Econ 102 final exam

The pound-dollar exchange rate is 0.75 pounds to the dollar. The yen-dollar exchange rate is 150 yen to the dollar. The yen-pound exchange rate is 100 yen to the pound. Starting with 1 pound, you can make arbitrage profits of

1 pound

Assume that an economy produces only lemonade and cookies. The output and prices in 2019 and 2020 are as follows: 2019 Output 2019 Prices 2020 Output 2020 Prices Lemonade 200 glasses $1 per glass 300 glasses $2 per glass Cookies 100 cookies $2 per cookie 100 cookies $3 per cookie Suppose that 2019 is the base year. What is the GDP deflator in 2020? Enter its value below:

1.8 or 180

Consider the market for pizza, and let P and Q stand for the price and quantity of pizza, respectively. Suppose that the demand is given by an equation P = 70 - 5Q and the supply is P = 10 + Q. What is the market equilibrium quantity? Enter it below:

10

Suppose that the GDP of the United States this year is $20 trillion. If the annual growth rate of GDP is expected to be 7% indefinitely, in how many years will the GDP reach $40 trillion? Enter this number of years below.

10

Consider the following data for an economy: Corporate profits$100Interest income200Indirect business taxes180Depreciation300Employee compensation1,110Proprietors' income100Rents20Personal consumption1,300Government consumption and gross investment400Net exports10Income received by residents for factors of production supplied abroad300Income paid to foreigners for their contribution to domestic output250 What is the economy's GDP? Enter its value below:

1960

The following data come from the government of Macroland. All data are in billions of dollars: Assume that Macroland had a public debt of $200 billion at the beginning of 2015 and is able to issue bonds to finance the budget deficit that pays zero interest to investors and roll over any debt coming due. In the drop-in session, we have calculated the value of Macroland's public debt at the end of each year. In which year is the public debt maximized?

2018

If the consumer price index changed from 120 to 125 between January 2010 and January 2011, what was the rate of inflation (in percentage points) during 2010? Enter this rate below (rounded to the first decimal):

4.2

Based on the data, what is the economy's natural rate of unemployment? [ Select ] and what would be the price level when the economy's actual output is equal to potential output? [ Select ]

4.7 103

The expenditure approach to computing GDP involves summing which of the following?

Consumption, investment, government purchases, and net exports

Which of the following is an example of fiscal consolidation?

The authorities choose to reduce government spending and increase taxes by enough to make the deficit sustainable.

Consider the market for corn. What happens if there is an increased demand for corn tortillas and at the same time a new corn seed becomes available that dramatically increases the yield per acre?

The change in price is indeterminate; quantity increases.

Which of the following is held constant along a given short-run aggregate supply curve?

The expected level of input prices

Which of the following statements about public debt are true? Check all that apply. Note: points are awarded for correct answers and subtracted for wrong answers.

The federal government of the United States has never defaulted on its debt. At the end of the FY 2020, the national debt of the United States was nearly $27 trillion.

In the second quarter of 2020, which of the following was true of the unemployment rate in the United States?

The rate exceeded 10%.

BLS calculates and reports several measures of labor under-utilization in the U.S. economy. Which one of the following measures is the official unemployment rate?

U-3

Which of the following is TRUE of an inferior good?

When income increases, demand decreases.

Figure: Inflationary and Recessionary GapsReference: Ref 12-11(Figure: Inflationary and Recessionary Gaps) Look at the figure Inflationary and Recessionary Gaps. If the economy is in short-run equilibrium at Y1 in panel (a), self adjustment will result in:

a decrease in the Price level and an increase in the level of output.

An amount of money owed by government is known as:

public debt

A survey reveals that on a small island initially 100 people have jobs, 25 people don't have jobs but are looking for jobs, and 45 people are neither working nor looking for work. Suppose that 15 of the 45 people who weren't looking for work now begin looking for work. There are now 40 people looking for work and 100 people working. The unemployment rate:

rises to 28.6%.

