ECON 1101 9-15
At the beginning 2010, the government of Norway had no debt and held $180 billion dollars in its sovereign fund. To stimulate its economy during 2011, Norway's government plans to spend $35 billion more than it will collect in tax revenue and in 2012, its spending will exceed tax revenues by $25 billion. What will the total government debt equal at the end of 2012?
$0
The diagram above refers to a private closed economy. In this instance, the equilibrium GDP is:
$180 billion.
Alex wants to measure the nominal 1998 GDP of $993 billion in 2008 dollars. From the data he gathered, he knows the deflator for 1998 is 30 and for 2008, it is 74, and that real interest in those years was 6.23% and 3.21% respectively. If he avoids making a misleading calculation, what will the value be?
$2,449 billion
Stealth bank has deposits of $700 million. It holds reserves of $20 million and has purchased government bonds worth $350 million. The bank's loans, if sold at current market value, would be worth $600 million. What does Stealth bank's net worth equal?
$270 million
If a firm holds a pure monopoly in the market and is able to sell 5 units of output at $4.00 per unit and 6 units of output at $3,90 per unit, it will produce and sell the sixth unit if its marginal cost is
$3.40 or less
"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:
$44
Stealth bank has deposits of $600 million. It holds reserves of $30 million and government bonds worth $80 million. If the bank sells its loans at market value of $400 million, what will its total assets equal?
$510 million
Stealth bank holds deposits of $600 million. It holds reserves of $30 million and government bonds worth $80 million. The current market value of the bank's loans is $400 million. What is the value of the bank's total liabilities?
$600 million
Stealth bank has deposits of $300 million. It holds reserves of $20 million and has purchased government bonds worth $300 million. The bank's loans, if sold at current market value, would be worth $600 million. What does Stealth bank's net worth equal?
$620 million
Stealth bank has deposits of $700 million. It holds reserves of $20 million and has purchased government bonds worth $350 million. The banks loans, if sold at current market value, would be worth $600 million. What is the total value of Stealth bank's assets?
$970 million
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27 Additional practice
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27 HW
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28 Additional practice
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28 HW
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3 Additional practice
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3 HW
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30 Additional practice
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Lesson 1 CH 1
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Lesson 10 CH 21
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Lesson 13 CH 27
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Lesson 14 CH 28
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Lesson 15 CH 30
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Lesson 2 CH 2
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Lesson 3 CH 3
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Lesson 4 CH 5
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Lesson 5 CH 6
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Lesson 6 CH 7
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Lesson 7 CH 8
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Lesson 8 CH 9
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Lesson 9 CH 20
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An analyst needs to adjust the nominal GDP for the years 2000 and 2010 into real terms to conclude his comparison analysis. The nominal GDP in 2000 was $672 billion and $1,690 billion for 2010; the real interest rate was 6.79% in 2000 and 3.71% in 2010; the 2000 deflator was 24 and 51 in 2010. What is the real gain?
18.34%
A government collects $700 billion annually in tax revenue. Each year it allocates $130 billion to interest payments that it must pay on its accumulated debt. What percentage of annual tax revenue is allocated to make these interest payments?
18.57%
If the price index moves from 107 to 110, the rate of inflation is:
2.8%
The people in an economy have $10 million in money. There is only one bank that all the people deposit their money in and it holds 5% of the deposits as reserves. What is the money multiplier in this economy?
20
During the Great Depression of the 1930s, the unemployment rate reached more than _________ of the labor force.
25%
If the number of employed persons in a country equals 24 million, the number of unemployed persons equals 8 million, and the number of persons over age 16 in the population equals 40 million, the unemployment rate equals:
25%.
If nominal GDP is 2700 and the money supply is 900, what is velocity?
3
Billy Bob's Barber Shop knows that a 5 percent increase in the price of their haircuts results in a 15 percent decrease in the number of haircuts purchased. What is the elasticity of demand facing Billy Bob's Barber Shop?
3.0
A country will roughly double its GDP in twenty years if its annual growth rate is:
3.5 Percent.
Assuming a country's economy maintains an 8% rate of growth, young adults starting at age 20 would see the average standard of living in their country more than double by the time they had reached age __________.
30
A government annually collects $230 billion in tax revenue and allocates $70 billion to military spending. What percentage of this government's budget is spent on its military?
30.43%
In certain African countries like Niger, Tanzania, Nigeria, and Sudan, for example, GDP per capita at the start of the 2000s was still less than $____
300
Approximately what percentage of the US labor force is employed by firms that have fewer than 100 employees?
35%
The U.S. unemployment rate moves up and down as the economy moves in and out of recessions. But over time, the unemployment rate seems to return to a range of
4%-6%
Suppose that Bobo purchases 1 pizza per month when the price is $19 and 3 pizzas per month when the price is $15. What is the price elasticity of Bobo's demand curve?
4.25
The following table shows the aggregate supply and demand data for a country. What is the equilibrium price level?
400
Of the world's population of 6.7 billion people, _________ are scraping by on incomes that average less than $2 per day.
5 billion
In Bangladesh during the early 2000s, the illiteracy rate for girls between the ages of 15 and 24 was __________ and the illiteracy rate for males in this age group was ______________.
78%; 75%
If the unemployment rate is 8 percent, then this means:
8 percent of the labor force is unemployed.
The basket of goods in the Consumer Price Index consists of about _________ products; that is, several hundred specific products in over __________ broad-item categories.
80,000; 200
The US government has registered ________ on behalf of business firms to protect a particularly distinct element each has selected for its ability to aid consumers to easily_____________.
800,000 trademarks; identify the source of goods
Refer to the diagram above. In this instance, at the range of output represented at point b, A. total costs exceed total revenues. B. total revenues exceed total costs. C. the firm is earning profits. D. the firm should shut-down.
