPI would fall by the weighted value of oranges in the CPI, but because industrial plastic injection molding machines are not a consumer good, they would not affect the CPI.

An index of the average prices of all goods and services throughout the economy is called:

the GDP deflator

The recession of 2007-2009 has been dubbed:

the Great Recession

comparative advantage

the ability to produce a good at a lower opportunity cost than another producer

What is a trade deficit?

the amount by which a country's imports exceed its exports

quantity demanded

the amount of a good that buyers are willing and able to purchase

Quantity supplied

the amount of the good or service that producers are willing to sell at the current price

One improvement of the chained consumer price index (CPI) over the traditional CPI is that

the chained CPI more quickly takes into account new goods

In Bovania, milk constitutes 56% of the typical basket of goods for a typical consumer. Let's say the price of milk rises by 7% and the prices of all other goods fall by 4%. Based on the information given, we can definitely say

the consumer price index (CPI) in Bovania is greater than in the previous year

the consumer price index (CPI) in Bovania is greater than in the previous year.

In Bovania, milk constitutes 56% of the typical basket of goods for a typical consumer. Let`s say the price of milk rises by 7% and the prices of all other goods fall by 4%. Based on the information given, we can definitely say:

the consumer price index (CPI) in Bovania is greater than in the previous year.

If people bought the same market basket of goods as the average consumer again and again

the consumer price index (CPI) would be extremely accurate

If people bought the same market basket of goods as the average consumer again and again:

the consumer price index (CPI) would be extremely accurate.

In a particular nation, people buy a completely unique and different set of goods and services every year. None of the goods purchased in the new year are the same as any of the goods purchased in the previous year. Based on this information

the consumer price index (CPI) would be meaningless in this nation.

If housing prices increase by 25% and the price of all other goods decreases by 22%, then

the consumer price index (CPI) would definitely fall during the year in question because housing prices do not constitute the majority of the CPI

If housing prices increase by 25% and the price of all other goods decreases by 22%, then:

the consumer price index (CPI) would definitely fall during the year in question because housing prices do not constitute the majority of the CPI.

interest rate on the demand side

the cost of borrowing. higher interest rates mean a firm pays more to borrow.

vault cash

the currency a bank has in its vault and cash drawers

The value of the consumer price index (CPI) is best described as

the current year prices to base year prices, holding the market basket content constant.

The value of the consumer price index (CPI) is best described as:

the current year prices to base year prices, holding the market basket content constant.

Trade balance is:

the difference between a nation's total exports and total imports

When you include discouraged workers and unemployed workers in calculations of the unemployment rate

the difference between this alternate measure and the official unemployment rate increases significantly during recessions

A price confusion problem is best described as:

the difficulty producers have in determining whether higher prices are due to increased demand or inflation.

The best measure of the average living standards of people in the country is

the dollar value of final goods and services produced per person

required reserves

the dollar value of the percentage of deposits that must be held and not loaned out. (example: 10% of $100 is $10)

A government might want to reduce aggregate demand if it believes that:

the economy is expanding past its long-run capabilities

When actual unemployment is less than its natural rate:

the economy is in an expansion.

Assume that the government is currently balancing the national budget so that outlays equal tax revenue. Then the economy slips into recession, and the government decides to increase government spending by $50 billion. The government must pay for this by borrowing; it must sell $50 billion worth of Treasury bonds. As a result:

the federal budget will be in deficit by at least $50 billion.

Assume that the government is currently balancing the national budget so that outlays equal tax revenue. Then the economy starts into an expansion, and the government decides to decrease government spending by $50 billion. As a result:

the federal budget will be in surplus by at least $50 billion.

The sum of the number of unemployed and the number of employed is:

the labor force

deadweight loss

the loss of consumer and producer surplus from a tax

According to the price confusion problem, if the price of a product increases, then

the market demand has increased, and the firm's output should increase

According to the price confusion problem, if the price of a product increases, then:

the market demand has increased, and the firm`s output should increase.

Gross Domestic Product (GDP)

the market value of all final goods and services legally produced within a nations borders during a given year.

Even when inflation rates are high, you don't see vending machines on your school campus adjusting prices frequently. This is an example of

the menu costs of inflation.

