Econ 101 Final 2022

Suppose that, in year 1, an economy produces 150 golf balls that sell for $3 each and 100 pizzas that sell for $8 each. The next year, the economy produces 250 golf balls that sell for $3.25 each and 120 pizzas that sell for $9 each. Using year 1 as the base year,the growth rate of real GDP from year 1 to year 2 is _____%. a. 36.8 b. 43.7 c. 26.9 d. 51.4

a. 36.8

If the cost of a market basket is $150 in year 1 and $200 in year 2, the price index for year 1 using year 2 as the base is: a. 75. b. 100. c. 133. d. 150.

a. 75.

Mark and Julie are going to sell brownies and cookies for their third annual fundraiser bake sale. In one day, Mark can make 40 brownies or 20 cookies, and Julie can make 15 brownies or 15 cookies. Based on this information, _____ has the comparative advantage in making brownies and _____ has the comparative advantage in making cookies. a. Mark; Julie b. Mark; Mark c. Julie; Mark d. Julie; Julie

a. Mark; Julie

Which example illustrates consumption expenditure (C) in the national income identity? a. Stephanie bought a laptop for her brother. b. Herman Smith spent $1,500 to buy a used car for his son. c. Samantha bought an oven for her cooking show on Food Network d. Jim purchased 200 shares of Google stock.

a. Stephanie bought a laptop for her brother.

If real GDP rises while nominal GDP falls, then prices on average have: a. fallen. b. stayed the same. c. risen. d. decreased and then been offset by an equal increase.

a. fallen.

The models that economists construct: a. usually make simplifying assumptions. b. often rely on physical constructs, such as those used by architects. c. rarely use mathematical equations or graphs. d. attempt to precisely replicate the real world.

a. usually make simplifying assumptions.

What is the GDP price deflator when nominal GDP = $1,200 and real GDP = $1,000? a. 0.2 b. 120 c. 12 d. 200

b. 120

Contractionary fiscal policy includes: a. decreasing taxes. b. increasing taxes. c. increasing the money supply. d. increasing government expenditures.

b. increasing taxes.

Unemployment decreased to its lowest level in 10 years last month. This statement is a(n): a. example of an opportunity cost. b. positive economic statement. c. normative economic statement. d. value judgment.

b. positive economic statement.

A period of rising real GDP is a(n)_______in the business cycle: a. peak. b. trough. c. expansion. d. recession.

c. expansion.

The sequence of business cycle phases is: a. peak, trough, expansion, recession. b. peak, expansion, trough, recession. c. peak, recession, trough, expansion. d. peak, expansion, recession, trough.

c. peak, recession, trough, expansion.

In a typical business cycle, the trough is immediately followed by the: a. peak. b. recession. c. depression. d. expansion.

d. expansion.

Which item is NOT a factor of production? a. labor b. machines and buildings c. land d. money

d. money

As long as people have different _____, everyone has a comparative advantage in something. a. direct costs b. benefits c. utility d. opportunity costs

d. opportunity costs

Which statement is positive? a. The poverty rate is 14%. b. A high rate of inflation is the most important economic goal for the country. c. Everyone in the country should save money for retirement. d. Basketball players should not be paid higher salaries than are teachers.

a. The poverty rate is 14%.

If a market is NOT in equilibrium, then which of the following is likely to occur? a. The price will adjust to bring the market to equilibrium. b. The demand curve will shift to bring the market to equilibrium. c. The supply curve will shift to bring the market to equilibrium d. Nothing will happen.

a. The price will adjust to bring the market to equilibrium.

If you decide to go to Cancún with your friends during spring break, you cannot go to Paris with your sister in the summer. Which economic principle does this statement BEST represent? a. The true cost of something is its opportunity cost. b. "How much" is a decision at the margin. c. People usually respond to incentives, exploiting opportunities to make themselves better off. d. There are gains from trade.

a. The true cost of something is its opportunity cost.

A decrease in inventories is: a. a fall in investment spending. b. an increase in investment spending that will lead to an increase in sales. c. thought to have no impact on investment, since it is not part of investment spending. d. part of government spending.

a. a fall in investment spending.

A student organization forms on your college campus to protest the high rent for apartments near campus. This organization is planning a meeting with the dean and the president of the college. Which choice BEST describes one policy the student organization might fight for? a. a price ceiling b. a laissez faire policy c. a price floor d. a quantity control

a. a price ceiling

Goods that are sold in 2020 but produced in 2018: a. are included in investment in 2018 as an inventory. b. are included in investment in 2020. c. count as consumption in 2020. d. are classified as purely financial transactions.

a. are included in investment in 2018 as an inventory.

