Econ 102 Final

46) The data in the table above are the U.S. balance of payments. The current account balance is A) $140 billion. B) -$45 billion. C) $155 billion. D) $170 billion.

A) $140 billion.

money multiplier formula

(1+currency drain ratio)/(reserve ratio+CDR)

export effect

-decrease in er -decrease in price of US exports to foreign buyers expressed in foreign currency -increase in exports of US g and s produced -increase in Qd for US $ by foreigners to buy US produced g and s

expected profit effect

-for a given future exchange rate, decrease in er today -increase in expected profits from buying US $ today and holding them to sell in the future -increase in Q$d

Why is the supply curve upward sloping?

-import effect -expected profit effect

expected profit effect (supply)

-increase er -decrease exp prof from buying $US -increase exp profit from selling $ and buying foreign currency -increase in Qs$

import effect

-increase in er -decrease price of imports to US buyers expressed in $ US -increase imports of foreign produced g and s -increase Qs of US $ to buy foreign currency used to purchase imports

50) Real GDP in 2015 is $10 trillion. Between 2015 and 2016, using 2015 prices, GDP grew 3 percent and using 2016 prices real GDP grew 7 percent. Using the chain-weighted output index method of calculating chained-dollar real GDP, real GDP in 2016 is ________ trillion. A) $10.5 B) $10.1 C) $12.72 D) $11

A) $10.5

6) During 2014, the country of Economia had a real GDP of $115 billion and the population was 0.9 billion. In 2013, real GDP was 105 billion and the population was 0.85 billion. In 2013, real GDP per person was A) $124. B) $135. C) $117. D) $128.

A) $124.

4) According to the table above, the value of M1 is ________ and the value of M2 is ________. A) $813 billion; $3303 billion B) $813 billion; $2490 billion C) $1,488 billion; $3978 billion D) $805 billion; $2490 billion

A) $813 billion; $3303 billion

6) At the beginning of the year, Tom's Tubes had a capital stock of 5 tube inflating machines. During the year, Tom scrapped 2 old machines and purchased 3 new machines. Tom's net investment for the year totaled A) 1 machine. B) 2 machines. C) 3 machines. D) 6 machines.

A) 1 machine.

16) Which of the following is NOT a factor of production? A) 100 shares of Microsoft stock B) an apartment building C) mineral resources D) a university professor

A) 100 shares of Microsoft stock

18) Leisure Land produces only sunscreen and camel rides. The table shows the marginal benefit and marginal cost schedules for sunscreen and camel rides. The allocatively efficient number of camel rides is ________. A) 4 rides per day B) 6 rides per day because that is the maximum number of rides C) 1 ride per day because the marginal benefit exceeds the marginal cost by as much as possible D) 2 rides per day

A) 4 rides per day

20) According to the diagram in the figure above, what is the marginal cost of producing the 3 millionth gallon of gasoline per month? A) 5 pounds of shrimp per gallon of gasoline B) 3 pounds of shrimp per gallon of gasoline C) 4 pounds of shrimp per gallon of gasoline D) 1 pound of shrimp per gallon of gasoline

A) 5 pounds of shrimp per gallon of gasoline

29) When the monetary base increases by $2 billion, the quantity of money increases by $10 billion. Thus, the money multiplier equals A) 5. B) 20.0. C) 0.2. D) 0.5.

A) 5.

35) If the price level in the U.S. is 120, the price level in South Africa is 140, and the nominal exchange rate is 7 South African rands per dollar, then the real exchange rate is A) 6 South African goods per U.S. good. B) 8.4 South African goods per U.S. good. C) 1.4 South African goods per U.S. good. D) 9.8 South African goods per U.S. good.

A) 6 South African goods per U.S. good.

6) In the above table, the labor force participation rate is A) 62 percent. B) 55 percent. C) 69 percent. D) 44 percent.

A) 62 percent.

34) Which graph shows the impact of scientists developing a more powerful fertilizer? A) Figure A B) Figure B C) Figure C D) Figure D

A) Figure A

24) Which of the following are major influences on the expected profit from an investment? I. technology advances II. stock market behavior III. accounting practices A) I only B) I and II C) I and III D) II and III

A) I only

34) Which of the following are included in the supply of loanable funds? I. private saving II. government budget surplus III. international borrowing A) I, II and III B) I and III C) II and III D) I and II

A) I, II and III

2) Molly just graduated from high school. The figure shows her possibilities frontier. If Molly goes to college, she will move from point M to point K. In terms of consumption goods, Molly's opportunity cost of going to college is A) LM. B) OL. C) KL. D) MK

A) LM.

33) Suppose a deposit in New York earns 6 percent a year and a deposit in London earns 4 percent a year. Interest rate parity holds if the A) U.S. dollar depreciates by 2 percent a year. B) U.K. pound depreciates by 2 percent a year. C) U.S. dollar appreciates by 2 percent a year. D) None of the above answers is correct because interest rate parity requires that the interest rates be the same in both countries

A) U.S. dollar depreciates by 2 percent a year.

36) Which of the following will shift the supply of loanable funds curve leftward? A) a decrease in disposable income B) a decrease in the real interest rate C) a decrease in expected future income D) a decrease in real wealth

A) a decrease in disposable income

36) A common definition of a recession is a time with A) a decrease in real GDP for two or more successive quarters. B) a decrease in real GDP for two or more successive years. C) a decline in interest rates. D) a decline in the price level.

A) a decrease in real GDP for two or more successive quarters.

26) One of the largest categories of exports from the United States is now pop culture: movies, music, TV programming, and videos. A direct conclusion from this information is that, compared to other countries, the United States has A) a lower opportunity cost of producing pop culture. B) a higher opportunity cost of producing pop culture. C) lower wages for producers of pop culture. D) higher wages for producers of pop culture.

A) a lower opportunity cost of producing pop culture.

4) An example of "investment" in computing real GDP using the expenditure approach is the purchase of A) a new set of tools by an auto mechanic, for use in repairing cars. B) computer chips by Dell to put in their personal computers. C) a 100 year old house by a married couple. D) 100 shares of IBM stock.

A) a new set of tools by an auto mechanic, for use in repairing cars.

42) In the above figure, the distance between points S and T represents A) a recession. B) a peak. C) a trough. D) an expansion

A) a recession.

38) In the above figure, a price of $15 per dozen for roses would result in A) a shortage. B) equilibrium. C) a surplus. D) downward pressure on prices.

A) a shortage.

44) The use of purchasing power parity prices A) accounts for differences in the prices of the same goods in different countries when measuring real GDP. B) weakens the validity of cross country comparisons of economic welfare. C) increases the amount by which U.S. GDP is larger than that of any other nation. D) decreases the real GDP per person statistics published by the International Monetary Fund.

A) accounts for differences in the prices of the same goods in different countries when measuring real GDP.

34) According to purchasing power parity, a rise in inflation in the United States. relative to the rest of the world will lead to A) an exchange rate depreciation. B) an exchange rate appreciation. C) a balance of payments deficit. D) a balance of payments surplus.

A) an exchange rate depreciation.

14) The law of demand implies that, other things remaining the same A) as the price of a cheeseburger rises, the quantity of cheeseburgers demanded will decrease. B) as the price of a cheeseburger rises, the quantity of cheeseburgers demanded will increase. C) as income increases, the quantity of cheeseburgers demanded will increase. D) as the demand for cheeseburgers increases, the price of a cheeseburger will fall.

A) as the price of a cheeseburger rises, the quantity of cheeseburgers demanded will decrease.

24) Structural unemployment is A) associated with the general decline of specific industries. B) almost always short-term in nature. C) associated with the normal changing of jobs in a dynamic economy. D) associated with the general downturns in the economy.

A) associated with the general decline of specific industries.

41) Which of the following exchange rate policies uses a target exchange rate, but allows the target to change? A) crawling peg B) fixed exchange rate C) flexible exchange rate D) moving target

A) crawling peg

18) Cyclical unemployment ________. A) decreases during an expansion B) decreases during a recession C) grows at the same rate as potential GDP D) is zero at a business-cycle trough

A) decreases during an expansion

28) A decrease in the demand for loanable funds and a leftward shift of the demand for loanable funds curve results from A) decreases in the expected profit. B) tax cuts. C) an increase in the real interest rate. D) technological improvements.

A) decreases in the expected profit.

18) When a good is imported into the United States, a ________ is created. A) demand for foreign currencies and a supply of dollars B) supply of foreign currency with no effect on the market for the dollar C) supply of foreign currencies and a demand for dollars D) demand for dollars with no effect on markets for foreign currencies

A) demand for foreign currencies and a supply of dollars

44) Suppose a British bank offers a 3 percent interest rate while a U.S. bank offers a 7 percent interest rate. People must expect the U.S. dollar will A) depreciate 4 percent. B) depreciate 10 percent. C) appreciate 10 percent. D) appreciate 4 percent.

A) depreciate 4 percent.

16) The percentage of people employed aged 16 years and older divided by the working-age population is known as the A) employment-to-population ratio. B) working-age population ratio. C) labor force participation rate. D) employment rate.