M1 money supply

the money supply measure composed of currency and checkable deposits. = currency + DD (demand deposits)

GDP is most often measured by

the month

GDP is most often measured by:

the month

The assertion that increases in government spending and decreases in taxes are largely offset by increases in savings is called:

the new classical critique

To calculate the labor force participation rate, you only need to know:

the number of employed and unemployed and the relevant adult population.

Which of the following is a topic of macroeconomics?

the number of people in the economy with no jobs

If the labor force participation rate increases

the number of unemployed could have increased

If your real wage rose but your nominal wage fell, this would imply that:

the overall price level has fallen more than your nominal wage.

The unemployment rate is:

the percentage of the labor force that is unemployed.

Marginal propensity to consume is:

the portion of additional income that is spent on consumption.

interest rate

the price of loanable funds.

Assume the price of salt increased from $0.30 in 1985 to $0.50 in 1995. If we calculate the average rate of price increase for salt over this period, we could accurately say

the price of salt increased at about a 5% rate per year during this period

Assume the price of salt increased from $0.30 in 1985 to $0.50 in 1995. If we calculate the average rate of price increase for salt over this period, we could accurately say:

the price of salt increased at about a 5% rate per year during this period.

Which of the following is a topic of microeconomics?

the profit of firms in the banking industry

Typically if real wages fall, the quantity demanded of labor rises. If workers agree to 3% wage increases for a four-year period and inflation is more than 3%, then, based on this information alone:

the quantity demanded of labor will increase, because real wages fell.

loanable funds "law of supply"

the quantity of savings rises when the interest rate rises. the interest rate is a reward for saving.

what is the natural rate of output?

the rate of production acheived by the economy in the long run when unemployment is at its natural rate

Inflation can create uncertainty by making:

the real value of future payments uncertain.

reserve ratio

the reserve requirement expressed in 'decimal' form (example: .10)

Which of the following would be included in the U.S. GDP

the sale of a song written by a Californian to a customer in Kansas

Which of the following would be included in the U.S. GDP?

the sale of a song written by a Californian to a customer in Kansas

Economics

the study of how people allocate their limited resources to satisfy their unlimited wants. the study of how people make decisions.

market demand

the sum of all the individual quantities demanded by each buyer in the market at each price

Natural unemployment is:

the sum of structural and frictional unemployment

The size of the labor force is calculated as:

the sum of the number of unemployed and the number of employed

The x axis for the Laffer curve represents:

the tax rate.

The contraction phase of a business cycle is best described as

the time elapsed from a peak to a trough

The contraction phase of a business cycle is best described as:

the time elapsed from a peak to a trough.

The expansion phase of a business cycle is best described as:

the time elapsed from a trough to a peak.

total reserves

the total amount of cash a bank 'owns'. It is the vault cash plus the amount on reserve at the FED bank.

If the value of the consumer price index (CPI) in 2013 was 135 and the value of the CPI in 2012 was 117, we could correctly say that

the typical basket of goods was about 15.4% more expensive in 2013 than in 2012

Which of the following would be studied by a macroeconomist

the unemployment rate

During periods of recession:

the unemployment rate rises

The main statistic that is used to monitor unemployment in the economy is:

the unemployment rate.

Fiscal policy is:

the use of government spending and taxes to influence the economy.

fiscal policy

the use of government spending and taxes to influence the economy. taxes and spending changes must be legislated and approved by congress and the president.

An accurate measure of GDP is derived by adding:

the value added at each stage of the production process.

Real Gross Domestic Product (Real GDP)

the value of all final goods and services legally produced within a nations borders during a given year adjusted for inflation.

When aggregate demand is low enough to drive unemployment above the natural rate:

there is downward pressure on the price level and the government may want to conduct expansionary fiscal policy.

When aggregate demand is high enough to drive unemployment below the natural rate:

there is upward pressure on the price level and the government may want to conduct contractionary fiscal policy

how do secondary increase the value of stocks?

they expose to more buyers and make them easier to sell

When you include discouraged workers and unemployed workers in calculations of the unemployment rate:

this alternate measure is much higher than the official unemployment rate.

If the consumer price index (CPI) was 100 in the period of 1982-1984, then

this period was the base period

If the consumer price index (CPI) was 100 in the period of 1982-1984, then:

this period was the base period.

If the goods producers buy change dramatically between years, then:

this would be reflected in the GDP deflator but not the CPI.

Recognition lag, implementation lag, and impact lag are all examples of:

time lags that accompany policy decisions.