Money that the government has ordered to be accepted as money is: a. fiat money. b. not usable in international transactions. c. convertible paper money. d. commodity money.

a. fiat money.

Andre recently moved to Boston with his partner Deja, who has a new job as an economics professor at Harvard. Andre is an experienced surgeon who is interviewing with several hospitals in Boston. Andre is: a. frictionally unemployed. b. structurally unemployed. c. cyclically unemployed. d. counted as employed, since he is likely to receive a job offer soon.

a. frictionally unemployed.

The GDP deflator is equal to: a. nominal GDP divided by real GDP times 100. b. real GDP divided by nominal GDP times 100. c. real GDP times nominal GDP times 100. d. [(real GDP times nominal GDP) divided by real GDP] times 100

a. nominal GDP divided by real GDP times 100.

Cyclical unemployment is a result of _____. a. recessions and economic downturns b. efficiency wages c. union wages d. the minimum wage

a. recessions and economic downturns

If an economy is in short-run equilibrium and the level of actual real GDP is greater than potential output, in the long run nominal wages will _____ and the _____ curve will shift _____, bringing the economy back to its potential real GDP. a. rise; SRAS; left b. rise; AD; right c. fall; SRAS; right d. fall; AD; left

a. rise; SRAS; left

If real GDP falls while nominal GDP rises, then prices on average have: a. risen. b. fallen. c. stayed the same. d. Real GDP cannot rise when nominal GDP falls.

a. risen.

Which item would NOT be included in GDP? a. the dollar value of a repair job done by your cousin on her own car b. the dollar value of a lawyer's service c. new car sales by a local dealer d. production of new cars that were not sold in the current year

a. the dollar value of a repair job done by your cousin on her own car

Which item is included in GDP? a. the purchase of a ticket to a Lady Gaga concert. b. the purchase of a 1965 Ford Mustang. c. Social Security payments from the U.S. government to retired people. d. the purchase of 100 shares of Microsoft stock.

a. the purchase of a ticket to a Lady Gaga concert.

If the minimum wage is a binding price floor: a. those who want to work will outnumber the jobs available. b. the market-clearing equilibrium wage will increase. c. there will be a job for everyone who is willing to work. d. business owners will hire more workers.

a. those who want to work will outnumber the jobs available.

Which of the following is the best indicator for measuring the economic growth across time for a country? a. Nominal GDP. b. Real GDP. c. Inflation. d. Nominal GDP per capita

b. Real GDP.

When the minimum wage increases, which outcome is MOST likely? a. Unemployment among skilled workers increases. b. Unemployment among unskilled workers increases. c. Skilled workers will outnumber unskilled workers. d. Fewer workers are willing to work off the books.

b. Unemployment among unskilled workers increases.

Suppose that the average cost of a doctor visit is $100. If the government imposes a price ceiling of $50 on the cost of a doctor visit, there will be: a. an excess supply of doctor visits. b. an excess demand for doctor visits. c. an increase in the equilibrium number of doctor visits. d. no change in the number of doctor visits.

b. an excess demand for doctor visits.

Which factor would NOT result in an increase in the supply of a good? a. a beneficial technological change b. an increase in input prices c. an increase in the number of suppliers d. a decrease in input prices

b. an increase in input prices

The federal funds rate is the interest rate at which: a. banks borrow funds directly from the Federal Reserve. b. banks borrow from other banks with excess reserves. c. the influential companies borrow from banks. d. households' savings are invested in the Federal Reserve.

b. banks borrow from other banks with excess reserves.

When the economy is at full employment, _____ is zero. a. unemployment b. cyclical unemployment c. frictional unemployment d. the natural rate of unemployment

b. cyclical unemployment

If goods A and Z are complements, an increase in the price of good Z will: a. increase the demand for good A. b. decrease the demand for good A. c. decrease the demand for good Z. d. decrease the demand for both good A and good Z.

b. decrease the demand for good A

The problem of determining what goods and services society should produce: a. exists because we can produce more than we need or want. b. exists because there are not enough resources to provide all of the goods and services that people want. c. would not exist if all goods and services were scarce. d. would not exist if government owned all of the resources.

b. exists because there are not enough resources to provide all of the goods and services that people want.

To be binding, a price floor must be set: a. lower than the equilibrium price. b. higher than the equilibrium price. c. so that quantity demanded exceeds quantity supplied. d. lower than the equilibrium price and so that quantity demanded exceeds quantity supplied.

b. higher than the equilibrium price.