A. total costs exceed total revenues.
Refer to Figure 2-1. Figure 2-1 Along the production possibilities frontier, the most efficient point of production depicted is:
All points on the production possibilities frontier are equally efficient.
Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect:
Andy's demand for beer to increase.
_____________________ are a form of tax and spending rules that can affect aggregate demand in the economy without any additional change in legislation.
Automatic stabilizers
Kim has $24 per week in her entertainment budget. She splits her time between going to the movies and yoga classes. Each movie costs $8 while each yoga class costs $3. The total utility from each of these activities is set out in the table below. What is Kim's total utility maximizing point? A. 0 movies, 8 yoga classes B. 1 movie, 5 yoga classes C. 2 movies, 2 yoga classes D. 3 movies, 0 yoga classes
B. 1 movie, 5 yoga classes
Refer to the diagram above. Based on the information illustrated in this graph, which of the following is an accurate statement? A. MC is initially downward sloping in the region of increasing MR at low output levels B. As production increases, marginal revenue always increase so profits rise C. as production decreases, marginal revenue will increase so profits will rise D. a profit-seeking firm should continue to expand production as long as MR is less than MC
A. MC is initially downward sloping in the region of increasing MR at low output levels
Refer to the diagram above. What is the significance of the point marked L1 at the bottom upward-sloping portion of the individual labor supply (2) curve? A. as wages increase over this range, the quantity of hours worked also increases. B. as wages increase over this range, the quantity of hours worked changes very little. C. as wages increase over this range, the quantity of hours worked actually decreases. D. as wages increase of this range, the quantity of hours worked is inelastic.
A. as wages increase over this range, the quantity of hours worked also increases.
Garth inherited $25,000. He needs to decide now much to spend now and how much to save for later. If he saves the money, then he can earn 15% interest on the total before he spends it. Using the information about his marginal utility in the table below, Garth should: A. spend $5,000 now and $22,250 in the future B. spend nothing now and $28,750 in the future C. spend $15,000 now and $13,500 in the future D. spend $10,000 now and $16,750 in the future
B. spend nothing now and $28,750 in the future
____________ is a completely inadequate mechanism ____________________ in a modern advanced economy.
Barter; for trying to coordinate trades
Why is there scarcity?
Because our unlimited wants exceed our limited resources
_____________ are a form of financial instrument through which corporations and governments borrow money from financial investors and promise to repay with interest.
Bonds
In the circular flow diagram model:
Both (a) and (b) are correct.
Which of the following best characterizes the circular flow of income?
Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.
Refer to Figure 2-1. Figure 2-1 An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from:
C to F
The graph above illustrates the total cost function for GoodieCookie Co. The changing slope of the total cost curve reflects this company's A. decreasing average total costs. B. decreasing marginal costs. C. decreasing average variable costs. D. decreasing fixed costs.
B. decreasing marginal costs.
The graph above illustrates the total cost function for GoodieCookie Co. How are the company's fixed costs represented in this graph? A. by adding up the fixed costs B. at any vertical axis point where the total cost curve never equals zero C. as the point where the total cost curve touches the vertical axis D. by adding up the variable costs
C. as the point where the total cost curve touches the vertical axis
Refer to the diagram above. Which of the following explains the slope of the total revenue curve illustrated in this graph? A. total revenue shown as a straight line sloping up indicates a perfectly competitive firm B. the slope of the total revenue curve is determined by the price of the goods produced C. at higher levels of output, diminishing returns will cause total cost to slope downward steeply D. the slope of the total revenue curve is explained by both a and b above.
C. at higher levels of output, diminishing returns will cause total cost to slope downward steeply
Nancy's union has negotiated a three-year wage contract that provides for a 2.4% increase indexed to inflation. The rates of inflation are forecast to be 1.62%, 1.93% and 2.21% respectively. How will Nancy's wage increase be expressed in the new contract?
COLA plus 2.4%
Which of the following institutions determines the quantity of money in the economy as its most important task?
Central Bank
The ___________________ is the institution designed to control the quantity of money in the economy and also to oversee the:
Central Bank; safety and stability of the banking system.
_______________________ that require the depositor to commit to leaving their funds in the bank for a certain period of time, in exchange for a higher rate of interest are also called ________________.
Certificates of deposit; time deposits
How does the U.S. Bureau of Labor Statistics gather information with regard to the typical consumption choices of Americans?
Consumer Expenditure Survey
In countries like _____________ the command economy predominates.
Cuba and North Korea
Refer to the above diagram. In this instance: A. the BC line is diagonal because the amount spent on both goods is less or equal to income. B. the consumer will find that every point along the I3 line is outside the budget constraint. C. the consumer will find the highest utility where x and y just touch the I2 line. D. all of the above and the consumer can choose any point on or below the budget constraint line BC.
D. all of the above and the consumer can choose any point on or below the budget constraint line BC.
Refer to the diagram above. In this instance, the marginal revenue curve A. reflects a perfectly competitive firm B. is equal to the price of the good C. is a horizontal straight line D. reflects each of the above
D. reflects each of the above
____________________________ occur when the marginal gain in output diminishes as each additional unit of input is added.
Diminishing marginal returns
Country Able and Country Baker initially have the same real GDP per capita. Country Able experiences no economic growth, while Country Baker grows at a sustained rate of 7 percent. In 12 years, Country Baker's GDP will be approximately ___________ that of Country Able.
Double
_____________ - a term referring to the fact that for many goods, as the level of production increases, the average cost of producing each individual unit declines.
Economies of scale
______________________ argues that the productivity of workers will increase if they are paid more, and so employers will often find it worthwhile to pay their employees somewhat more than market conditions might dictate.
Efficiency wage theory
When we want to measure wage inflation in the labor market, we use the:
Employment Cost Index
Which of the following is correct?
