ECN 211 Final

Assume for the US that the opportunity cost of each airplane is 50 cars. Which of these pairs of points could be on the US' production possibilities frontier?

(200 airplanes, 12,500 cars) and (150 airplanes, 15,000 cars)

Who is considered officially unemployed

Lex was laid off from an auto parts producer and is now seeking full time work in the health care industry

Classical theory of money neutrality is the appropriate theory for analysis of the economy in the

Long run, because real and nominal variables are determined separately in the long run

Suppose the income of buyers in a market for an inferior good decreases and a technological advancement occurs also. What would we expect to happen in the market

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

When the price level increases, the real value of people's money holdings

Falls and consumption decreases

The fisher effect

Says a change in the inflation rate will change the nominal interest rate and leave the real interest rate unchanged

Cyclical unemployment is closely associated with

Short-run ups and downs of the economy

The law of demand states that, other things remaining the same, the higher the price of a good, the

Smaller the quantity of the good demanded

Which of the types of unemployment is associated with longer spells of unemployment

Structural

In addition to controlling the money supply, the Federal Reserve

Supervises and regulates banks

The consumer price index is used to

turn dollar figures into meaningful measures of purchasing power

Common biases is the CPI include ? and as a result, the CPI ? the true cost of living

unmeasured quality of change, substitution and intro of new goods/ overestimates

Factors of production are

used to produce goods and services

When two variables have a positive correlation,

when the x-variable increases, the y-variable increases

Who gets scarce resources in a market economy?

whoever is willing and able to pay the price

Suppose the reserve requirement is 5% what is the max possible expansion of deposits that could result from the initial deposit of $500

$10,000

Suppose bankrate.com displays a 30-yr mortgage quote of 3.75%. If the annual inflation rate is 3%, what is the annual real interest rate

0.75%

A leftward shift in a supply curve for cars would most likely be caused by

?

Suppose due to an unexpected decline in the value of the stock market, some retired workers re-enter the labor market and begin searching for jobs. Assuming no change in the number of employed workers, this would result in an ? in the unemployment rate and an ? In the labor force participation rate

?

When the price of fresh apples rises,

?

Which of the following is a tool of monetary policy

?

When assets fall below liabilties

A bank is insolvent

What shifts both the short run and long run AS left

A decrease in capital stock

Which of the following would lead to a leftward shift in the dam and curve for iPads (a normal good)

A decrease in household income

A rightward shift in the supply curve for bicycles would most likely be caused by

A decrease in the price of steel to make bicycles

In 2008, households and firms became pessimistic about future income and employment in the US economy. All else constant, this caused

A leftward shift in the aggregate demand curve

If population in the economy falls, this will cause

A leftward shift in the long run AS curve

Which of the following is an example of a positive economic analysis

A simple study is conducted that shows annual earnings increase with education level

The labor force is best described by

All employed workers plus unemployed

Which of the following is considered human capital? Knowledge acquired from

All: early childhood education programs, on the job experience, and job training

What would lead to a increase in the natural level of real gdp and a rightward shift to the long run AS curve

An advance in tech

Which of the following would cause price to dcrease

An increase in supply

What would cause a shift in the short run AS curve, but no change in the long run AS curve

An increase in the price of oil

It takes Suzi 4 hrs to sew a shirt and 2 hrs to bake a cake. Anna can sew a shirt in 3 hrs and bake a cake in 1 hr. If Anna and Suzi decide to specialize and trade, who should make cakes?

Anna

Which of the following events must result in a higher price in market for cigars

Demand for cigars increases, and supply of cigars decreases.

Suppose the federal reserve wanted to increase the money supply. It could

Decrease the reserve requirement

In the short run, a decrease in AD leads to ? price level and ? in unemployment

Decrease/ no change

Holding the nominal interest rate constant, the real interest rate

Decreases when there is an increase in the inflation rate

Which of the following is FALSE regarding gdp per person as a measure of standard of living

GDP is adjusted to account for environmental quality

Which of the following is TRUE

Growth in productivity is required for sustained growth in real gdp per capita

What would lead to an increase in the multiplier effect of fiscal policy

Household save a lower fraction of income

Which of the following price changes would be effected in CPI? I. The price of haircuts from a Tempe salon increases II. The price of cars imported by the US from Japan increases Iii. The price of heavy farm equipment purchased by farmers in the US increases IV. The price of ammunition purchased by the US govt for military operations increases

I and II

Which of the following lead to increase in GDP for the US in 2011 I. $10,000 worth of Washington apples are sold to a grocery firm in Mexico in October 2011 II. A customer pays $50 for a haircut in a Tempe salon in June 2011 III. A GM car is produced in Detroit in July 2011 and sold to a dealer, the car sit on the lot until 2012 IV. A plumber paid $500 for services provided in Tempe on March 2011 but he conceals his income from tax authorities

I, II, and III

Which of the following is NOT currently considered part of the US money supply I. A savings deposit in the amount of $10,000 II. A bank deposit in the amount of $5,000 III. A $100 bill IV. A treasury bond worth $10,000

IV

Which of the following is a positive economic statement

If the price of gasoline rises, a smaller quantity of it will be bought.