Sticky wages and prices occur: a. in the long run. b. in the short run. c. in both the short and long run. d. only when the economy is operating above its potential real GDP.

b. in the short run.

If goods A and B are substitutes, an increase in the price of good A will: a. increase the demand for good A. b. increase the demand for good B. c. increase the demand for good B and decrease the demand for good A. d. decrease the demand for good A.

b. increase the demand for good B.

An increase in the supply of money with no change in demand will lead to a(n) _____ in the equilibrium quantity of money and a _____ in the equilibrium interest rate. a. increase; rise b. increase; fall c. decrease; rise d. decrease; fall

b. increase; fall

An intermediate good would be: a. a new boat to be used for vacations. b. lumber used to build a house. c. payments to military personnel. d. a professor's salary.

b. lumber used to build a house.

If the state government allocates additional spending on education programs, the opportunity cost is: a. the dollar amount of the additional spending. b. measured in terms of the best alternative uses for that money. c. considered only if taxes have to be raised to fund the spending. d. zero.

b. measured in terms of the best alternative uses for that money.

When we are forced to make choices, we are facing the concept of: a. market failure. b. scarcity. c. human capital d. inflation

b. scarcity

The circular-flow diagram illustrates how firms _____ goods and services and _____ factors of production. a. sell; sell b. sell; buy c. buy; sell d. buy; buy

b. sell: buy

A positive demand shock, holding everything else constant: a. shifts AD to the left and results in lower aggregate price levels and lower real GDP in the short run. b. shifts AD to the right and results in higher aggregate price levels and higher real GDP in the short run. c. moves the economy downward along the AD curve. d. moves the economy upward along the AD curve.

b. shifts AD to the right and results in higher aggregate price levels and higher real GDP in the short run.

Potential output is the level of real GDP that: a. occurs when the economy has only cyclical unemployment. b. the economy would produce if all prices, including nominal wages, were fully flexible. c. occurs when the actual rate of unemployment is zero. d. the economy would produce if all prices, including nominal wages, were sticky.

b. the economy would produce if all prices, including nominal wages, were fully flexible.

In the Republic of Sildavia, a market basket of goods and services cost $130 in 2009, $140 in 2010, and $160 in 2011. Based on this information and considering 2009 to be the base year, the price index in 2011 was: a. 100. b. 107.69. c. 123.07. d. 130.

c. 123.07.

Suppose that there are 70 million people in the labor force, of whom 60 million are employed. The unemployment rate is: a. 7%. b. 10%. c. 14.29%. d. 4.2%.

c. 14.29%.

Assume that the marginal propensity to consume is 0.8 and potential output is $800 billion. The government spending multiplier is: a. 0.8. b. 1.25. c. 5. d. 4.

c. 5.

When the economy suffers a downturn and the incomes of many people decrease, vacationers are more likely to take car trips than to fly. Which statement provides one possible explanation for this phenomenon? a. Air travel and travel by car are complementary goods. b. Air travel and travel by car are both normal goods. c. Air travel is a normal good and travel by car is an inferior good. d. Air travel is an inferior good and travel by car is a normal good.

c. Air travel is a normal good and travel by car is an inferior good.

Eric can spend $80 on either a new digital pen or a mouse. If he chooses to buy the new digital pen, the opportunity cost is: a. The question did not provide enough information. b. both the $80 and his enjoyment of having the new mouse. c. His enjoyment of having the new mouse. d. $80.

c. His enjoyment of having the new mouse.

GDP overstates a country's well-being because: a. It overlooks the underground economy. b. It does not account for the work done by stay-at home spouses. c. It does not account for pollution. d. It does not include the value of leisure time.

c. It does not account for pollution.

A choice made _____ is a choice whether to do a little more or a little less of an activity. a. at the front end b. in the beginning c. at the margin d. ceteris paribus

c. at the margin

A pattern of expansion, then recession, then expansion again is a(n): a. annual trend. b. secular trend. c. business cycle. d. consumer cycle.

c. business cycle.

The BEST example of making a choice at the margin is whether to: a. buy a new computer. b. quit your job. c. eat another slice of pizza. d. attend college.

c. eat another slice of pizza.

In movement along a production possibility frontier, the opportunity cost to society of getting more of one good: a. is always constant. b. is measured in dollar terms. c. is measured by the amount of the other good that must be given up. d. usually decreases.

c. is measured by the amount of the other good that must be given up.

When the government policy is to regulate the quantity of a good that can be bought and sold rather than the price at which it is transacted, it uses a: a. price floor. b. price ceiling. c. quota. d. price control.

c. quota.