Increased education adds to the stock of human capital, not unlike building factories adds to the stock of physical capital.
Which of the following best describes the relationship between economic growth and literacy?
Increased literacy stimulates economic growth by raising labor productivity, and as the economy grows, people consume more education.
What name is given to the index based on the prices of exported or imported merchandise?
International Price Index
Over the long run, ____________ per hour is the most important determinant of the average wage level in any economy.
Productivity
The value of what is produced per worker, or per hour worked, is called
Productivity
_________ is output per hour in the business sector.
Productivity
___________are funds that the bank keeps on hand that are not loaned out or invested in bonds.
Reserves
If Sarah uses her smart card to purchase movies over the internet, then the money to pay the retailer will come from:
Sarah's M1 funds.
_________________ results when an economy experiences high unemployment and high inflation at the same time.
Stagflation
Since the late 1950s, economists have performed "growth accounting" studies in the United States. These have determined that ________________ is typically the most important contributor to U.S. economic growth.
Technology
Which of the following institutions oversees the safety and stability of the U.S. banking system?
The Federal Reserve
_____________________ is a term which refers to the widespread use of power-driven machinery and the economic and social changes that resulted in the first half of the 1800s.
The Industrial Revolution
____________________________ will often cause monetary policy to be considered counterproductive because it makes it hard for the central bank to know when the policy will take effect?
Long and variable time lags
Does a price ceiling attempt to make a price higher or lower?
Lower
Which of the following terms is considered to be a narrow definition of the money supply that includes, among other things, currency?
M1
Which category of the money supply would you be contributing to if you invest in money market funds?
M2
Which of the following did not result in economic growth?
Many citizens emigrating from Zimbabwe when a politically repressive regime took office.
Central Bank policy requires Northern Bank to hold 10% of its deposits as reserves. Northern Bank policy prevents it from holding excess reserves. If the central bank purchases $30 million in bonds from Northern Bank what will be the result?
Northern's loan assets increase by $30 million
______________ include all of the costs of production that increase with the quantity produced.
Variable costs
If the government for the state of Washington collects $65.8 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be:
a budget deficit.
Which of the following best denotes the reason for the existence of substantial black markets?
a command economy
When a Central Bank takes action to decrease the money supply and increase the interest rate, it is following:
a contractionary monetary policy.
Which of the following would most likely shift the production possibilities curve inward?
a decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time
In macroeconomics, ___________________________ describes a situation in which two people each want to exchange some good or service that the other can provide.
a double coincidence of wants
If the economy is in recession with high unemployment and output below potential GDP, then __________________ would cause the economy to return to its potential GDP?
a loose monetary policy
In economics, a firm that faces no competitors is referred to as _________________.
a monopoly
After widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, the likely economic effect on the U.S. demand curve for beef from Canada is:
a shift of the demand curve for beef to the left.
In an AD/AS diagram, __________________________ could explain a rise in cyclical unemployment?
a shift to the left in either AS or AD
Which one of the following is the most accurate description of a monopolist?
a sole producer of a product for which good substitutes are lacking in a market with high barriers to entry
Economic theory offers ____________________ about the full range of possible events and responses, which can prevent __________________ about how households will respond to changes in prices or incomes.
a systematic way of thinking; misguided conclusions
Banks typically come under financial stress because of:
a widespread decline in the value of their assets.
Frictional unemployment occurs when:
a worker decides to quit one job to seek a different job.
Specialization:
can lead to an increase in overall production.
When society has a higher level of capital per person, it is called
capital deepening
In the U.S., the amount in savings contributed to IRAs rose from $239 billion in 1992 to $3,667 billion by 2005, while overall savings actually dropped from low to lower. Evidence suggests that, in the economy as a whole, increased savings in these retirement accounts:
are being offset by negative savings or less savings in other kinds of accounts.
is the term that an economist uses to describe what happens when a shopper gets a "good deal" on a product.
consumer surplus
When demand is inelastic:
consumers are not very responsive to changes in price.
A typical ____________________________ fiscal policy allows government to decrease the level of aggregate demand, through increases in taxes.
contractionary
The form of legal protection intended to prevent reproduction of original works is referred to as ______________ law.
copyright
Intellectual property law is a body of law that includes
copyright legislation, as well as all of the above
In 2010, Microsoft will pay corporate income tax to the federal government based on the company's
corporate profits
In 2010, Microsoft will pay corporate income tax to the federal government based on the company's __________________.
corporate profits
In the 1970s and 1980s, labor unions commonly negotiated wage contracts that had _______________________ which guaranteed that their wages would keep up with inflation.
cost of living adjustments
It is said that in a perfectly competitive market, raising the price of a firm's product from the prevailing market price of $179.00 to $199.00, ____________________.
could likely result in a notable loss of sales to competitors
When the economy of a country is operating close to its full capacity:
cyclical unemployment is close to zero.
The type of unemployment that occurs because of a recession is called:
cyclical unemployment.
The fact that a consumer is not required to buy the goods that a given firm produces, as well as the fact that the consumer might want the goods a firm produces, but may choose to buy from other firms instead
are two stark realities any business firm must recognize.
If an economy moves into a recession, causing that country to produce less than potential GDP, then:
automatic stabilizers will cause tax revenue to decrease and government spending to increase.
If Canada's economy moves into an expansion while its economy is producing more than potential GDP, then:
automatic stabilizers will decrease government spending and increase tax revenue. Submit
In order to determine ____________, the firm's total costs must be divided by the quantity of its output.
average cost
A ______________________ means that government spending and taxes are equal.
balanced budget
What is the name given to the macroeconomic equation MV = PQ?
basic quantity equation of money
Marginal utility can:
be positive, negative, or zero
If the central bank increases the amount of reserves banks are required to hold to 20%, then:
both the money multiplier and supply of money in the economy will decrease.