A) employment-to-population ratio

38) If capital per hour of labor increases, real GDP per hour of labor A) increases for a given level of technology. B) increases because the level of technology increases. C) decreases because the level of technology decreases. D) decreases for a given level of technology.

A) increases for a given level of technology.

12) The "law of demand" states that, other things remaining the same, the quantity demanded of any good is A) inversely related to its price. B) directly related to the supply of the good. C) directly related to its price. D) positively related to its price.

A) inversely related to its price.

20) Frictional unemployment A) is unemployment associated with normal labor turnover. B) is unemployment associated with declining industries. C) is voluntary part-time unemployment. D) includes discouraged workers

A) is unemployment associated with normal labor turnover.

5) With everything else the same, in the foreign exchange market the A) larger the value of U.S. exports, the greater is the quantity of dollars demanded. B) the higher the exchange rate, the cheaper are U.S.-produced goods and services. C) the lower the exchange rate, the smaller is the expected profit from buying dollars. D) lower the exchange rate, the smaller the amount of U.S. exports.

A) larger the value of U.S. exports, the greater is the quantity of dollars demanded.

10) Scarcity requires that people must A) make choices. B) compete. C) cooperate. D) trade.

A) make choices.

2) The most direct way in which money eliminates the need for a double coincidence of wants is through its use as a A) medium of exchange. B) store of value. C) standard of deferred payment. D) unit of account.

A) medium of exchange.

14) Susan likes to drink sodas. The ________ soda Susan drinks, the ________ of the last soda. A) more; lower the marginal benefit B) less; lower the marginal benefit C) less; higher the opportunity cost D) more; higher the marginal benefit

A) more; lower the marginal benefit

44) The figure above shows the U.S. production function. From 1986 to 2008 the United States experienced major advances in technology as well as an increase in the working-age population. The combined effect can best be shown by a A) movement from point W to point Z. B) movement from point Y to point X. C) movement from point W to point X. D) movement from point Y to point Z.

A) movement from point W to point Z.

14) A nation's investment must be financed by A) national saving plus borrowing from the rest of the world. B) borrowing from the rest of the world only. C) the government's budget deficit. D) national saving only.

A) national saving plus borrowing from the rest of the world.

48) The biases in the CPI include the A) new goods, quality change, and substitution biases. B) substitution, new goods, and old goods biases. C) old goods, new goods, and quality change biases. D) old goods, unemployment, and inflation biases.

A) new goods, quality change, and substitution biases.

42) An economic model includes A) only details considered essential. B) no use of marginal concepts. C) only normative statements. D) all known details in order to increase its accuracy.

A) only details considered essential.

18) Gross private domestic investment is all purchases of newly produced business capital goods and buildings A) plus the change in business inventories plus residential construction. B) plus fixed investment minus inventory investment. C) minus the change in business inventories. D) plus purchases of capital goods produced in previous years to replace any depreciated capital goods.

A) plus the change in business inventories plus residential construction.

40) In the above figure, which point represents the under use of resources? A) point G B) point K C) point F D) point H

A) point G

34) Use the figure above to answer this question. Suppose the economy is operating at point a. A move to ________ could be explained by ________. A) point c; an increase in the use of credit cards B) point e; an increase in U.S. exports C) point b; an increase in real GDP D) point b; an increase in the nominal interest rate

A) point c; an increase in the use of credit cards

42) Arbitrage in the foreign exchange market, international loans markets, and goods markets results in A) purchasing power parity, interest rate parity and law of one price. B) purchasing power parity, price parity and no round-trip profit. C) purchasing power parity, interest rate parity and round-trip profit. D) purchasing power parity, interest rate parity and price parity.

A) purchasing power parity, interest rate parity and law of one price.

24) Labor productivity is A) real GDP per hour of labor. B) real GDP per hour of labor times the number of people. C) the rate of change in real GDP per hour of labor. D) real GDP per hour of labor times the hours of work.

A) real GDP per hour of labor.

34) If there exists a shortage in the market for snowmobiles, then the price of a snowmobile will A) rise. B) fall. C) neither rise nor fall. D) at first fall then rise.

A) rise.

32) When the nominal interest rate rises, the opportunity cost of holding money A) rises and people hold less money. B) falls and people hold more money. C) rises and people hold more money. D) falls and people hold less money.

A) rises and people hold less money.

27) The larger the public's currency drain from the banking system, the A) smaller is the money multiplier. B) smaller is the monetary base. C) larger is the monetary base. D) larger is the money multiplier

A) smaller is the money multiplier

32) In the 1990s, video recordings were made primarily on tapes. However, in the 2000s DVDs became increasingly popular, leading to a sharp decline in video tapes. As a result, many people who manufactured tapes lost their jobs and didn't have the skills necessary to work making DVDs. This occurrence is best consider an example of A) structural unemployment. B) underemployment. C) frictional unemployment. D) cyclical unemployment

A) structural unemployment.

16) The demand for Mexican tomatoes by an American food grocery chain creates a A) supply of U.S. dollars. B) demand for the U.S. dollar. C) supply of Mexican pesos. D) demand for an interest rate differential.

A) supply of U.S. dollars.

8) For a commercial bank, the term "reserves" refers to A) the cash in its vaults and its deposits at the Federal Reserve. B) the net interest that it earns on loans. C) a banker's concern ("reservation") in making loans to an individual without a job. D) the profit that the bank retains at the end of the year.

A) the cash in its vaults and its deposits at the Federal Reserve.

30) In the figure above, the shift in the supply curve for U.S. dollars from S0 to S1 could occur when A) the expected future exchange rate rises. B) the current exchange rate falls. C) the expected future exchange rate falls. D) the U.S. interest rate differential decreases

A) the expected future exchange rate rises.

45) A country's balance of payments accounts records A) the international trading, borrowing, and lending positions of a country over a period of time. B) only the goods and services purchases among countries over a period of time. C) the flow of human and non-human capital among countries over a period of time. D) only official transactions between governments over a period of time.

A) the international trading, borrowing, and lending positions of a country over a period of time.

26) A fall in the price of a good causes producers to reduce the quantity of the good they are willing to produce. This fact illustrates A) the law of supply. B) a change in supply. C) the nature of an inferior good. D) the law of demand

A) the law of supply

30) A rise in the price of a good causes producers to supply more of the good. This statement illustrates A) the law of supply. B) the nature of an inferior good. C) a change in supply. D) the law of demand.

A) the law of supply.

36) Assume the inflation rate falls from 4 percent to 2 percent. This means that A) the price level is increasing more slowly. B) real GDP is decreasing. C) the price level has fallen. D) the economy is experiencing deflation.

A) the price level is increasing more slowly.

8) A relative price is A) the ratio of one price to another price. B) also called the money price. C) not an opportunity cost. D) the number of dollars that must be given up in exchange for the good.

A) the ratio of one price to another price.

38) A lawn service is deciding whether to add an additional employee to its summer crew. The marginal cost of hiring this worker depends on the A) total amount paid to ONLY the new worker. B) the additional revenue created by having an additional worker minus the cost of hiring the worker. C) the total amount paid to ALL the workers, both the new one and the previously hired workers. D) total amount paid to all PREVIOUSLY hired workers.

A) total amount paid to ONLY the new worker.

24) To obtain the gains available from comparative advantage, individuals or countries must do more than specialize; they must also A) trade. B) save. C) invest. D) engage in research and development

A) trade.

36) Suppose that for the past two months, you have studied economics one hour a day. You now decide to study economics two hours a day. For the past two months A) your marginal benefit from studying economics an hour must have been greater than its marginal cost. B) the opportunity cost of studying economics must have risen. C) your marginal cost of studying economics for an hour must have exceeded its marginal benefit. D) the marginal cost of studying economics must have fallen

A) your marginal benefit from studying economics an hour must have been greater than its marginal cost.

25) Suppose Bank A holds $200 of reserves, has deposits of $1000, and the desired reserve ratio is 20 percent. How many deposits can Bank A create? A) zero, because Bank A has no excess reserves B) $400 C) $200 D) $800

A) zero, because Bank A has no excess reserves

18) When a California farmer decides to harvest lettuce using machines instead of by migrant workers, the farmer is answering the ________ part of one of the two big economic questions. A) "scarcity" B) "how" C) "for whom" D) "what"

B) "how"

26) Use the information in the table above to calculate the value of net exports. A) -$10 million B) $10 million C) $30 million D) $0

B) $10 million

14) In the above figure, what is the full-employment real wage rate and quantity of hours per year? A) $35 and 100 billion hours per year B) $40 and 60 billion hours per year C) $50 and 100 billion hours per year D) $50 and 40 billion hours per year

B) $40 and 60 billion hours per year

46) Using the data in the above table, gross private domestic investment equals A) $260. B) $460. C) $250. D) some amount that cannot be determined without more information.

B) $460.