Which topic is studied in macroeconomics? a. the change in automobile sales due to a change in the price of automobiles b. the effect of a tax reduction on the profits of an individual business c. recessions d. the unemployment of workers displaced by technological change in the typesetting industry

c. recessions

Technological improvements will: a. leave the production possibility frontier unchanged. b. shift the production possibility frontier inward. c. shift the production possibility frontier outward. d. necessarily lead to increased unemployment.

c. shift the production possibility frontier outward.

The law of demand states that, other things remaining the same, the higher the price of a good, the..... a. smaller is the demand for the good. b. larger is the quantity of the good demanded. c. smaller is the quantity of the good demanded. d. larger is the demand for the good.

c. smaller is the quantity of the good demanded.

Bank reserves are: a. the fraction of deposits kept in gold with the Federal Reserve. b. the deposits lent to finance illiquid investments. c. the fraction of deposits kept in the form of very liquid assets. d. gold kept in the bank's vault.

c. the fraction of deposits kept in the form of very liquid assets.

Khalil is offered a free ticket to the opera, which he cannot resell. His opportunity cost of going to the opera is: a. zero—the tickets were free. b. the price listed on the ticket. c. whatever Khalil would have done had he not gone to the opera. d. the price listed on the ticket and whatever Khalil would have done had he not gone to the opera.

c. whatever Khalil would have done had he not gone to the opera.

Which statement is positive? Which statement is normative? I. The minimum wage should be high enough that families will not live in poverty. II. The inflation rate was 2.4% in 2018. a. I is positive; II is normative. b. I is positive; II is positive. c. I is normative; II is normative. d. I is normative; II is positive.

d. I is normative; II is positive.

The national income accounting identity associated with the expenditure-based accounting method is represented by ___________. a. Y = C + I + G + M − X. b. Y = C + I + G + X + M. c. Y = C + I + G + X. d. Y = C + I + G + X − M.

d. Y = C + I + G + X − M.

The most likely reason that the government implements a price _____ is because it feels the price is too high for _____. a. floor; consumers b. floor; producers c. ceiling; producers d. ceiling; consumers

d. ceiling; consumers

If an economy has to sacrifice only one unit of good X for each unit of good Y produced throughout the relevant range, then its production possibility frontier has a(n): a. decreasing negative slope. b. increasing negative slope. c. zero slope. d. constant negative slope.

d. constant negative slope.

The money demand curve is _____ because a lower interest rate _____ the opportunity cost of holding money. a. upward sloping; increases b. downward sloping; increases c. upward sloping; decreases d. downward sloping; decreases

d. downward sloping; decreases

If the opportunity cost of manufacturing machinery is lower in the United States than in Britain and the opportunity cost of manufacturing sweaters is higher in the United States than in Britain, then the United States will: a. export both sweaters and machinery to Britain. b. import both sweaters and machinery from Britain. c. export sweaters to Britain and import machinery from Britain. d. import sweaters from Britain and export machinery to Britain.

d. import sweaters from Britain and export machinery to Britain.

Consider an economy that is facing a recessionary gap. The Federal Reserve decides to use expansionary monetary policy to close that gap. As a result of this policy, in the short run the money supply will _____, the interest rate will _____, investment and consumption spending will _____, and real GDP will _____. a. decrease; fall; decrease; increase b. increase; increase; decrease; decrease c. decrease; increase; decrease; decrease d. increase; fall; increase; increase

d. increase; fall; increase; increase

The tool of monetary policy with which the Federal Reserve buys and sells government bonds is called: a. moral suasion. b. reserve requirements. c. the discount rate. d. open-market operations.

d. open-market operations.

Researchers find a new strain of genetically modified seeds that result in a higher yield for corn producers. Holding all other things constant, this research will: a. shift the supply curve for corn left. b. increase the quantity supplied of corn. c. decrease the quantity supplied of corn. d. shift the supply curve for corn to the right.

d. shift the supply curve for corn to the right.

A business cycle is a: a. very deep and prolonged economic downturn. b. period in which output and employment are rising. c. period in which output and employment are falling. d. short-run shift between economic upturns and downturns.

d. short-run shift between economic upturns and downturns.

When we keep part of our wealth in a savings account, money is playing the role mainly of: a. medium of exchange. b. unit of account. c. barter. d. store of value.

d. store of value.

GDP does NOT exclude: a. the value of leisure. b. damage to the environment. c. the value of housework. d. the value of owner-occupied housing.

d. the value of owner-occupied housing.