If the central bank decreases the amount of reserves banks are required to hold from 20% to 10%, then:
both the money multiplier and the supply of money in the economy will increase.
A ______________________ is created each time the federal government spends more than it collects in taxes in a given year.
budget deficit
If the state of Washington's government collects $75 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be a:
budget surplus.
Cyclical unemployment arises when:
business activity in the macroeconomy declines.
The rise in unemployment that occurs because of a recession is known as cyclical unemployment, because it is closely tied to the
business cycle
A central bank that wants to increase the quantity of money in the economy will:
buy bonds in open market operations.
The nature of demand indicates that as the price of a good increases:
buyers desire to purchase less of it.
Atlantic Bank is required to hold 10% of deposits as reserves. If the central bank increases the discount rate, how would Atlantic Bank respond?
by increasing its reserves
An _________________ is calculated by subtracting the firm's costs from its total revenues, _______________________.
accounting profit; excluding opportunity cost
In order to reduce the harmful affects of recession and carbon emissions, the government provided tax incentives for manufacturing firm's to ___________________ that provide alternative, more efficient methods of combining inputs to produce output.
acquire energy efficient production technologies
What distinguishes the real value of a statistic from the nominal value of a statistic?
adjusting for inflation
The _________________ argument points out that if an employer reacts to poor business conditions by reducing pay for all workers, then the best workers, with the best employment alternatives at other firms, are the most likely to leave and the least-attractive workers, with fewer employment alternatives, are more likely to stay.
adverse selection of wage cuts
In macroeconomics, _____________________ denotes the relationship between the total quantity of goods and services and the price level for output.
aggregate demand (AD)
During a recession, if a government uses an expansionary fiscal policy to increase GDP, the:
aggregate demand curve will shift to the right.
The labor force consists of:
all adults who are working or actively seeking work.
Any given demand or supply curve is based on the ceteris paribus assumption that ___________________.
all else is held equal
The term "ceteris paribus" means that:
all variables except those specified are constant.
If a firm is producing so that the point chosen along the production possibility frontier is socially preferred, then that firm is said to have reached its
allocative efficiency
The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display _____________________.
allocative efficiency
Which of the following is considered to be a relatively weak tool of monetary policy?
altering the discount rate
In macroeconomics, the connection from inputs to outputs for the entire economy is called
an aggregate production function
In macroeconomics, _____________________________ describes a situation where a bank's liabilities can be withdrawn in the short-term while its assets are being repaid in the long-term.
an asset-liability time mismatch
In macroeconomics, _____________________________ describes a situation where a bankâ s liabilities can be withdrawn in the short-term while its assets are being repaid in the long-term.
an asset-liability time mismatch
Which of the following would function as a store of value, and also provide a medium of exchange, and unit of account?
an estate
The government can use _____________ in the form of ____________________ to increase the level of aggregate demand in the economy.
an expansionary fiscal policy; an increase in government spending
A consensus estimate based on a number of studies suggests that if there is an increase in budget deficits (or a fall in budget surplus) by 1% of GDP, it will most likely cause which of the following?
an increase of 0.5-1.0% in the long-term interest rate
Which of the following is a valid criticism of the use of money as a store of value in modern economies?
annual inflationary loss of buying power
Another term used to describe negative inflation is:
deflation
Melanie decided to save 20% of her annual earnings for 10 years so she would have a down payment for a house. After 5 years, what change in the economy would cause an increase in the purchasing power of the funds she has managed to save?
deflation
With regard to the economy, the term negative inflation is synonymous with which of the following?
deflation
The situation where the buying power of money in terms of goods and services increases is called:
deflation.
What term is used to describe the interest rate charged by the central bank when it makes loans to commercial banks?
discount rate
When the government passes a new law that explicitly changes overall tax or spending levels, it is enacting:
discretionary fiscal policy.
In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers.
division of labor
If Bill performs plumbing upgrades for Alice in exchange for her incorporating his business, then their _________________________ will be satisfied.
double coincidence of wants
The slope of the demand curve for a monopoly firm is
downward sloping
Changes in the price level of the different components of aggregate demand are reflected in the AD/AS macroeconomic model by a
downward sloping AD curve
Which of the following is most likely to cause variation in American household spending patterns?
each of the above will cause a variation
The term __________________ describes a situation where the quantity of output rises, but the average cost of production falls.
economies of scale
The leader of a federal political party made the following campaign promise: "My administration will increase national defense without requiring sacrifices elsewhere in the economy." The promise can be kept if:
either b) or c) occurs, but not as a result of a).
Demand is said to be ___________ when the quantity demanded is very responsive to changes in price.
elastic
A price cut will increase the total revenue a firm receives if the demand for its product is:
elastic.
The government wants to make medicare benefits available to more people, but to achieve this goal, it needs to make cuts in the existing medicare budget. The two areas where they are considering cuts are non-essential elective surgery and 6-12 month mental health care programs. Applying the concept of diminishing marginal utility, the budget cuts should be made for spending on:
elective surgery due to its lower marginal return rate.
A manufacturer would likely make an ___________ in a market following the long-run process of beginning and expanding production in response to ________________ .
entry; a sustained pattern of profits
Which of the following is generally accepted as a valid criticism of the production of useful goods and services?
environmental pollution
If the supply curve for a product is vertical, then the elasticity of supply is:
equal to zero.