18) Use the information in the table above to calculate the value of government saving. A) $15 million B) $5 million C) $45 million D) -$5 million

B) $5 million

22) The table above shows the balance sheet for Ralph's Bank. If the desired reserve ratio is 15 percent, Ralph's Bank has excess reserves of ________. A) $2,500 B) $50 C) $500 D) $450

B) $50

46) At the end of last year, the CPI equaled 120. At the end of this year, the CPI equals 132. What is the inflation rate over this year? A) 12 percent B) 10 percent C) 6 percent D) None of the above answers are correct because more information is needed to calculate the inflation rate.

B) 10 percent

6) When operating on its PPF, a country can produce 2 tons of butter and 200 cars OR 3 tons of butter and 150 cars. The opportunity cost of 1 ton of butter is ________ cars per ton of butter. A) 200 B) 50 C) 300 D) 0.75

B) 50

10) The money price of a pizza is $12 per pizza and the money price of a taco is $2 per taco. The relative price of a pizza is A) 1/6 pizza per taco. B) 6 tacos per pizza. C) $12 per pizza. D) $24 per pizza.

B) 6 tacos per pizza.

4) Slowdonia's current growth rate of real GDP per person is 1 percent a year. Approximately how long will it take to double real GDP per person? A) 35 years B) 70 years C) 10 years D) 100 years

B) 70 years

22) Agnes can produce either 1 unit of X or 1 unit of Y in an hour, while Brenda can produce either 2 units of X or 4 units of Y in an hour. A) Agnes has a comparative advantage in the production of Y. B) Brenda has an absolute advantage in the production of X and Y. C) Brenda cannot gain from trade. D) Brenda has a comparative advantage in the production of X.

B) Brenda has an absolute advantage in the production of X and Y.

12) Which part of the Federal Reserve System meets every 6 weeks to determine the nation's monetary policy? A) the Federal Reserve Banks B) Federal Open Market Committee C) Board of Governors D) depository institutions such as commercial banks

B) Federal Open Market Committee

46) The above figure shows the market for pizza. Which figure shows the effect of a decrease in the price of a hamburger, which for consumers is a substitute for pizza? A) Figure A B) Figure B C) Figure D D) Figures B and C

B) Figure B

36) In the above figure, suppose the economy is initially on the demand for money curve MD1. What is the effect of an increase in financial innovation such as the introduction of ATMs? A) The demand for money curve would shift rightward to MD2. B) The demand for money curve would shift leftward to MD0. C) There would be a movement upward along the demand for money curve MD1. D) There would be a movement downward along the demand for money curve MD1.

B) The demand for money curve would shift leftward to MD0.

37) In the above figure, suppose the economy is initially on the demand for money curve MD1. What is the effect of an increase in the use of credit cards? A) The demand for money curve would shift rightward to MD2. B) The demand for money curve would shift leftward to MD0. C) There would be a movement upward along the demand for money curve MD1. D) There would be a movement downward along the demand for money curve MD1

B) The demand for money curve would shift leftward to MD0.

40) In the above figure, the economy is at point a on the initial supply of loanable funds curve SLF0. What happens if real wealth decreases? A) The supply of loanable funds curve would shift leftward to a curve such as SLF1. B) The supply of loanable funds curve would shift rightward to a curve such as SLF2. C) Nothing; the economy would remain at point a. D) There would be a movement to a point such as b on supply of loanable funds curve SLF0.

B) The supply of loanable funds curve would shift rightward to a curve such as SLF2.

8) Which of the following questions is a macroeconomic issue? A) How many more pounds of cookies will a consumer purchase if the price of cookies decreases? B) What is the future growth prospect for an economy? C) What effect would a cure for Mad Cow Disease have on the market for beef? D) How many workers should the owner of a business hire?

B) What is the future growth prospect for an economy?

26) When part of the quantity of money is held in currency, then A) the Fed will find it beneficial to increase the discount rate. B) a currency drain occurs. C) there is a higher level of excess reserves. D) the money multiplier will increase in value.

B) a currency drain occurs.

42) Which of the following raises the equilibrium price and increases the equilibrium quantity of used cars? A) an increase in the wage rate paid to used car salespeople B) a fall in income if used cars are an inferior good C) neither of the above because the question suggests a violation of the "law of demand" D) neither of the above because the question suggests a violation of the "law of supply"

B) a fall in income if used cars are an inferior good

39) If a nation's central bank increased domestic interest rates, the nation's exchange rate would change if the country's exchange rate was a A) a crawling peg. B) a flexible exchange rate. C) a fixed exchange rate. D) a nominally fixed exchange rate.

B) a flexible exchange rate.

44) The statement "Managers with a college education earn $18 an hour while ski instructors who did not complete college earn $10" is A) an ethical statement. B) a positive statement. C) a normative statement. D) a political statement.

B) a positive statement.

12) The Occupy Wall Street movement advocates A) following the teachings of Adam Smith. B) a shift away from market capitalism. C) a shift towards more market capitalism. D) centrally planned socialism.

B) a shift away from market capitalism.

10) When the Fed is ________ it is ________. A) regulating the nation's financial institutions; conducting monetary policy B) adjusting the amount of money in circulation; conducting monetary policy C) issuing government bonds; conducting monetary policy D) adjusting the amount of money in circulation; issuing government bonds

B) adjusting the amount of money in circulation; conducting monetary policy

14) Using the table above, if the current market value of the dollar is 70 francs A) investor A holds dollars, but B and C hold francs. B) all three investors hold dollars. C) investor A holds francs, but B and C hold dollars. D) all three investors hold francs

B) all three investors hold dollars.

13) Using the table above, if the current market value of the dollar is 125 francs A) investor A holds francs, but B and C hold dollars. B) all three investors hold francs. C) investor A holds dollars, but B and C hold francs. D) all three investors hold dollars.

B) all three investors hold francs.

16) Consider the demand curves for soft drinks shown in the figure above. Suppose the economy is at point a. Which of the following could result in a movement to point d? A) a decrease in income B) an increase in the relative price of a soft drink C) a decrease in the price of bottled water D) a decrease in the relative price of a soft drink

B) an increase in the relative price of a soft drink

20) Suppose the peso-dollar foreign exchange rate changes from 50 pesos per dollar to 30 pesos per dollar. Then the peso has ________ against the dollar and the dollar has ________ against the peso. A) depreciated; appreciated B) appreciated; depreciated C) appreciated; appreciated D) depreciated; depreciated

B) appreciated; depreciated

12) Suppose Mitsubishi Bank (a Japanese bank) expects the exchange rate to be 125 yen per U.S. dollar at the end of the year. If today's exchange rate is 120 yen per U.S. dollar, Mitsubishi bank A) sells U.S. dollars today because it expects losses from buying U.S. dollars and holding them. B) buys U.S. dollars today because it expects profit from buying U.S. dollars and holding them. C) does not buy or sell any U.S. dollars today because it expects zero profit from buying U.S. dollars and holding them. D) None of the above answers is correct because a foreign commercial bank cannot buy or sell U.S. dollars.

B) buys U.S. dollars today because it expects profit from buying U.S. dollars and holding them.

43) In the figure above, suppose the demand for dollars temporarily decreases so that the demand curve shifts to D2. To maintain the target exchange rate, the Fed A) must violate both interest rate parity and purchasing power parity. B) can buy dollars. C) can sell dollars. D) cannot maintain the target exchange rate.

B) can buy dollars.

38) In the above figure, suppose the demand for dollars temporarily increases so that the demand curve shifts to D1. To maintain the target exchange rate, the Fed A) can buy dollars. B) can sell dollars. C) must violate interest rate parity but not purchasing power parity. D) cannot maintain the target exchange rate.

B) can sell dollars.

24) Marginal cost is the A) cost of all forgone alternatives. B) cost of an increase in an activity. C) total cost of an activity. D) cost of an activity minus the benefits of the activity

B) cost of an increase in an activity.

30) An increase in labor productivity shifts the labor ________ curve ________. A) supply; leftward B) demand; rightward C) demand; leftward D) supply; rightward

B) demand; rightward

4) When people who are holding the money of some other country want to exchange it for U.S. dollars, they ________ U.S. dollars and ________ that other country's money. A) demand; demand B) demand; supply C) supply; demand D) supply; supply

B) demand; supply

47) A small country is an international borrower and its domestic supply of loanable funds increases. Consequently, the equilibrium quantity of loanable funds used in the country ________ and the country's international borrowing ________. A) does not change; does not change B) does not change; decreases C) does not change; increases D) increases; does not change

B) does not change; decreases

19) A factor determining the supply of U.S. dollars in the foreign exchange market is the A) expected future interest rate in the United States. B) expected future exchange rate. C) U.S. supply of exports. D) expected future interest rate in foreign countries.

B) expected future exchange rate.

32) As an economy's capital stock increases, the economy A) gains an absolute advantage in the production of capital goods. B) experiences economic growth. C) generally decides to engage in international trade. D) generally experiences increased unemployment of other resources, such as labor.

B) experiences economic growth.

8) Suppose that a bond promises to pay its holder $100 a year forever. If the price of the bond increases from $1,000 to $1,250, then the interest rate on the bond A) rises from 8 percent to 10 percent. B) falls from 10 percent to 8 percent. C) does not change because it is not affected by the price of the bond. D) falls from 10 percent to 6 percent.