Tofu becomes more expensive in 2008 at Safeway/Vons in Laguna Nigel, California. This means

tofu, even if included in the CPI in 2008, would make a small difference on the average weighted price of food and beverages. Food and beverages only constitute a small portion of the CPI, and hence, this would be unlikely to affect the overall CPI by any significant amount

For nearly four decades, the United States has had a:

trade deficit

If Hong Kong has an open economy, it ____________ with other countries.

trades both services and goods

positive institutions

transparent, consistent gov, private property rights, stable money, and prices

Congress and the president would conduct contractionary fiscal policy in order to:

try to control inflation

Congress and the president would conduct expansionary fiscal policy in order to:

try to stimulate the economy toward expansion.

Assume tuition and fees at North Carolina State University cost $4,259 in 2004 and $7,787 in 2012. If the price index was 184 in 2004 and 226 in 2012, then we could say

tuition has increased more rapidly than inflation

Assume tuition at Houston Community College cost $588 (per semester) in 2004 and $813 in 2012. If the price index was 184 in 2004 and 226 in 2012, then we could say

tuition has increased more rapidly than inflation

Assume tuition at the University of Virginia cost $2,962 (per semester) in 2004 and $11,584 in 2012. If the price index was 184 in 2004 and 226 in 2012, then we could say

tuition has increased much more rapidly than inflation

Assume tuition at the University of Virginia cost $2,962 (per semester) in 2004 and $11,584 in 2012. If the price index was 184 in 2004 and 226 in 2012, then we could say:

tuition has increased much more rapidly than inflation.

what is default risk?

two possible outcomes for a bond = you either get your money back or nothing

inverse

two variables move in opposite directions.

Which of the following function as an automatic stabilizer during business cycles?

unemployment compensation

One argument against unemployment insurance is that:

unemployment insurance creates an indirect incentive that can make it more attractive for workers to stay unemployed

A government program that reduces the hardship of being out of work by guaranteeing that unemployed workers receive a percentage of their former income while they are unemployed is referred to as:

unemployment insurance.

structural unemployment

unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one

what is a bond?

used by large established firms when they need an infusion of money

Countercyclical fiscal policy consists of:

using expansionary fiscal policy during times of recession and contractionary fiscal policy during times of expansion.

Trade surplus is:

when a nation exports more than it imports.

Trade deficit is:

when a nation imports more than it exports

During which of the following situations would you advise for expansionary fiscal policy?

when the current unemployment rate is above the natural rate of unemployment

Deflation is best described as

when the overall level of prices of goods falls

Inflation occurs:

when the overall level of prices rises.

Inflation occurs:

when the overall price level rises

Deflation is best described as:

when the overall prices of goods falls

Since 1972, which demographic has generally had the lowest labor force participation rate?

white women

Deflation:

will make you better off if your nominal wages fall more slowly than prices.

An increase in taxes or a decrease in spending during an economic expansion can:

work to decrease the budget deficit and pay off some of the government debt.

In November of 2009, the United States was in a deep recession. To help keep the economy afloat, the government extended the period of time one could receive unemployment insurance to 99 weeks. This policy had an unintended consequence because:

workers spent more time searching for the perfect job, which increased frictional unemployment

The ratio of Price in an Earlier Time / Price in Today's Time

would be used to convert today's price to an earlier price adjusting for inflation

The ratio of Price in an Earlier Time / Price in Today`s Time:

would be used to convert today`s price to an earlier price adjusting for inflation.

Let's say a company invents a very popular device called a Zorgon, which allows you to send small items via a transporter from one place to another. This would affect the consumer price index (CPI) in the sense that the CPI

would fail to include purchases of the Zorgon for some period of time after the product entered the market

Deflation

would negatively affect producers but positively affect consumers because producers must accept lower prices

Deflation:

would negatively affect producers but positively affect consumers because producers must accept lower prices

Deflation:

would negatively affect producers but positively affect consumers because producers must accept lower prices.

The website that provides official inflation statistics is

www.bls.gov.

You are offered two jobs, one in Chicago paying $67,000 and one in Philadelphia paying $79,000. The price index in Chicago is 110.8, and in Philadelphia it is 126.5. If real wages are the only consideration, then:

you would definitely take the job in Philadelphia because the real wage is higher there.