Whether the economy is in a recession is illustrated in the AD/AS model by how close the _____________________ is to the potential GDP line.
equilibrium
The ____________ is the quantity where quantity demanded and quantity supplied are equal at a certain price.
equilibrium quantity
The definition of market equilibrium states that at the _______________, the quantity of labor demanded by employers will equal the quantity supplied.
equilibrium wage
If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as ___________________
excess demand
If a government reduces taxes in order to increase the level of aggregate demand, what type of fiscal policy is being used?
expansionary
Assume that laws have been passed that require the federal government to run a balanced budget. During a recession, the government will want to implement _____________________, but may be unable to do so because such a policy would ____________________________.
expansionary fiscal policy; lead to a budget deficit
Regardless of the outcome in the long run, ______________________ always has the effect of stimulating the economy in the short run.
expansionary monetary policy
If the supply curve for housing is perfectly inelastic, then a reduction in demand will cause the equilibrium price to:
fall and the equilibrium quantity to stay the same.
When the Federal Reserve announces that it is implementing a new interest rate policy, the ____________________ will be affected?
federal funds rate
If you were to survey central bankers from around the world and ask them what they believe the primary task of monetary policy should be, what would the most popular answer likely be?
fighting inflation
In modern economies, _____________________ receive money from savers and provide funds to borrowers.
financial intermediaries
Which of the following terms is used to describe the set of policies that relate to government spending, taxation, and borrowing?
fiscal policies
Which of the following must be present in order for the aggregate supply curve to form an upward slope?
fixed cost of inputs combined with rising prices for outputs
A firm's ___________ consist of expenditures that must be made before production starts that typically, over the short run, _______________ regardless of the level of production.
fixed costs; do not change,
The __________________ in an AD/AS diagram is most relevant to Keynes's Law.
flat portion of the AS curve
The circular flow diagram of economic activity is a model of the:
flow of goods, services, and payments between households and firms.
If a Central Bank decides it needs to decrease both the aggregate demand and the money supply, then it will:
follow tight monetary policy.
When a Central Bank makes a decision that will cause an increase in both the money supply and aggregate demand, it is:
following a loose monetary policy.
When the Central Bank acts in a way that causes the money supply to increase while aggregate demand remains unchanged, it is:
following an expansionary monetary policy.
The _____________ holds that a rise in price level will make domestic goods relatively more expensive, ____________ exports and _______________ imports.
foreign price effect; discouraging; encouraging
The development of a nationwide computerized job bank listing of all job openings would be most likely to reduce:
frictional unemployment.
A welder who quits his job and moves from Pittsburgh to Madison to try to get a better welding job is said to be:
frictionally unemployed.
Some recent economic research has suggested that African countries' economic growth may have been limited by
geography and climate
In the ______________, households receive goods and services and pay firms for them.
goods and services market
The effects of inflation are seen in:
goods, services, wages and income levels
In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made.
government
Which of the following best describes a fiscal policy tool?
government spending
In an AD/AS diagram, an increase in structural unemployment will:
have no effect on AS or AD.
In the long run, the most important source of increase in a nation's standard of living is a:
high rate of economic growth.
Which of the government policies below is most unlikely to encourage per capita economic growth?
high taxes on companies that spend a lot on capital formation
If the price level of what firms produce is rising across an economy, but the costs of production are constant, then:
higher profits will induce expanded production.
Which of the following would reduce the supply of microcomputers?
higher wage rates for the workers that assemble the computers
A perfectly elastic supply curve is:
horizontal.
Economic profit can be derived from calculating total revenues minus all of the firm's costs,
including its opportunity costs.
When economists attempt to predict the spending patterns of U.S. households, they will typically view the _____________________ as a primary determining factor that influences the individual consumption choices that each will make.
income level of each household
If a country's GDP decreases, but its debt increases during that year, then the country's debt to GDP ratio for the year will _______________ in proportion to the magnitude of the changes.
increase
Inflation implies that the level of all prices
increase
Refer to Figure 3-3. A change from Point A to Point D represents a(n):
increase in supply.
If the demand curve is perfectly elastic, then an increase in supply will:
increase the quantity exchanged but result in no change in the price.
If the economy is at equilibrium as shown in the diagram above, then a contractionary monetary policy will
increase unemployment, but have little effect on inflation.
In microeconomics, the term _____________________ is synonymous with economies of scale.
increasing returns to scale
A payment is said to be ________________ if it is automatically adjusted for inflation.
indexed
When a price, wage, or interest rate is adjusted automatically with inflation, it is said to be
indexed
The demand schedule for a good:
indicates the quantities that will be purchased at alternative market prices.
Demand is said to be _____________ when the quantity demanded is not very responsive to changes in price.
inelastic
The evidence on the supply curve of financial capital is controversial, but at least in the short run, the elasticity of savings with respect to the interest rate appears to be __________.
inelastic
When economists are sketching examples of demand and supply, it is common to sketch a demand or supply curve that is close to vertical, and then to refer to that curve as _________.
inelastic
Taxes on goods with __________ demand curves will tend to raise more tax revenue for the government than taxes on goods with __________ demand curves.
inelastic; elastic
A demand or supply curve with ______________ would be horizontal in appearance.
infinite elasticity
The percentage change in the price level from one time period to the next, whether the price level is measured in terms of money or as a price index, will be the _____________.
inflation rate
__________ implies that pressure for price increases reaches across _______________markets, not just one.
inflation; most
The ____________ describes a situation where sufficient credit is available, but the economy experiences a reduction in consumption and investment.
interest rate effect
Which of the following best describes a monetary policy tool?
interest rates
As the aggregate price level in an economy rises,
interest rates increase
Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization?
international trade
The _________________ budget constraint shows the tradeoff between present and future consumption.
intertemporal choice
Investment in human capital:
is characterized by both b) and c). B. can be acquired through on-the-job training. C. is an important source of economic growth.
A nation can achieve higher economic growth if:
it devotes more resources to research and development.
Scarcity implies that:
it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.
When banks hold excess reserves because they don't see good lending opportunities:
it negatively affects expansionary monetary policy.