B) falls from 10 percent to 8 percent.

16) If foreigners spend more on U.S.-made goods and services than we spend on theirs A) all U.S. national saving remains in the United States. B) foreigners must borrow from the United States or sell U.S. assets to make up the difference. C) we must borrow from foreigners because of low imports. D) funds flow in from abroad to help finance U.S. investment.

B) foreigners must borrow from the United States or sell U.S. assets to make up the difference.

44) The figure illustrates the demand for and supply for jeans. Suppose jeans are a normal good and people's incomes increase. At the initial price of $50 for a pair of jeans, after the increase in income the quantity demanded is ________ than the equilibrium quantity and there is a ________ of jeans. A) less; shortage B) greater; shortage C) less; surplus D) greater; surplus

B) greater; shortage

46) If an economy has a velocity of circulation of 3, then A) the quantity of money is 3 times real GDP. B) in a year the average dollar is exchanged 3 times to purchase goods and services in GDP. C) the quantity of money is $3 for every dollar of GDP. D) nominal GDP is 1/3 the size of the quantity of money.

B) in a year the average dollar is exchanged 3 times to purchase goods and services in GDP.

26) In the figure above, suppose the economy is initially at point B. Then the interest rate in Japan rises relative to the interest rate in the United States. This change ________ the supply of dollars and the market moves to a point such as ________. A) decreases; A B) increases; C C) decreases; E D) increases; D

B) increases; C

50) Activities that encourage faster growth are A) taxes on saving that serve to encourage more spending and less saving. B) investment in new capital and human capital. C) high levels of consumption and low levels of savings. D) developing trade barriers to protect national industries.

B) investment in new capital and human capital.

28) A student is studying for an exam 2 hours a day and is debating whether to study an extra hour. The student's marginal benefit A) is the benefit the student receives from studying all 3 hours. B) is the benefit the student receives from studying the extra hour. C) depends on the grade the student earns on the exam. D) is greater than the student's marginal cost

B) is the benefit the student receives from studying the extra hour.

14) The required reserve ratio A) is higher for banks that make riskier loans. B) is the fraction of a bank's total deposits that is required to be held in reserves. C) is the amount of money that banks require borrowers to reserve in their accounts. D) increases when withdrawals from a bank are made.

B) is the fraction of a bank's total deposits that is required to be held in reserves.

15) When the U.S. exchange rate rises, foreign goods become ________ and U.S. imports ________. A) less expensive; decrease B) less expensive; increase C) more expensive; increase D) more expensive; decrease

B) less expensive; increase

12) In September 2014, 32 percent of unemployed workers had been unemployed for 6 months or more. This long-term unemployment is of particular concern because A) the labor force participation rate no longer includes these workers in the measurement since they are long-term unemployed. B) long-term unemployment is the most costly type of unemployment. C) the employment-to-population ratio no longer includes these workers in the measurement since they are long-term unemployed. D) the U-3 unemployment rate no longer includes these workers in the measurement since they are long-term unemployed.

B) long-term unemployment is the most costly type of unemployment.

12) If the marginal benefit from another computer exceeds the marginal cost of the computer, then to use resources allocatively efficiently A) fewer resources should be used to produce computers. B) more resources should be used to produce computers. C) if the marginal benefit exceeds the marginal cost by as much as possible, the efficient amount of resources are being used to produce computers. D) None of the above is correct because marginal benefit and marginal cost have nothing to do with using resources allocatively efficiently.

B) more resources should be used to produce computers.

12) The country of Kemper is on its aggregate production function at point W in the above figure. If the population increases with no change in capital or technology, the economy will A) move to point such as Z. B) move to point such as X. C) remain at point W. D) move to point such as Y.

B) move to point such as X.

40) The table above gives the quantity of money and money demand schedules. Suppose that the interest rate is equal to 6 percent. The effect of this interest rate in the money market is that A) bond prices fall and so the interest rate falls. B) people buy bonds and the interest rate falls. C) the money market is in equilibrium. D) people sell bonds and the interest rate falls.

B) people buy bonds and the interest rate falls.

24) In the figure above, the shift in the demand curve for U.S. dollars from D0 to D2 could occur when A) the expected future exchange rate increases. B) people expect that the dollar will depreciate. C) the U.S. interest rate rises. D) foreign interest rates fall.

B) people expect that the dollar will depreciate.

38) When economic growth occurs, the A) economy moves along its production possibilities frontier. B) production possibilities frontier shifts outward. C) production possibilities frontier shifts outward but no longer limits the amount that can be produced. D) production possibilities frontier becomes steeper.

B) production possibilities frontier shifts outward.

4) A relative price is the A) slope of the supply curve. B) ratio of one money price to another. C) slope of the demand curve. D) difference between one money price and another.

B) ratio of one money price to another.

34) The four parts of the business cycle occur in the following order A) expansion, trough, peak, recession. B) recession, trough, expansion, peak. C) recession, trough, peak, expansion. D) expansion, trough, recession, peak.

B) recession, trough, expansion, peak.

32) Using the data in the above table, at the price of $80 a phone, a A) surplus of 80 thousand cellular telephones occurs. B) surplus of 25 thousand cellular telephones occurs. C) shortage of 55 thousand cellular telephones occurs. D) shortage of 25 thousand cellular telephones occurs.

B) surplus of 25 thousand cellular telephones occurs.

38) In the figure above, an increase in the monetary base would create a change such as a A) movement from point a to point b along the supply of money curve MS0. B) shift from the supply of money curve MS0 to the supply of money curve MS1. C) movement from point b to point a along the supply of money curve MS0. D) shift from the supply of money curve MS1 to the supply of money curve MS0.

B) shift from the supply of money curve MS0 to the supply of money curve MS1.

32) In the above figure, new expectations of booming business conditions and a higher expected profit will A) make the demand for loanable funds curve become horizontal. B) shift the demand for loanable funds curve rightward. C) shift the demand for loanable funds curve leftward. D) have no effect on the demand for loanable funds curve

B) shift the demand for loanable funds curve rightward.

36) Human capital is the A) technology used by humans to produce GDP. B) skill and knowledge accumulated by humans. C) plant and equipment produced by humans and not by machines. D) machinery used by humans to produce GDP

B) skill and knowledge accumulated by humans.

30) A country that has a comparative advantage in producing capital goods will ________ a country that has a comparative advantage in consumption goods. A) reap all of the gains from trade when it trades with B) specialize in producing capital goods and trade with C) reap fewer of the gains from trade when it trades with D) grow slower than

B) specialize in producing capital goods and trade with

24) Wages for workers producing iPods and similar products will rise next year. Walkman Watch asks you to predict the effect of this change in next year's market for iPods. You predict that the major effect will be that the A) demand curve for an iPod will shift leftward. B) supply curve for an iPod will shift leftward. C) supply curve for an iPod will shift rightward. D) demand curve for an iPod will shift rightward.

B) supply curve for an iPod will shift leftward.

50) The table above gives some of the entries in the national income and product accounts. The government sector has a ________, and the private sector has a ________. A) surplus of $50 billion; deficit of $25 billion B) surplus of $50 billion; surplus of $25 billion C) deficit of $50 billion; deficit of $25 billion D) deficit of $50 billion; surplus of $25 billion

B) surplus of $50 billion; surplus of $25 billion

31) In the figure above, the shift in the supply curve for U.S. dollars from S0 to S2 could occur when A) the current exchange rate falls. B) the expected future exchange rate falls. C) the current exchange rate rises. D) the expected future exchange rate rises.

B) the expected future exchange rate falls.

32) A business cycle is A) the cyclical movement in the interest rates. B) the pattern of short-run upward and downward movements in total output. C) the cyclical change in the nation's balance of trade. D) the increase in consumer spending that accompanies an increase in disposable income

B) the pattern of short-run upward and downward movements in total output.

12) Transfer payments are not included in GDP because A) their market value cannot be accurately determined. B) they are not purchases of goods or services. C) they do not generate additional income. D) their value is included in government expenditure

B) they are not purchases of goods or services.

8) The production possibilities frontier is the boundary between A) those wants that are limited and those that are unlimited. B) those combinations of goods and services that can be produced and those that cannot. C) those resources that are limited and those that are unlimited. D) those combinations of goods and services that can be produced and those that can be consumed.

B) those combinations of goods and services that can be produced and those that cannot.

10) This year Pizza Hut makes a total investment of $1.3 billion in new stores. Its depreciation in this year is $300 million. Pizza Hut's gross investment is ________ and its net investment is ________. A) $1.0 billion; $0.7 billion B) $1.0 billion; $1.3 billion C) $1.3 billion; $1.0 billion D) $1.3 billion; $1.6 billion

C) $1.3 billion; $1.0 billion

20) The above table shows some national income accounting data for a nation. In this nation, gross domestic product is equal to ________ billion. A) $2,300 B) $2,000 C) $2,800 D) $2,500

C) $2,800

2) In January 2015, Tim's Gyms, Inc. owned machines valued at $1 million. During the year, the market value of the equipment fell by 30 percent. During 2015, Tim spent $200,000 on new machines. During 2015, Tim's gross investment totaled A) $1 million. B) $900,000. C) $200,000 D) $300,000.