The self-correcting property of the economy means that output gaps are eventually eliminated by:

rising or falling prices.

On July 1, the exchange rate between the Canadian dollar (CAD) and the US dollar (USD) was 0.80 USD for 1 CAD. On August 1, the exchange rate is 1 USD for 1 CAD. Over this period of time, we would say that:

the U.S. dollar depreciated.

The ___ states that exchange rates between any two currencies will adjust to reflect changes in the price levels of the two countries.

theory of purchasing power parity

If a person is out of a job and has been actively looking for a job in the past four weeks, this person is classified by the BLS as:

unemployed.

Which of the following are examples of money market instruments? Check all that apply. Note: points are awarded for correct answers and subtracted for wrong answers.

us treasury bills certificates of deposit bankers acceptances

A fall in the value of the dollar against other currencies makes U.S. final goods and services cheaper to foreigners even though the U.S. aggregate price level stays the same. As a result, foreigners demand more American aggregate output. Your study partner says that this represents a movement down the aggregate demand curve because foreigners are demanding more in response to a lower price. You, however, insist that this represents a rightward shift of the aggregate demand curve. Who is right?

you are right

Assume that an economy produces only lemonade and cookies. The output and prices in 2013 and 2014 are provided in the table below: 2013 Output 2013 Prices 2014 Output 2014 Prices Lemonade 200 glasses $1 per glass 220 glasses $1 per glass Cookies 100 cookies $2 per cookie 100 cookies $2.25 per cookie Nominal GDP in 2014 was:

445

If the real interest rate is 2 percent and expected inflation rate is 3 percent, what is the nominal interest rate according to the Fisher equation? Please enter its (percentage) value below.

5

Suppose that an economy produces only lemonade and cookies. Their output and prices in 2019 and 2020 are provided in the table below: 2019 Output 2019 Prices 2020 Output 2020 Prices Lemonade 200 glasses $1 per glass 220 glasses $1 per glass Cookies 100 cookies $2 per cookie 100 cookies $2.25 per cookie Assuming 2019 was the base year, what was the growth rate of real GDP from 2019 to 2020? Enter the value of this growth rate (in percentage points) below:

5

Taxonia levies a progressive income tax on its residents, with the tax brackets specified as follows: Tax rate, %Tax bracket, $100 to 10,0001510,000.01 to 20,00020Over 20,000 Suppose that you are a resident of Taxonia and your (before-tax) income is $35,000. Please calculate your tax liability (i.e., the amount of income tax you must pay) and enter it in the box below. You may round your answer to the nearest dollar.

5500

In 2011, consumption spending is $7,000, government purchases of goods and services is $2,000, and investment spending is $1,500. If GDP for 2011 is $10,300, exports are _____ and imports are _____.

600,800

The following table indicates the AD and SRAS schedules for the current period. Both buyers and sellers previously anticipated that the price level during this period would be 107. What quantity of real GDP will be produced during this period? [ Select ] Will the economy attain a long-run equilibrium in this period? [ Select ] How would the actual rate of unemployment compare to the natural rate during this period? [ Select ]

6000 no higher than the natural rate

A college student is faced with a difficult decision of how to spend one hour tonight. She could babysit her professor's child at an hourly wage of $7; she could work at the college library at a wage of $6; or she could finish her economics homework assignment. Suppose she chooses to complete her homework assignment. Enter below the opportunity cost of doing so that she has incurred:

7

Use the data below to answer the following question: Civilian population200 millionNumber employed120 millionNumber unemployed50 million What is the labor force participation rate in this economy? Enter its value (in percentage points) below:

85

Consider the following information for an economy (figures are in billions of dollars): Personal consumption500Compensation of employees450Gross private investment200Government consumption and net investment150Government consumption and gross investment240Exports50Indirect business taxes100Imports100Depreciation300Self-employment income75 What is the economy's GDP? Enter its value below:

890

The part of the business cycle starting with a peak and ending with the next trough is known as which of the following?