Why is productivity growth considered to be the most important factor in the AD/AS model?
it shifts the AS curve in the long-term
In the ____________, households work and receive payment from firms.
labor market
Economists refer to the relationship that a higher price leads to a lower quantity demanded as the _____________.
law of demand
Economists refer to the relationship that a higher price leads to a lower quantity demanded as the _____________________.
law of demand
In the ________, the perfectly competitive firm will react to losses by __________________________ .
long run; reducing production or shutting down
A 10 percent increase in income leads to a 15% decrease in the quantity of macaroni and cheese demanded but no change in the price of macaroni and cheese. From this information, we can assume:
macaroni is an inferior good and price elasticity of supply is infinite.
The unemployment rate may underestimate the true extent of unemployment if:
many people become discouraged and cease looking for work.
In economics, the term "shutdown point" refers to the point where the
marginal cost curve crosses the average variable cost curve.
The term _________________ refers to the additional utility provided by one additional unit of consumption.
marginal utility
In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers.
market-oriented economy
If mollusk shells were accepted as a method of payment in modern-day markets, what economic role would they play in the financial system?
medium of exchange
In modern economies, credit cards are a _________________ because of their wide acceptance as a method of payment for both goods and services.
medium of exchange
In 2010, Tara used $50,000.00 from funds she had invested in certificates of deposit as a down payment to buy a house. What function did this portion of her investments serve when she made the down payment?
medium of exchange.
Which of the following is omitted in a barter transaction?
money
In good economic times, a surge in lending exaggerates the episode of economic growth. Which of the following adaptations of monetary policy can moderate these exaggerated effects?
monitoring asset prices and leverage
The largest cattle rancher in a given region will be unable to have a __________ when sufficient numbers of smaller cattle ranchers provide sources of competition.
monopoly
I'maGoldMiner has benefited from a record rise in gold prices in the global commodities market. While the price of its output is highly influenced by market speculation, if it wants to increase production to take advantage of the current profit-maximizing opportunity, the company
must accept market price for its physical capital inputs.
A ___________ exists when the quantity demanded in the market is less than the quantity at the bottom of the long-run average cost curve.
natural monopoly
Deregulation occurs when a government eliminates or scales back rules relating to all but one of the following. Which one is it?
natural monopoly
The demand curve for a typical good has a(n):
negative slope because some consumers switch to other goods as the price rises.
Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be.
normative statement
If the economy is producing less than its potential GDP, _____________________ will show a larger deficit than the actual budget.
the standardized employment budget
If new manufacturers enter the computer industry, then (ceteris paribus):
the supply curve shifts to the right.
A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of:
the supply curve.
If cola and iced tea are good substitutes for consumers, then it is likely that:
their cross price elasticities are greater than zero.
The market in which loans are bought and sold is called the:
secondary loan market.
In the _________, the perfectly competitive firm will seek out ________________________ .
short run; the quantity of output where profits are highest
Economic production has fallen to less than full potential due to inadequate incentives for firms to produce. The duration of this economic condition will likely be:
short-term
The time lag for monetary policy is typically ________________ the time lag for fiscal policy.
shorter than
If a firm's revenues do not cover its average variable costs, then that firm has reached its _________________ .
shutdown point
When a country's economy is producing at a level that exceeds its potential GDP, the standardized employment budget will show a __________________ than the actual budget.
smaller deficit
Antonio tries to limit his risk of overexposure to debt by using a ________________ to store a certain amount of value that he then uses to make purchases.
smart card
is the sum of consumer surplus and producer surplus.
social surplus
Why would a profit-seeking firm need to tailor its decisions about the quantity of labor inputs that it purchases?
to produce the profit-maximizing quantity of output at the lowest possible average cost
The money multiplier is equal to the _______________ in the economy divided by the original _________________.
total money; quantity of money
Aggregate supply (AS) denotes the relationship between the __________________ that firms choose to produce and sell and the _________________, holding the price of inputs fixed.
total quantity; price level for output
The ____________________ in an AD/AS diagram is most relevant to Say's Law.
steep portion of the AS curve
Lance paid $175,000 for his house in 2003 and sold it for $325,000 in 2006. What function did the house serve during the time Lance owned it?
store of value
A 25 percent decrease in the price of breakfast cereal leads to a 20 percent increase in the quantity of cereal demanded. As a result:
total revenue will decrease.
In the business world, a __________ is recognized as a legally acceptable way for any business to keep knowledge of its particular methods of production from being known by competing firms.
trade secret
If Keynes' law applies during economic contractions and Say's law applies during economic expansion, how will the three goals of macroeconomics be affected?
trade-offs and connections may differ in the short run and the long run
Gomer loses his job as a road construction worker and cannot find another position with equivalent pay and benefits. As a result, he is still checking the want ads and reporting to the unemployment office on a weekly basis. He is considered to be:
underemployed.
If macroeconomics looks at the economy as a whole, it focuses on which of the following?
unemployed people
The unemployment rate measures:
unemployed workers as a percentage of the labor force.
When increasing oil prices cause aggregate supply to shift to the left, then:
unemployment and inflation increase.
Potential GDP in the U.S. will be unaffected by
unemployment rate
Frictional unemployment is:
unemployment that is due to normal turnover in the labor market.
In macroeconomics, a _______________ describes the common way in which market values are measured in an economy.
unit of account
According to the quantity theory, if constant growth in the money supply is combined with fluctuating velocity, which of the following is most likely to result?
unpredictable rises and falls in nominal GDP
But nearly all supply curves share a basic similarity: they slope ________________.
up from left to right
When inflation begins to climb to unacceptable levels in the economy, the government should:
use contractionary fiscal policy to shift aggregate demand to the right.
In microeconomic terms, the ability of a good or a service to satisfy wants is called:
utility.