C) $200,000

28) Suppose that in an hour Joe can prepare 10 sandwiches or 5 pizzas. The opportunity cost of Joe producing one sandwich is A) 5 pizzas. B) 1 pizza. C) 1/2 pizza. D) 2 pizzas.

C) 1/2 pizza.

20) The above table gives the initial balance sheet for Mini Bank. Mini Bank's actual reserve ratio equals ________. A) 33.3 percent B) 20 percent C) 25 percent D) 12.5 percent

C) 25 percent

22) Suppose the economy is experiencing frictional unemployment of 1 percent, structural unemployment of 3 percent and cyclical unemployment of 4 percent. What is the natural unemployment rate? A) 5 percent B) 7 percent C) 4 percent D) 3 percent

C) 4 percent

50) Suppose that last year the Consumer Price Index was 124; this year it is 130.7. What was the inflation rate between these years? A) 5.1 percent B) 6.7 percent C) 5.4 percent D) 30.7 percent

C) 5.4 percent

22) If the nominal interest rate is 7 percent and the inflation rate is 1 percent, the real interest rate is approximately A) -6 percent. B) 7 percent. C) 6 percent. D) 8 percent.

C) 6 percent.

10) If the number of people unemployed is 100, the number of people employed is 1000, and the working-age population is 1400, then the unemployment rate is A) 7.1 percent. B) 6.6 percent. C) 9.1 percent. D) 10 percent.

C) 9.1 percent.

8) Suppose China Airlines wants to purchase a French Airbus. The price of the Airbus is 95 million Euro. If the exchange rate is 1 euro per 10 yuan, the price of this airplane to China Airlines is A) 10.52 million yuan. B) 10 million yuan. C) 950 million yuan. D) 9.5 million yuan.

C) 950 million yuan.

28) The above table shows answers given by people interviewed in the Current Population Survey. Which people are structurally unemployed? A) A, B, and C B) A, B, C, and D C) B and C. D) A, B, and D

C) B and C.

22) Which of the following is NOT an example of an opportunity cost? A) By choosing to attend college, Jean was not able to continue working as an electrician; as a result, she gave up more than $85,000 in earnings while she was in college. B) Because David used all of his vacation time to paint his house, he was unable to visit the Caribbean last year. C) Because Mary is now being paid a higher wage, she can afford to buy a new car even though she is moving into a bigger apartment. D) By spending Thursday night studying for an economics exam, a student was unable to complete a homework assignment for calculus class.

C) Because Mary is now being paid a higher wage, she can afford to buy a new car even though she is moving into a bigger apartment.

40) Which of the following directly creates growth in labor productivity? I. Growth in capital per hour of labor II. Technological change III. Population growth A) I only B) II only C) I and II D) I and III

C) I and II

38) Which of the following is TRUE? I. As the real interest rate increases, people increase the quantity they save. II. The supply of loanable funds curve is downward sloping. III. As disposable income increases, the supply of loanable funds curve becomes steeper. A) I and III B) II and III C) I only D) III only

C) I only

44) Which of the following is TRUE regarding markets? I) Economists define a market as a geographic location where trade occurs. II) A market enables buyers and sellers to get information about each other and to buy and sell from each other. III) Markets coordinate decisions through prices. A) I only B) I and III C) II and III D) I, II and III

C) II and III

18) The Fed buys $100 million of government securities from Bank A. What is the effect on the Federal Reserve's balance sheet? A) Securities increase by $100 million and reserves of Bank A decrease by $100 million. B) Securities decrease by $100 million and reserves of Bank A increase by $100 million. C) Securities increase by $100 million and reserves of Bank A increase by $100 million. D) Securities increase by $100 million and Federal Reserve notes (currency) decrease by $100 million.

C) Securities increase by $100 million and reserves of Bank A increase by $100 million.

30) Which of the following items is NOT part of government expenditure on goods and services in the GDP accounts? A) drapes to brighten up the president's office B) new computer hardware for use by the IRS C) Social Security expenditures D) gasoline purchases for government car pools

C) Social Security expenditures

48) Which of the following is a positive statement? A) Unemployment is a more important problem than inflation. B) An unemployment rate of 9 percent is a national disgrace. C) When the national unemployment rate is 9 percent, the unemployment rate for inner-city youth is often close to 40 percent. D) Unemployment and inflation are equally important problems.

C) When the national unemployment rate is 9 percent, the unemployment rate for inner-city youth is often close to 40 percent.

22) An increase in the number of fast-food restaurants A) increases the demand for substitutes for fast-food meals. B) increases the demand for fast-food meals. C) increases the supply of fast-food meals. D) raises the price of fast-food meals

C) increases the supply of fast-food meals.

10) Point C on the production possibilities frontier in the above diagram illustrates A) a production point that has underutilization of resources. B) a combination of goods and services that cannot be produced efficiently. C) a point that achieves production efficiency. D) all goods and services that are desired but cannot be produced due to scarce resources.

C) a point that achieves production efficiency.

16) When the Fed lowers the federal funds rate, it can lead to A) a decrease in demand deposits. B) the Fed selling government securities. C) an increase in lending by banks. D) a decrease in the quantity of money.

C) an increase in lending by banks.

2) Discouraged workers ________ counted as officially unemployed because they ________. A) are not; are not qualified to work B) are; are not working C) are not; are not actively seeking work D) are; are still in the labor force

C) are not; are not actively seeking work

34) John has two hours of free time this evening. He ranked his alternatives, first go to a concert, second go to a movie, third study for an economics exam, and fourth answer his e-mail. What is the opportunity cost of attending the concert for John? A) answering his e-mail B) attending a movie, studying for an economics exam, and answering his e-mail C) attending a movie D) studying for an economics exam

C) attending a movie

4) Economics is best defined as the science of choice and how people cope with A) differences in needs. B) differences in wants. C) scarcity. D) different economic systems.

C) scarcity.

36) Suppose the Fed wants to fix the U.S. dollar/Mexican peso rate at 11 pesos per dollar under a fixed exchange rate policy. If the exchange rate falls to 10 pesos per dollar, the Fed can A) sell dollars. B) attempt to freeze all sales of dollars. C) buy dollars. D) any of the above actions could take place.

C) buy dollars.

6) Economics can be defined as the social science that explains the A) choices made by households. B) choices we make when we trade in markets. C) choices that we make as we cope with scarcity. D) choices made by politicians.

C) choices that we make as we cope with scarcity.

48) The chain-weighted output index method of calculating chained-dollar real GDP compares A) prices at different points in time using a sample of goods that is representative of goods purchased by households. B) quantities produced in different years with the prices that prevailed during the year in which the output was produced. C) compares the quantities of goods produced in consecutive years using prices in both years and averaging the percentage changes in the value of output. D) quantities produced in different years using prices from a year chosen as a reference period.

C) compares the quantities of goods produced in consecutive years using prices in both years and averaging the percentage changes in the value of output.

26) The unemployment rate is at the natural unemployment rate when A) structural unemployment equals zero. B) frictional unemployment equals zero. C) cyclical unemployment equals zero. D) all types of unemployment equal zero

C) cyclical unemployment equals zero.

35) In the above figure, suppose the economy is at point a. If there is an increase in real GDP, there is a movement to point such as A) e. B) c. C) d. D) b.

C) d.

49) If the world real interest rate falls, then a country that is an international lender A) does not change the amount of its lending. B) increases the amount of its lending. C) decreases the amount of its lending. D) None of the above answers is correct because lending might increase, decrease, or not change.

C) decreases the amount of its lending.

28) An increase in the currency drain A) results in an increase in deposits. B) results in an increase in required reserves. C) decreases the size of the money multiplier. D) leads to an increase in excess reserves.

C) decreases the size of the money multiplier.

16) The U.S. employment-to-population ratio peaked in 2000 and in 2012 fell to 58 percent, a level not seen since the early 1980s. This fall in the employment-to-population ratio ________ the equilibrium quantity of labor and ________ potential GDP. A) decreases; increases B) increases; increases C) decreases; decreases D) increases; decreases

C) decreases; decreases

2) Suppose real GDP for a country is $13 trillion in 2015, $14 trillion in 2016, $15 trillion in 2017, and $16 trillion in 2018. Over this time period, the real GDP growth rate is A) negative. B) constant. C) decreasing. D) increasing

C) decreasing.

21) In the foreign exchange market, an increase in the world demand for U.S. exports shifts the A) supply curve for U.S. dollars rightward. B) supply curve for U.S. dollars leftward. C) demand curve for U.S. dollars rightward. D) demand curve for U.S. dollars leftward.

C) demand curve for U.S. dollars rightward.

43) In the figure above, if the interest rate is 4 percent, there is a $0.1 trillion excess A) demand for money and bond prices will rise. B) quantity of money and bond prices will rise. C) demand for money and bond prices will fall. D) quantity of money and bond prices will fall.