All else held constant, a fall in the foreign price level would cause a

Increase in aggregate dmsnd

The short run result of an open market purchase of securities by the federal reserve is a ? in price level and a ? in real gdp

Increase/ increase

The most important reason for the slope of the AD curve is that as the price level

Increases, interest rates increase, and investment decreases

Examples of automatic stabilizers include govt expenditures that ? when national income decreases and help explain why deficits are ? during recessions

Increases/ larger

As the price level falls and other things remain the same, real monetary wealth ? and ?

Increases/ the quantity of real gdp demanded increases

Some consumer goods, like condensed soups and boxed dinners, are considered "recession proof". The quantity of these goods sold actually increases during periods when income declines. These goods are

Inferior goods

The federal funds rate is

Influenced by open market operations

Suppose the country of Xenophobia chose to isolate itself from the rest of the world. It's ruler proclaimed that Xenophobia should become self-sufficient, so it would not engage in foreign trade. From an economic perspective, this idea would

Not make sense as long as Xenophobia had a comparable advantage in some good

Suppose the Federal Reserve wanted to decrease the money supply. It could

Perform open market sales of securities

A nation's standard of living is best measured by its

Real gdp per person

The inflation tax

Refers to the loss of purchasing power for monetary assets when the govt prints more money

Which of the following is/are considered an asset of a bank?

Reserves

If the economy is producing above the natural rate of output in the short-run, wages and input prices will eventually ? and ? will decrease, returning the economy to long run equilibrium

Rise/ short-run aggregate supply

Flights to Paris are a normal good and people's income rise. At the same time, the price of jet fuel rises. The equilibrium price of a flight to Paris ? And the equilibrium quantity of flights to Paris ?

Rises; might increase, decrease, or not change

What accounts for about two-thirds of the decline in output during a recession

The decline in investment spending

If the price of train tickets decreases, what will be the impact on the market for bus travel?

The demand curve for bus travel shifts to the left

As a result of decreased price of roasted coffee beans,

The demand for coffee drinks increase

Johnny spends an hour studying. He could instead watch tv with his friends. The opportunity cost to him of studying is

The enjoyment he would have received if he had watched tv with his friends

Which best describes the quantity theory of moeny

The quantity theory is better at predicting long run inflation than short run inflation

A university's football stadium is always sold out, and students who wait in line for hours may be turned away. This indicates

The ticket price is below equilibrium price

In economics, the cost of something is

The value of the next-best alternative forgone to get it

Which is an automatic stabilizer

Unemployment benefits

The long run AS curve is

Vertical, because there is no relationship between the price level and real gdp in the long run

Suppose the economy is producing abode the natural rate of output. Which best describes the automatic adjustment to the long run

Wages and input prices increase and short run aggregate supply decreases

An upward sloping short run AS curve is drawn under the assumption that

Wages and some prices are fixed or "sticky"

Which of the following best illustrates the medium of exchange function of money

You pay for your oil change using currency.

The gains from trade are

a result of more efficient resource allocation than would be observed in the absence of trade

What shifts the AD curve

all: increase in money supply, increase in taxes, increase in govt spending

A decrease in the price of oil would lead to ? in short run aggregate supply and ? in long run aggregate supply

an increase/ no change

Technological knowledge refers to

available information on how to produce things

When the price level falls the quantity of

consumption goods demanded and the quantity of net exports demanded both rise.

Paper dollars are ___ money and gold coins are ___ money

fiat, commodity

High and unexpected inflation has a greater cost

for savers in high income tax brackets than for savers in low income tax brackets

Economics is the study of

how society manages its scarce resources

Matt is going to college to become a pharmacist. What he learns about existing information increases

human capital but not technological knowledge.

Holding the level of tech constant, increasing the level of capital per worker ? labor productivity at a ? rate

increases/decreases

Factors of production are

inputs into the production process

Technological knowledge

is a determinant of productivity.

Money is the most liquid asset available because

it is a medium of exchange

You pay for cheese and bread from the deli with currency. Which function of money does this best illustrate?

medium of exchange

The consumer price index is used to #2

monitor changes in the cost of living over time

relative price variability

rises with inflation, leading to a misallocation of resources

The key determinant of the standard of living in a country is

the amount of goods and services produced from each unit of labor input

A rational decision maker takes an action if and only if

the marginal benefit of the action exceeds the marginal cost

Frictional unemployment is the result of

the search process of matching workers with jobs