A contraction

Which of the following is most likely to help residents of a nation produce more goods and services and achieve higher income levels in the longer term?

A higher spending on education.

The following figure shows the PPF for Tealand: Which of the points indicated on the figure are either unattainable or Pareto inefficient? Check all that apply. Note: points are awarded for correct answers and subtracted for wrong answers.

A, E

If a foreign currency appreciates, which of the following can we expect? Check all that apply. Note: points are awarded for correct answers and subtracted for wrong answers.

Americans will buy fewer foreign currency. Americans will buy fewer goods from abroad. U.S. exports to other countries will increase.

Which of the following would case a shift of SRAS to the left? Check all that apply. Note: points are awarded for correct answers and subtracted for wrong answers.

An imposition of lockdown measures by the government in response to a pandemic. A major earthquake that kills one-tenth of the country's population. An unusually cold summer resulting in lower crop yields this year.

Suppose that over the course of the year 2019, your nominal wage increased by 2 percent. Over the course of this same year, the price level increased by 1 percent. Which of the following statements correctly describes the changes in your nominal wage and in your real wage during 2019?

Both your nominal wage and your real wage increased.

David Ricardo is known for which of the following?

Developing the concept of comparative advantage and applying it to international trade.

If the economy is at its potential GDP (i.e., full employment), then it has the actual rate of unemployment that will be which of the following?

Equal to the natural rate of unemployment

The small economy of Pizzania produces three goods (bread, cheese, and pizza). Each is produced by a separate company. The bread and cheese companies produce all the inputs they need to make bread and cheese, respectively. The pizza company uses the bread and cheese from the other companies to make its pizzas. All three companies employ labor to help produce their goods, and the difference between the value of goods sold and the sum of labor and input costs is the firm's profit. The accompanying table on the next slide summarizes the activities of the three companies when all the bread and cheese produced are sold to the pizza company as inputs in the production of pizzas. Which of the following is incorrect? Bread company Cheese company Pizza company Cost of inputs $0 $0 $50 (bread) $35 (cheese) Wages 15 30 75 Value of output 50 35 200

For the cheese company, factor income is $35: labor earns $20 and profit is $15.

In the NIPA, "GNP" stands for:

Gross National Product

Which of the following statements about taxes is true? Check all that apply. Note: points are awarded for correct answers and subtracted for wrong answers.

Individual income tax and corporate income tax are examples of direct taxes. An estate tax and inheritance tax are taxes imposed on the value of an individual's property at the time of their death. Real property taxes are a key revenue source for the state and local governments in the United States.

The local government sets a maximum price on city rents that is above the equilibrium rent. What will this cause?

No effect at all

For the federal government, "fiscal year 2018" means the year that began on ___________.

October 1, 2017

The change in the demand for beef is illustrated in the following figure: This change is consistent with which of the following?

People expect the price of beef to fall in the near future.

Real GDP decreases from 2015 to 2016. What can you conclude?

Production levels are lower in 2016 than in 2015.

GDP is designed to measure an economy's output. However, it is NOT designed to be a measure of which of the following? Check all that apply. Note: points are awarded for correct answers and subtracted for wrong answers.

Quality of life Environmental sustainability non-market transactions

Which of the following is an example of an organization that assigns ratings (e.g., AAA) to securities?

Standard and Poor's

Figure: Foreign Exchange MarketsReference: Ref 12-3(Figure: Foreign Exchange Markets) Look at the figures in the Foreign Exchange Markets graphs. Suppose there was an increase in the domestic level of Government spending. The resulting changes would be:

an increase in the of supply of dollars and an increase in the demand for foreign currency.

Consider the following figure (two panels): If the economy is in a short-run equilibrium at Y1 in panel (b), self-adjustment in the long run will result in:

an increase in the price level and a decrease in the level of output.