C) demand for money and bond prices will fall.

42) A system of property rights A) reduces the efficiency of government, which reduces the growth rate of the economy over time. B) discourages economic growth by discouraging the development of new ideas and ways of doing things. C) encourages economic growth by creating incentives to invest in capital and to be innovative. D) encourages investment but discourages entrepreneurial activity, so the effect on economic growth is uncertain.

C) encourages economic growth by creating incentives to invest in capital and to be innovative.

34) When a worker quits a job to look for a better job A) structural and cyclical unemployment increase. B) structural unemployment decreases. C) frictional unemployment increases. D) cyclical unemployment increases.

C) frictional unemployment increases.

50) The Ricardo-Barro effect says that A) government budget deficits resulting from an increase in government expenditure have no effect on investment but government deficits resulting from a decrease in taxes crowd out investment. B) government budget deficits crowd out private investment and thereby lower the real interest rate. C) government budget deficits have no crowding out effect because taxpayers increase their savings to match the quantity of loanable funds demanded by the government. D) government budget deficits cause households to save more in anticipation of higher taxes, which causes higher real interest rates.

C) government budget deficits have no crowding out effect because taxpayers increase their savings to match the quantity of loanable funds demanded by the government.

46) The crowding-out effect refers to A) private investment crowding out government saving. B) government spending crowding out private spending. C) government investment crowding out private investment. D) private saving crowding out government saving.

C) government investment crowding out private investment.

40) A key factor that leads to economic growth is A) avoiding the opportunity cost of investment. B) increasing current consumption. C) human capital accumulation. D) Both answers A and B are correct.

C) human capital accumulation.

37) If the Fed wants to depreciate the dollar against the yen, the Fed will A) increase the demand for dollars by selling yen. B) increase the supply of dollars by selling yen. C) increase the supply of dollars by buying yen. D) decrease the supply of dollars by selling yen.

C) increase the supply of dollars by buying yen.

31) When price levels rise, the quantity of nominal money demanded will ________ and the quantity of real money demanded will ________. A) increase; increase B) increase; decrease C) increase; stay the same D) decrease; increase

C) increase; stay the same

20) When the population increases with no change in labor productivity, employment ________ and potential GDP ________. A) decreases; increases B) decreases; decreases C) increases; increases D) increases; decreases

C) increases; increases

44) An example of the new goods bias in the CPI is the A) introduction of higher quality brakes as standard equipment on new cars. B) decreasing popularity of SUVs as the price of gasoline has risen. C) introduction of hybrid automobiles, vehicles that were not made until recently. D) switch from traditional car dealerships to low-cost Internet car buying services

C) introduction of hybrid automobiles, vehicles that were not made until recently.

42) On-the-job-training is an example of A) increasing labor force participation. B) investment in physical capital. C) investment in human capital. D) technological change.

C) investment in human capital.

30) Due to the recession in 2008, firms decreased their profit expectations. As a result, there was a ________ shift in the ________ loanable funds curve. A) rightward; demand for B) rightward, supply of C) leftward; demand for D) rightward; supply of

C) leftward; demand for

7) When the U.S. exchange rate falls, U.S. goods become ________ to foreign residents and U.S. exports ________. A) more expensive; decrease B) more expensive; increase C) less expensive; increase D) less expensive; decrease

C) less expensive; increase

40) Today, Julie attended her 12:30 Economics class. If she hadn't gone to class, Julie would have gone out to lunch with friends. She had other options; she could have worked or slept in. Julie's opportunity cost of going to class is the A) income from working, lunch, and sleep she gave up. B) sleep she gave up. C) lunch she gave up. D) income from working she gave up.

C) lunch she gave up.

50) When Al makes the statement, "The cost of living has increased 10 percent over the past 10 years," he is A) making a normative statement. B) facing the standard of living tradeoff. C) making a positive statement. D) testing an economic model.

C) making a positive statement.

42) In the above figure, the initial supply of loanable funds curve is SLF0 and the initial demand for loanable funds curve is DLF0. An increase in the expected profit would A) have no effect on either the demand for loanable funds curve or the supply of loanable funds curve. B) shift the supply of loanable funds curve rightward to a curve such as SLF1, and shift the demand for loanable funds curve rightward to a curve such as DLF1. C) only shift the demand for loanable funds curve rightward to a curve such as DLF1. D) only shift the supply of loanable funds curve rightward to a curve such as SLF1.

C) only shift the demand for loanable funds curve rightward to a curve such as DLF1.

16) A new 2015 Honda Civic produced in 2015 and purchased in 2016 is A) part of GDP in 2016. B) not part of GDP in either year because it was produced in one year and sold in another year. C) part of GDP in 2015. D) part of GDP in both 2015 and 2016

C) part of GDP in 2015.

23) In the figure above, the shift in the demand curve for U.S. dollars from D0 to D1 could occur when A) the U.S. interest rate decreases. B) foreign interest rates increase. C) people expect that the dollar will appreciate. D) the expected future exchange rate falls.

C) people expect that the dollar will appreciate.

49) According to the quantity theory of money, in the long run, changes in the price level are the result of changes in the A) real interest rate. B) velocity of circulation. C) quantity of money. D) prime interest rate

C) quantity of money.

22) An increase in labor productivity ________ the real wage rate and an increase in population ________ the real wage rate. A) lowers; lowers B) lowers; raises C) raises; lowers D) raises; raises

C) raises; lowers

26) People base their labor supply on the ________ because they care about ________. A) money wage; a surplus of labor B) money wage; the amount of labor firms demand C) real wage; what their earnings will buy D) real wage; the equality of money wages and the price level

C) real wage; what their earnings will buy

10) Transfer payments A) refer to all payments made to households by governments. B) are included in the government expenditure category in gross domestic product. C) refer to payments made by the government that are not made to purchase a good or service. D) are made by households to firms in exchange for goods and services.

C) refer to payments made by the government that are not made to purchase a good or service.

46) Which of the following has NOT been one of the primary sources of economic growth over the last 200 years? A) discoveries of new technology B) investment in human capital C) resource conservation D) investment in new capital

C) resource conservation

50) In the figure, the equilibrium price is initially $3 per bushel of wheat. If suppliers come to expect that the price of a bushel of wheat will rise in the future, but buyers do not, the CURRENT equilibrium price will A) not change. B) fall. C) rise. D) Perhaps rise, fall, or stay the same, depending on whether there are more demanders or suppliers in the market.

C) rise.

39) In the figure above, a decrease in the monetary base would create a change such as a A) movement from point b to point a along the supply of money curve MS0. B) shift from the supply of money curve MS0 to the supply of money curve MS1. C) shift from the supply of money curve MS1 to the supply of money curve MS0. D) movement from point a to point b along the supply of money curve MS0.

C) shift from the supply of money curve MS1 to the supply of money curve MS0.

11) The higher the exchange rate today, the A) greater the quantity of U.S. dollars demanded in the foreign exchange market today. B) greater is the expected profit from buying U.S. dollars today and holding them. C) smaller is the expected profit from buying U.S. dollars today and holding them. D) smaller is the expected profit from buying foreign currency today and holding it.

C) smaller is the expected profit from buying U.S. dollars today and holding them.

18) An increase in the population and hence the supply of labor causes a A) surplus of labor at the original real wage rate and the real wage rate will rise. B) shortage of labor at the original real wage rate and the real wage rate will rise. C) surplus of labor at the original real wage rate and the real wage rate will fall. D) shortage of labor at the original real wage rate and the real wage rate will fall

C) surplus of labor at the original real wage rate and the real wage rate will fall.

27) In the figure above, the shift in the supply curve for U.S. dollars from S0 to S1 could occur when A) the expected future exchange rate falls. B) the U.S. interest rate differential decreases. C) the U.S. interest rate differential increases. D) the current exchange rate falls.

C) the U.S. interest rate differential increases.

22) Airbus is a European jet airline producer. Indian Airlines wants to buy 23 Airbus planes from Airbus, due to increased demand for world travel. As a result A) only the demand curve for Indian rupees shifts rightward. B) only the demand curve for European euros shifts rightward. C) the demand curve for European euros and the supply curve for Indian rupees both shift rightward. D) the demand curve for European euros shifts rightward and the supply curve for Indian rupees shifts leftward.

C) the demand curve for European euros and the supply curve for Indian rupees both shift rightward.

32) Laura is a manager for HP. When Laura must decide whether to produce a few additional printers, she is choosing at the margin when she compares A) the extra revenue from selling a few additional printers to the average cost of producing the additional printers. B) the total revenue from sales of printers to the total cost of producing all the printers. C) the extra revenue from selling a few additional printers to the extra costs of producing the printers. D) HP's printers to printers from competing companies, such as Lexmark.

C) the extra revenue from selling a few additional printers to the extra costs of producing the printers.