You are offered two jobs, one in Richmond, Virginia, paying $67,000, and one in San Diego, California, paying $79,000. The price index in Richmond is 104.5, and in San Diego it is 132.3. If real wages are the only consideration, then:

you would definitely take the job in Richmond because the real wage is higher there.

Your entertainment price index (EPI) was computed based on three goods: movie tickets, popcorn, and limeade. If you change the quantity of these goods from this year to next year and the prices of two of the three goods increase while the other price falls, then:

your EPI might rise or fall, contingent only on the percentage of the market basket that these goods constituted and the percentage that each good occupied within the basket, regardless of the quantity change from year to year.

Your firm expands its output in a time when demand appears to be increasing. Demand for all goods is increasing because of inflation, and consumers want to buy all goods faster because their real purchasing power is falling due to inflation. This situation could indicate that:

your firm experienced a price confusion problem.

In Las Vegas, the cost of living index is 110, and in San Francisco, it is 170. You work in Las Vegas currently and your salary is $57,000. You are offered a promotion and pay raise of $70,000 to move to San Francisco. If you take the promotion

your nominal wage increased but your real wage has decreased

your nominal wage increased but your real wage has decreased.

how to calculate the interest rate on a bond

price at inception= facevalue/1+(interest rate/100) interest rate= face value-price at inception/ price at inception x100

When you buy a new car built by Ford, it is included in the ________ category of GDP

consumption

When you buy a new car built by Ford, it is included in the ________ category of GDP.

consumption

Which is the largest component of U.S. GDP

consumption

When people in the United States buy clothing made in China, this counts as

consumption and imports

The four major expenditure categories of GDP are

consumption, investment, government purchases, and net exports

If the economy starting at full-employment output begins to enter into an expansion, one would expect Congress and the president to conduct:

contractionary fiscal policy

When the government decreases spending or increases taxes to slow economic expansion, the government is conducting:

contractionary fiscal policy

When the government decreases spending or increases taxes to slow economic expansion, the government is conducting:

contractionary fiscal policy.

can you think of why they us economy has grown so much compared to the other countries?

corrupt government

negative institutions

corrupt, political instability

Amy can produce either 5,000 pounds of cheese or 20 houses per year. Jim can produce either 5,000 pounds of cheese or 10 houses per year. Jim's opportunity cost of producing one pound of cheese is ____________ house(s).

1/500

Amy can produce either 5,000 pounds of cheese or 20 houses per year. Jim can produce either 5,000 pounds of cheese or 10 houses per year. If both Amy and Jim produce only cheese, how much cheese can they produce per year?

10,000 pounds

The value of the consumer price index (CPI) in 2011 was 229 compared to the base period's, which will always have the value of

100

The value of the consumer price index (CPI) in 2011 was 229 compared to the base period, which will always have the value of:

100

Suppose a basket of goods and services has been selected to calculate the consumer price index (CPI) and 2002 has been chosen as the base year. In 2002, the basket's cost was $76.00; in 2004, the basket's cost was $79.50; and in 2006, the basket's cost was $85.00. The value of the CPI was

100 in 2002

Suppose a basket of goods and services has been selected to calculate the consumer price index (CPI) and 2002 has been chosen as the base year. In 2002, the basket`s cost was $76.00; in 2004, the basket`s cost was $79.50; and in 2006, the basket`s cost was $85.00. The value of the CPI was:

100 in 2002

100 in 2002.

In December 2012, what percentage of a typical consumer's income was spent on consumer goods and services found in the CPI

100%

important institutions for economic growth

1. Political stability and rule of law 2. Private property rights 3. Stable money and prices 4. Competitive markets 5. Efficient taxes 6. International trade 7. Flow of funds across borders

Nominal GDP increased from $15.62 trillion to $16.09 trillion, and the price level increased from 120.0 to 122.4. The growth rate of real GDP was approximately: (Round to the nearest second decimal.)

1.00%

Amy can produce either 5,000 pounds of cheese or 20 houses per year. Jim can produce either 5,000 pounds of cheese or 10 houses per year. Amy's opportunity cost of producing one pound of cheese is _____________ house(s).

1/250

1/3 hotdog

If in response to a decrease in taxes of $100 billion, the nation's RGDP increases by $300 billion, which of the following is true?

All of these answers are true.

Changes in the quantity of money lead to real changes in the economy. If this is the case, why would the central bank every stop increasing the money supply?