Say's Law argues that a given ____________________ must create an equivalent ________________________ somewhere else in the economy.
value of supply; value of demand
In economics, the demand for a good refers to the amount of the good that people:
will buy at various prices.
Approximately what portion of annual consumption is typically spent by American households on shelter?
one-third
Jay and Jen are married with two children. They are preparing a household budget for the coming year. Based on statistical information for American households, approximately what portion of this family's annual consumption will most likely be budgeted for food and vehicle expenses?
one-third
While one occasionally sees references to inflation over short time periods, the term typically implies a(n)_____________ in prices.
ongoing rise
Which of the following is a traditional tool used by the Fed during recessions?
open market operations
Attending college is a case where the ________________ exceeds the monetary cost.
opportunity cost
A university student who is enrolled in school fulltime and not seeking employment is considered:
out of the labor force.
Reginald looked for work for six months but could not find a job to his liking. He now spends his time at the beach. For purposes of employment he is considered:
out of the labor force.
The quantitative easing policies adopted by the Federal Reserve are usually thought of as:
temporary emergency measures.
Following the assumption that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency?
output will be too small and its price too high.
The most commonly cited measure of inflation in the United States is:
the Consumer Price Index (CPI).
The effect of substitution bias is that the rise in the price of a fixed basket of goods over time tends to ___________________ the rise in a consumer's true cost of living, because it doesn't take into account that the person can substitute between goods according to changes in their relative prices.
overstate
In uncertain economic times, ____________________ serves as a way of preserving economic value that can be spent or consumed in the future.
owning gold
Government ______________ regulations specify that inventors will maintain exclusive legal rights to their respective inventions for ______________ .
patent; a limited time
Why do banks use a T-account?
the T-account separates assets on the left from liabilities on the right
Inflation can be calculated in terms of how the overall cost of ___________________ changes over time.
the basket of goods
Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is:
the benefit to his grades from studying for an hour
The opportunity cost of attending university is likely to include all except which of the following?
the cost of haircuts received during the school term
If Brent uses his credit card to purchase a new television, then the money to pay the retailer is taken from:
the credit card company's M1 funds.
Philosophers draw a distinction between ___________________, which describe the world as it is, and normative statements, which describe how the world should be.
positive statements
The term "full employment GDP" is synonymous with which of the following?
potential GDP
What term is used to describe the maximum quantity that an economy can produce, in the context of its existing inputs, market and legal institutions?
potential GDP
The maximum quantity that an economy can produce, given its existing levels of labor, physical capital, technology, and institutions, is called:
potential GDP.
The use of sharp, temporary price cuts as a form of ________ would enable traditional US automakers to discourage new competition from smaller electric car manufacturers.
predatory pricing
When a business adopts a strategy of reducing and/or discontinuing production in response to a sustained pattern of losses, it is
preparing to exit operations.
If a perfectly competitive firm is a price taker, then
pressure from competing firms will force acceptance of the prevailing market price.
The term _________________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product.
price taker
The downward slope of the demand curve again illustrates the pattern that as _____________ rises, _________________ decreases.
price, quantity demanded
A monopolist is able to maximize its profits by
producing output where MR = MC and charging a price along the demand curve.
A __________________________ policy will cause a greater share of income to be collected from those with high incomes than from those with lower incomes.
progressive tax
When a firm makes plans for investments in physical capital, it compares the _______________ on these investments with ______________________ .
projected rates of return; the cost of financial capital to the firm
To achieve a high standard of living, a nation should:
promote economic growth.
A ________________________________ is calculated as a flat percentage of income earned, regardless of level of income.
proportional tax
If government tax policy requires Bill to pay $20,000 in taxes on annual income of $200,000 and Paul to pay $10,000 in tax on annual income of $100,000, then the tax policy is:
proportional.
Idaho farmers can sell as large a quantity of their potato crop as they wish,
provided each is willing to accept the prevailing market price.
Which of the following is described as an innovative and nontraditional method used by the Federal Reserve to expand the quantity of money and credit during the recent U.S. recession?
quantitative easing
A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and ____________, shown on the horizontal axis.
quantity
A demand curve shows the relationship between price and _________________ on a graph.
quantity demanded
_____________ refers to the total number of units that are purchased at that price.
quantity demanded
When economists talk about supply, they are referring to a relationship between price received for each unit sold and the ________________.
quantity supplied
A central bank that desires to reduce the quantity of money in the economy can:
raise the reserve requirement.
The __________________ is the nominal interest rate minus the rate of inflation.
real interest rate
If South Dakota's governor reports a budget surplus in 2011, that state government likely:
received more in taxes than it spent in that year.
If the economy is at equilibrium as shown in the diagram above, then an expansionary monetary policy will:
reduce unemployment, but have little effect on inflation.
When the share of individual income tax collected by the government from people with higher incomes is smaller than the share of tax collected from people with lower incomes, then the tax is
regressive
When the share of individual income tax collected by the government from people with higher incomes is smaller than the share of tax collected from people with lower incomes, then the tax is ____________________.
regressive
Aggregate supply curves are ________________________ for low levels of output, and ____________________________ for high levels of output.
relatively flat; relatively steep
Which of the following terms is used to describe the proportion of deposits that banks are legally required to deposit with the central bank?
reserve requirements
The price elasticity of demand measures the:
responsiveness of quantity demanded to a change in price.
In a discussion of economics, which of the following would exert the most influence on an individual firm's decision to hire workers?
the macroeconomy
When the central bank decides it will sell bonds using open market operations:
the money supply decreases.
The central bank requires Southern to hold 10% of deposits as reserves. Southern Bank's policy prohibits it from holding excess reserves. If the central bank sells $25 million in bonds to Southern Bank which of the following will result?
the money supply in the economy decreases
When the central bank lowers the reserve requirement on deposits:
the money supply increases and interest rates decrease.