The table presents hypothetical employment statistics. Use these data for the following computations. Including discouraged workers, what is the U-4 labor underutilization rate? Demographic Group Number of Residents Employed 7,000 Not employed and looking for work 900 Not working due to disability 300 Not working due to retirement 900 Not employed and not looking for work due to discouragement over job prospects 400 Under the age of 16 2,500 Total Population 12,000

between 15.6 and 16

The following figure shows a hypothetical business cycle: Which of the following time periods, if any, represent a period of the business cycle? Check all that apply. Note: points are awarded for correct answers and subtracted for wrong answers.

between points A and C

Which of the following is NOT a determinant of supply?

consumer tastes

The risk faced by the lender that borrowers may not repay their loans in full is commonly known as _____ risk. Please enter the omitted term in the preceding sentence in the box below.

credit

At the beginning of a year, decision makers expected the general level of prices to increase at a 6% annual rate. The CPI actually increased from 100 to 103 during the year, which means that:

decision makers overestimated the rate of inflation during the year.

According to the new growth theory:

discoveries are a public capital good.

People who are absent from their jobs because of illness, bad weather, or labor disputes are which of the following?

employed

Use the figure below to answer the following question: The output of the economy depicted in this figure is:

equal to the full employment output.

Two neighboring countries, Treeland and Flowerland, have recently severed diplomatic and trade relations. Each country produces two goods, pyramids and stealth fighters. It takes 1,000 Treeland's workers 30 days to build a pyramid and 10 days to assemble 5 stealth fighters, while 1,000 Flowerland's workers can construct a pyramid in 60 days and make a stealth fighter in 5 days. According to the opportunity costs of both products in each country, _____ has a comparative advantage in pyramids _____ has a comparative advantage in stealth fighters.

flowerland treeland

Which of the following expenditure categories comprising the CPI is the most important one, relatively speaking?

housing

A country that experiences a rate of inflation of 1 million percent per year would be said to be experiencing:

hyperinflation

According to the real wealth effect, when prices decrease, the purchasing power of assets _____ and consumer spending _____.

increases; increases

Recall a figure from the lectures on the composition of the federal government's revenues by source in FY 2019. The following diagram presents a version of that figure without the naming the sources: The largest (50% of the revenues) and second largest (36%) sources are:

individual income taxes and social insurance taxes.

Scarcity exists when:

individuals can have more of one good but only by giving up something else.

Which of the following has the strongest and most direct influence over the level of private investment spending?

interest rate

Look at the figure for the PPF of Tealand: If Tealand is producing 10 million scones and 10 million cups of tea (point A), we know that the economy:

is using its resources inefficiently.

Suppose that in Wageland all workers sign annual wage contracts each year on January 1. No matter what happens to prices of final goods and services during the year, all workers earn the wage specified in their annual contract. This year, prices of final goods and services fall unexpectedly after the contracts are signed. Answer the following question assuming that the economy starts at potential output.How will the quantity of aggregate output supplied respond to the fall in prices?

it will decrease

Oil, gold, silver, and coal are examples of:

natural resources

Olive oil is an example of a good whose price varies greatly from year to year. Explain how the following would affect the market: Event: Medical research proves that the Mediterranean diet, which includes abundant use of olive oil, is not just a fad, but is really good for you. In response, millions of consumers start following the diet. 1. Would the supply curve shift? The supply curve would not shift . 2. Would the demand curve shift? The demand curve would shift to the right . 3. What will happen to the price and the quantity? The market would move up and to the right along the supply curve to a new equilibrium where both price and quantity are higher than before.

not shift shift to the right higher

The following figure (four panels) illustrates various shifts of aggregate demand and aggregate supply curves: An increase in wages in the short run is best illustrated by:

panel (d).

The inflation rate is the:

percentage change in the price level from one year to the next.

Which of the following are examples of institutional elements essential to economic growth? Check all that apply. Note: points are awarded for correct answers and subtracted for wrong answers.

political stability protected property rights

The four key macroeconomic markets that coordinate the flow of income in an economy are:

product, resources, loanable funds, and Forex.