50) According to the quantity theory of money, in the long run, an increase in the quantity of money results in an equal percentage increase in ________. A) the growth rate of real GDP B) the growth rate of potential GDP C) the price level D) the inflation level

C) the price level

14) Human capital is A) all capital owned by individuals or corporations, but not by governments. B) all capital owned by individuals, but not by corporations or governments. C) the skill and knowledge of workers. D) machinery that meets or exceeds federal safety standards for use by humans.

C) the skill and knowledge of workers.

46) In economics, positive statements are about A) macroeconomics, not microeconomics. B) the way things ought to be. C) the way things are. D) microeconomics, not macroeconomics.

C) the way things are.

32) If the labor market is in equilibrium and then the labor supply curve shifts rightward A) the equilibrium wage rate will rise. B) there will be a shortage of labor at the original equilibrium wage rate. C) there will be a surplus of labor at the original equilibrium wage rate. D) there will be a surplus of jobs at the new equilibrium.

C) there will be a surplus of labor at the original equilibrium wage rate.

20) A complement is a good A) of lower quality than another good. B) of higher quality than another good. C) used in conjunction with another good. D) used instead of another good.

C) used in conjunction with another good.

20) If you lend a dollar for a year and at the end of the year the price level has risen by 10 percent A) the purchasing power of your loan has remained constant over the year regardless of the interest rate at which you lent it. B) the purchasing power of your loan has risen over the year regardless of the interest rate at which you lent it. C) you must have earned a nominal interest rate of 10 percent to maintain the purchasing power of your loan. D) you must have earned a nominal interest rate of 5 percent to maintain the purchasing power of your loan.

C) you must have earned a nominal interest rate of 10 percent to maintain the purchasing power of your loan.

20) When a farmer decides to raise hogs instead of cattle, the farmer is answering the ________ part of one of the two big economic questions. A) "how" B) "why" C) "for whom" D) "what"

D) "what"

22) Last year in the country of Nerf imports equaled exports. Nerf's GDP was $500 million, its consumer expenditure was $380 million, and its investment was $20 million. Nerf's government expenditure on goods and services were ________. A) $900 million B) zero C) $500 million D) $100 million

D) $100 million

47) If velocity is 6 and the quantity of money is $2 trillion, what is nominal GDP? A) $6 trillion B) $3 trillion C) $333 billion D) $12 trillion

D) $12 trillion

48) The quantity of money in an economy is $9 million, and the velocity of circulation is 3. Nominal GDP in this economy is ________. A) $9 million B) $3 million C) $6 million D) $27 million

D) $27 million

48) Refer to the table above. Suppose that in normal years demand is represented by Case 2 and supply is represented by Case B. In a normal year the price of wapanzo beans will be A) $1 per pound. B) $2 per pound. C) $4 per pound. D) $3 per pound.

D) $3 per pound.

24) Suppose Bank A holds $200 of reserves, has deposits of $1000, and the desired reserve ratio is 15 percent. How many loans can Bank A create at Bank A? A) zero, because Bank A has no excess reserves B) $850 C) $200 D) $50

D) $50

28) Using the information in the table above, net exports equals A) $650 billion. B) $1,370 billion. C) $70 billion. D) -$70 billion.

D) -$70 billion.

2) The price of a bag of corn chips is $3, and the price of a bottle of soda is $1. What is the relative price of a bottle of soda? A) 3 bags of corn chips per bottle of soda B) $3 C) 33¢ D) 1/3 bag of corn chips per bottle of soda

D) 1/3 bag of corn chips per bottle of soda

38) In 2012, consumers in Dexter consumed only books and pens. The prices and quantities for 2012 and 2013 are listed in the table above. The reference base period for Dexter's CPI is 2012. What is the CPI in 2012? A) 320 B) 3.20 C) 1.00 D) 100

D) 100

40) In 2012, consumers in Dexter consumed only books and pens. The prices and quantities for 2012 and 2013 are listed in the table above. The reference base period for Dexter's CPI is 2012. What is the CPI in 2013? A) 59 B) 102 C) 129 D) 169

D) 169

6) An ice cream cone costs $1.50. A can of soda costs $0.75. The relative price of an ice cream cone is A) $0.75, the opportunity cost of a can of soda. B) 1/2 can of soda per ice cream cone, the opportunity cost of an ice cream cone. C) $1.50, the opportunity cost of a can of soda. D) 2 cans of soda per soda, the opportunity cost of an ice cream cone

D) 2 cans of soda per soda, the opportunity cost of an ice cream cone

16) In the figure above, the allocatively efficient output of computers is A) 4 million per year. B) 2 million per year. C) the largest amount possible. D) 3 million per year

D) 3 million per year

14) In the table above, the size of the labor force is A) 80 million. B) 40 million. C) 46 million. D) 42 million

D) 42 million

42) In the table above, what inflation rate belongs in space B? A) 8.3 percent B) 17.0 percent C) -4.0 percent D) 6.8 percent

D) 6.8 percent

8) Using the information in the table above, calculate the employment-to-population ratio. A) 50 percent B) 23.2 percent C) 75 percent D) 65 percent

D) 65 percent

9) Suppose China Airlines wants to purchase a French Airbus. The price of the Airbus is 95 million Euro. If the exchange rate is 1 euro per 9 yuan, the price of this airplane to China Airlines is A) 85.5 million yuan. B) 10.6 million yuan. C) 11.11 million yuan. D) 855 million yuan.

D) 855 million yuan

8) In 2011, Armenia had a real GDP of $4.21 billion and a population of 2.98 million. In 2012, real GDP was $4.59 billion and population was 2.97 million. What was Armenia's economic growth rate from 2011 to 2012? A) 8.3 percent B) 3.8 percent C) 0.38 percent D) 9.0 percent

D) 9.0 percent

6) Gross domestic product is the A) total amount that buyers spent on the final goods and services produced in a country during a specific time. B) total amount of income earned in producing the final goods and services in a country during a specific time. C) value of the final goods and services produced in a country during a specific time. D) All of the above answers are correct.

D) All of the above answers are correct

50) Markets A) coordinate price information between buyers and sellers. B) facilitate trade. C) allow traders to enjoy gains from trade. D) All of the above answers are correct.

D) All of the above answers are correct.

36) In the above figure, once on PPF2, a country would grow slowest by producing at point A) A. B) B. C) C. D) D

D) D

48) Which of the following ideas apply to the neoclassical growth theory? I. The rate of technological change influences the rate of economic growth. II. Technological change promotes saving and investment. III. Convergence of economic growth rates across countries A) I only B) III only C) I and II D) I, II and III

D) I, II and III

1) The term "foreign currency" refers to foreign I. coins II. notes III. bank deposits A) II only B) II and III only C) I and II only D) I, II, and III

D) I, II, and III

12) Investment is financed by which of the following? I. Government spending II. National saving III. Borrowing from the rest of the world A) I, II, and III B) I and II only C) I and III only D) II and III only

D) II and III only

18) Consider the demand curves for soft drinks shown in the figure above. Suppose the economy is at point a. Which of the following could result in a movement to point c? A) a decrease in income B) a decrease in the price of bottled water C) an increase in the relative price of a soft drink D) a decrease in the relative price of a soft drink

D) a decrease in the relative price of a soft drink

40) A price below the equilibrium price results in A) a further price fall. B) excess supply. C) a surplus. D) a shortage.

D) a shortage.

2) GDP equals A) aggregate income. B) aggregate expenditure. C) the value of the aggregate production in a country during a given time period. D) all of the above.

D) all of the above.

32) Which of the following will lead to an appreciation of the U.S. dollar against the British pound? A) an increase in U.S. demand for British imports B) an increase in British interest rates C) a decrease in British demand for U.S. assets D) an increase in British demand for U.S. imports

D) an increase in British demand for U.S. imports

28) The figure above shows supply curves for soft drinks. Suppose the economy is at point a. A movement to point d would be the result of A) a decrease in the relative price of a soft drink. B) an increase in the number of soft drink suppliers. C) an increase in technology. D) an increase in the relative price of a soft drink.

D) an increase in the relative price of a soft drink.

4) Between September 2013 and September 2014 the number of discouraged workers decreased from 852,000 to 698,000. Assuming the change resulted from discouraged workers starting to make specific efforts to find a job again, this change creates A) a decrease to the U-3 unemployment rate. B) a decrease in the labor force participation rate. C) no change to the U-3 unemployment rate. D) an increase to the U-3 unemployment rate.

D) an increase to the U-3 unemployment rate.

2) Last year the exchange rate between U.S. dollars and Mexican pesos was 10 pesos per dollar. Today is it 11 pesos per dollar. Here, the dollar ________ against the peso, and the peso ________ against the dollar A) depreciated; appreciated B) depreciated; depreciated C) appreciated; appreciated D) appreciated; depreciated

D) appreciated; depreciated

6) The demand curve for U.S. dollars slopes downward because as the dollar ________ U.S. goods become ________ expensive to foreign residents, so they purchase fewer U.S. goods, and the quantity of dollars demanded decreases. A) depreciates; more B) appreciates; less C) depreciates; less D) appreciates; more

D) appreciates; more

24) In the country of Darrowby, net domestic income at factor cost is $2.0 million. Gross domestic product is $3.0 million, and depreciation is $0.5 million. Indirect taxes less subsidies ________. A) cannot be calculated B) are $1 million C) are -$0.5 million D) are $0.5 million

D) are $0.5 million

6) Checks are NOT money because they A) are not backed by either gold or silver. B) have value in exchange but little intrinsic value. C) are issued by banks, not by the government. D) are merely instructions to transfer money.