If a nation's labor force receives a significant influx of young workers:
the natural rate of unemployment is likely to increase.
If there is a deadweight loss,
the net value to society is smaller than it could be.
Price elasticity of demand is defined as:
the percentage change in quantity demanded divided by the percentage change in price.
As depicted in _________________________________, it is necessary to give up some of one good to gain more of the other good.
the production possibilities frontier
In order to determine the average variable cost, the firm's variable costs are divided by _______________________.
the quantity of output
The theoretical model of the intertemporal budget constraint for the U.S. economy as a whole suggests that the most common pattern seems to be that:
the quantity of savings doesn't adjust much to changes in the rate of return.
If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:
Goods X and Y are complement goods.
Does a price floor attempt to make a price higher or lower?
Higher
________________ serves society in three functions: medium of exchange, unit of account, and store of value.
Money
________________________ arises where many firms are competing in a market to sell similar but differentiated products.
Monopolistic competition
_______________________ are economists who generally emphasize the importance of aggregate supply in determining the size of the macroeconomy over the _____________.
Neoclassical economists; long run
______________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling.
Price floors
_____________ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price.
Total revenue
By June, 2010, the U.S. government owed $13.6 trillion dollars ________________ that, over time, has remained unpaid.
in accumulated government debt
Economists are able to determine total utility by:
summing up the marginal utilities of each unit consumed.
When Anders took out his first two-year membership with Maxima Gym in 2004, the fee was $540.00. He renewed his membership three times; in 2006 for $580.00, in 2008, for $600.00, and again in 2010, for $630.00. What is the overall rate of inflation for Anders' gym membership?
16.66%
In the US economy, nearly half of all the workers employed by private firms work at
18,000 large firms that employ more than 500 workers.
If accounting profits for a firm are 20% of output, and the opportunity cost of financial capital is 8% of output, then what do the firm's economic profits equal?
12% of output
Suppose that Mimi plays golf 5 times per month when the price is $40 and 4 times per month when the price is $50. What is the price elasticity of Mimi's demand curve?
1.0
During the deep recessions of the early 1980s and of 2007-2009, unemployment reached roughly
10%
In 2009, the U.S. government spent $1.4 trillion more than it collected in taxes. This deficit was about:
10% of the size of the U.S. GDP in 2009. Submit
If GDP is 3600 and the money supply is 300, what is the velocity?
12
During the last two centuries, the average rate of growth of GDP per capita in the leading industrialized countries has averaged about _________ per year.
2%
Refer to Figure 5-1. Figure 5-1 With reference to Graph A, at a price of $10, total revenue equals: A. $1,000. B. $500. C. $400. D. $200.
C. $400.
Given the data provided in the table below, what will the marginal revenue equal for production at quantity (Q) level 4? A. $20.00 B. $15.00 C. $5.00 D. $1.00
C. $5.00
Given the data provided in the table below, the total revenue (TR) for production at quantity (Q) level 4 equals A. zero B. $1.00 C. $15.00 D. $20.00
D. $20.00
_______________________ happens when the economy is producing at its potential and unemployment is at the natural rate of unemployment.
Full employment GDP
An economics professor is discussing a measure of inflation over time based on a basket of goods comprised of all the components of GDP. Which measure is it?
GDP Deflator
A nation's prosperity is sometimes measured in terms of
GDP per capita
An economy's rate of productivity growth is closely linked to the growth rate of its ______________, although the two aren't identical.
GDP per capita
When discussing economic growth, it is often useful to focus on ____________, to avoid studying changes in the size of GDP that represent only having more people in the economy, and focus on those increases in GDP which represent an actual rise in the standard of living on a per person basis.
GDP per capita
Some prominent members of the slow-economic growth country club include a high-income country like
Germany
In an AD/AS model, the point where the economy has excess capacity is called the:
Keynesian zone of the AS curve
______________________ refers to the additional revenue gained from selling one more unit.
Marginal revenue
The marginal benefit of a slice of pizza is the:
Maximum amount that a consumer is willing to pay for the slice.
Refer to Figure 2-1. Figure 2-1 The most inefficient point depicted is:
Point G
Referring to the above diagram, which of the following is a true statement?
There is insufficient aggregate demand to reach full employment.
What do goods like gasoline, tobacco, and alcohol typically share in common?
They are all subject to government excise taxes.
Increased investment alone will guarantee economic growth.
This is a false statement, because economic growth hinges on the quality and type of investment as well as the human capital and improvements in technology.
Which of the following would be classified in the M1 category of the money supply?
demand deposits
With respect to measuring the money supply, which of the following terms describes a checking account?
demand deposits
If loans become far less available, then sectors of the economy that ______________ like business investment, home construction, and car manufacturing can be dealt a crushing blow.
depend on borrowed money
Which of the following is most unlikely to present a barrier to entry into a market?
deregulation
In economics, labor demand is synonymous with
derived demand.
When prices of outputs in an economy become sufficiently high causing production to exceed potential GDP, the resulting:
hyper-intense production will be unsustainable in the long run.
In the early 1990's extremely high inflation rates of 2500% were common in Russia. During that time, we can say that as a result of those inflation rates, Russia was experiencing
hyperinflation
A perfectly competitive industry is a
hypothetical extreme.
As the aggregate price level in an economy decreases,
imports decrease.
Which of the following can be thought of as an adjustment for the risks involved with respect to the cost of a firm acquiring financial capital?
imposition of hurdle rates of interest
If the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium price to:
rise and the equilibrium quantity to stay the same.
One of the reasons that a rise in the price of a fixed basket of goods over time tends to overstate the rise in a consumer's true cost of living, is:
substitution bias