Although there is a short-run incentive to increase the money supply, these effects wear off in the long run as pieces adjust and then drive down the value of money

Which of the following would cause crowding out?

American Recovery and Reinvestment Act

A tariff is a tax imposed on ________ good

An imported good

The bank in your hometown has decided to double the number of its local branch offices. How will this affect the bank's balance sheet?

Assets will increase

In 2011, 60% of goods imported by the United States came from just seven nations. Which of the following nations was NOT one of those seven?

Australia

Progressive tax rates, taxes on corporate profits, unemployment compensation, and welfare programs are all examples of:

Automatic stabilizers

Which of the following would not be counted in the calculation of GDP? Select all that apply

Buying a counterfeit designer purse from a guy in an alley. Government spending on social security. Cleaning your own house.

Which of the following transactions, if they were included in the calculation of GDP, would lead to an overstated GDP figure? Select all that apply

Buying a used car. Purchasing your first home, which was not a new construction. The purchase of a special fabric adhesive by a furniture company in North Carolina.

Which of the following transactions, if they were included in the calculation of GDP, would lead to an overstated GDP figure? Select all that apply.

Buying a used car. Purchasing your first home, which was not a new construction. The purchase of a special fabric adhesive by a furniture company in North Carolina.

The first of two significant fiscal policy initiatives enacted by the government during the Great Recession, signed in February 2008 by President George W. Bush, was the:

Economic Stimulus Act of 2008.

Why does the federal debt tend to increase during periods of recession?

Economic activity decreases, while decreases revenues and increases outlays

While comparative advantage is the biggest reason many nations engage in trade, two other important reasons are:

Economies of scale and increased competition

Which of the following trade agreements provides for the development of a single market among its members?

European Union

If the economy begins to fall into a recession, one would expect Congress and the president to conduct:

Expansionary fiscal policy

______________ is when a central bank acts to increase the money supply in an effort to stimulate the economy

Expansionary monetary policy

Brian Murphy is a political consultant for a candidate in Massachusetts. Mr. Murphy's candidate is defeated in the November election, and as a result, Mr. Murphy finds himself unemployed. Mr. Murphy's unemployment is classified as:

Frictional unemployment

According to classical economists, changes in aggregate demand have little effect on the overall economy, and therefore:

Long-run aggregate supply is the primary source of economic growth

An institutional breakdown in U.S. financial markets would tend to cause:

Long-run aggregate supply to decrease

During the Great Recession, the U.S. _______ curve shift to the _________

Long-run aggregate supply; left

If Ann were to convert some of her checkable deposits into a certificate of deposit, which of the following changes would take place?

M1 would decrease; there would be no change in M2

If your marginal propensity to consume is 0.75 and you get an additional $400 in income, you would spend __________ on consumption

MPC = change in consumption/change in income 0.75=x/400 = 300

Why is the PPF downward sloping?

Must give up one good to increase production of another

In Nation A, the price index rises from 110 to 120 in a particular year. In the same year, the price level rises from 120 to 130 in Nation B. This means:

Nation A is experiencing inflation of less than 9.3% and Nation B is experiencing inflation of less than 8.5%.

What is a "closed, private economy"?

No government and no foreigners

Total world exports of goods and services are now _______ about the size of world gross domestic product (GDP)

One-fourth

Nominal GDP increased from $15.44 trillion to $15.75 trillion, and the price level increased from 116.5 to 122.3. Which of the following is true

Output grew slower than the price level

Nominal GDP increased from $15.44 trillion to $15.75 trillion, and the price level increased from 116.5 to 122.3. Which of the following is true?

Output grew slower than the price level

In his song "Allentown," Billy Joel sings about the demise of the steel and coal industry in Pennsylvania. In areas like Allentown and much of the Midwest, manufacturing was once the largest employer, but many of those jobs have disappeared as technology has changed. What type of unemployment is the song about

Structural

Which of the following statements about structural unemployment is true?

Structural unemployment cannot be eliminated

Which of the following statements about unemployment is true?

To be officially unemployed, a person has to be in the labor force.

Countries engaged in international trade tend to specialize in production based on:

comparative advantage

Florida's nice beaches and subtropical climate give the state ___________ in tourism.

comparative advantage

The ability of one person or nation to produce a good at a lower opportunity cost than another is called a(n):

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