D) are merely instructions to transfer money.

17) In the foreign exchange market, the supply curve for dollars slopes upwards because A) supply curves always slope upwards. B) as the exchange rate rises, more dollars are supplied since the profit from selling dollars falls. C) as the exchange rate rises, imports become more expensive, and more dollars are supplied to pay for the imports. D) as the exchange rate rises, imports become cheaper, and more dollars are supplied to pay for the increase in the quantity of imports.

D) as the exchange rate rises, imports become cheaper, and more dollars are supplied to pay for the increase in the quantity of imports.

45) In the short run, when the Fed decreases the quantity of money A) bond prices rise and the interest rate falls. B) the demand for money increases. C) the supply of money curve shifts rightward. D) bond prices fall and the interest rate rises.

D) bond prices fall and the interest rate rises.

44) In the short run, when the Fed increases the quantity of money A) the demand for money increases. B) bond prices fall and the interest rate rises. C) the supply of money curve shifts leftward. D) bond prices rise and the interest rate falls.

D) bond prices rise and the interest rate falls.

48) In order to societies to reap the gains from trade, it is necessary to A) distribute resources equally. B) foster economic growth. C) achieve productive efficiency. D) define and enforce property rights.

D) define and enforce property rights.

3) If 100 Japanese yen buy more U.S. dollars today than yesterday, the dollar has ________ and the yen has ________. A) depreciated; depreciated B) appreciated; appreciated C) appreciated; depreciated D) depreciated; appreciated

D) depreciated; appreciated

8) Gross investment equals net investment plus A) dividends paid to the owners of the company. B) capital gains. C) capital. D) depreciation.

D) depreciation.

48) A small country is an international lender and its domestic supply of loanable funds increases. Consequently, the equilibrium quantity of loanable funds used in the country ________ and the country's international lending ________. A) increases; does not change B) increases; decreases C) does not change; does not change D) does not change; increases

D) does not change; increases

38) Real GDP A) grows at a constant 3 to 4 percent per year. B) fluctuates from year to year but is always below potential GDP. C) can be called potential GDP when it is adjusted for price changes. D) fluctuates around potential GDP.

D) fluctuates around potential GDP.

10) The lower the exchange rate today, ceteris paribus, the A) smaller the quantity of U.S. dollars demanded in the foreign exchange market today. B) smaller is the expected profit from buying U.S. dollars today and holding them. C) greater is the expected profit from buying foreign currency today and holding it. D) greater is the expected profit from buying U.S. dollars today and holding them.

D) greater is the expected profit from buying U.S. dollars today and holding them.

44) When a government has a budget surplus, the surplus A) must be subtracted from private saving to get total saving. B) crowds-out private saving. C) increases the world real interest rate. D) helps finance investment.

D) helps finance investment.

48) In the absence of the Ricardo-Barro effect, an increase in the government deficit results in a ________ real interest rate and a ________ equilibrium quantity of investment. A) lower; lower B) lower; higher C) higher; higher D) higher; lower

D) higher; lower

2) Which of the following is a microeconomic topic? A) how a trade agreement between the United States and Mexico affects both nations' unemployment rates B) how a tax rate increase will impact total production C) comparing inflation rates across countries D) how rent ceilings impact the supply of apartments

D) how rent ceilings impact the supply of apartments

10) Real GDP per person in the country of Flip is $10,000, and the growth rate is 10 percent a year. Real GDP per person in the country of Flap is $20,000 and the growth rate is 5 percent a year. When will real GDP per person be greater in Flip than in Flap? A) never B) in 10 years C) in 2 years D) in 15 years

D) in 15 years

4) A PPF, such as the one above, that bows outward illustrates A) that technology is improving. B) that productivity is falling. C) decreasing opportunity cost. D) increasing opportunity cost.

D) increasing opportunity cost.

30) The quantity of real money demanded is A) proportional to the price level B) negatively related to the price level. C) positively related to the price level. D) independent of the price level.

D) independent of the price level.

28) The demand for labor curve A) shifts rightward when the real wage rate rises. B) is upward sloping and the supply curve of labor is downward sloping. C) is upward sloping because productivity of labor diminishes as more workers are employed. D) is downward sloping because productivity of labor diminishes as more workers are employed.

D) is downward sloping because productivity of labor diminishes as more workers are employed.

34) The more education that workers have, the ________ is their human capital and the ________ is their productivity. A) smaller; smaller B) smaller; higher C) larger; smaller D) larger; higher

D) larger; higher

42) In the figure above, if the interest rate is 8 percent, people demand $0.1 trillion A) less money than the quantity supplied and bond prices will fall. B) more money than the quantity supplied and bond prices will fall. C) more money than the quantity supplied and bond prices will rise. D) less money than the quantity supplied and bond prices will rise.

D) less money than the quantity supplied and bond prices will rise.

46) Two social institutions that are essential for trade to be organized are A) markets and banks. B) businesses and banks. C) property rights and laws. D) markets and property rights.

D) markets and property rights

30) Structural unemployment is the result of A) normal labor market turnover. B) a slowdown in the rate of economic expansion. C) irresponsible workers with poor work habits. D) technological change or foreign competition.

D) technological change or foreign competition.

4) If the economy's capital stock increases over time A) depreciation is less than zero. B) depreciation exceeds gross investment. C) gross investment equals depreciation. D) net investment is positive.

D) net investment is positive.

30) The loss of the highest-valued alternative defines the concept of A) scarcity. B) entrepreneurship. C) marginal benefit. D) opportunity cost

D) opportunity cost

41) The table above gives the quantity of money and money demand schedules. Suppose that the interest rate is equal to 3 percent. The effect of this interest rate in the money market is that A) the money market is in equilibrium. B) bond prices rise so that the interest rate rises. C) people buy bonds and the interest rate falls. D) people sell bonds and the interest rate rises.

D) people sell bonds and the interest rate rises.

25) In the above figure, suppose the economy is initially at point A. The interest rate in Japan rises relative to the interest rate in the United States. As a result, there will be a change from point A to a point such as ________. A) point B B) point C C) point D D) point E

D) point E

36) If the price of a video rental is below its equilibrium price, there will be a ________ of video rentals and the price will ________. A) surplus; fall B) surplus; rise C) shortage; fall D) shortage; rise

D) shortage; rise

26) Marginal benefit is the benefit A) that your activity provides to someone else. B) that arises from the secondary effects of an activity. C) of an activity that exceeds its cost. D) that arises from an increase in an activity

D) that arises from an increase in an activity

40) If the People's Bank of China adopted a flexible exchange rate policy A) the yuan would depreciate. B) the U.S. dollar would appreciate. C) the yuan-U.S. dollar exchange rate would rise. D) the U.S. dollar would depreciate.

D) the U.S. dollar would depreciate.

29) If the European Central Bank increases interest rates A) the demand curve for European euros shifts leftward and the supply curve of European euros shifts rightward. B) the demand curve for European euros and the demand curve for U.S. dollars both shift rightward. C) the demand curve for European euros shifts leftward and the demand curve for U.S. dollars shifts rightward. D) the demand curve for European euros shifts rightward and the supply curve of European euros shifts leftward.

D) the demand curve for European euros shifts rightward and the supply curve of European euros shifts leftward.

28) If the Federal Reserve increases interest rates A) the demand curve for U.S. dollars and the demand curve for European euros both shift rightward. B) the demand curve for U.S dollars shifts leftward and the demand curve for European euros shifts rightward. C) the demand curve for U.S. dollars shifts leftward and the supply curve of U.S. dollars shifts rightward. D) the demand curve for U.S. dollars shifts rightward and the supply curve of U.S. dollars shifts leftward.

D) the demand curve for U.S. dollars shifts rightward and the supply curve of U.S. dollars shifts leftward.

33) The opportunity cost of holding money refers to A) the price level. B) the utility that would have been received if the money balances had been used to buy a good or service. C) the service fees charged to withdraw currency from an ATM. D) the interest that could have been earned if the money balances had been changed into an interest-bearing asset.

D) the interest that could have been earned if the money balances had been changed into an interest-bearing asset.

26) If the real interest rate increases from 3 percent to 5 percent A) the supply of loanable funds curve will shift rightward. B) the nominal interest rate will also increase. C) the demand for loanable funds curve will shift rightward. D) there will be a movement up along the demand for loanable funds curve.

D) there will be a movement up along the demand for loanable funds curve.

14) Net investment is the A) value of software and other network related products. B) profit or loss in the stock market. C) value of the depreciated capital multiplied by the changes in the price level. D) total amount of gross investment minus depreciation.

D) total amount of gross investment minus depreciation.