Econ 201 - Practice Final
If the reserve requirement is 1.25%, the potential money multiplier is...
80
The proposition that, private parties with clearly defined property rights and low transaction costs can resolve externalities problems on their own is called the...
Coase Theorem
If an advance in technology shifts the long-run aggregate supply curve out...
prices drop and output increases
A(n) ______ is excludable and rival in consumption
private good
The ________ is the sum of past ___________.
public debt; budget deficits
When banks hold excess reserves, they...
reduce the actual money multiplier
A contractionary fiscal policy is a policy that...
reduces aggregate demand by decreasing money supply
Graphically, expansionary fiscal policy is displayed by a shift to the ______ in aggregate ______
right; demand
Who recognized the need to develop tools to analyze the macro economy as a whole?
John Maynard Keynes
Bluefin tuna travel in schools throughout the world's oceans. Fishing boats from many nations harvest Bluefin tuna as the schools migrate through their national waters. The schools of Bluefin tuna are best described as...
a common resource
A decrease in aggregate demand will generate _____ in real GDP and _______ in the price level in the short run.
a decrease; a decrease
Gary's Gas and Frank's Fuel are the only two provides of gasoline in their town. Gary and Frank decide to form a cartel. Later, Gary summarizes his pricing strategy as, "I'll cheat on the cartel because regardless of what Frank does, cheating gives me the best payoff." This is an example of...
a dominant strategy
Commodity money is...
a good used as a medium of exchange that has other uses
Conditions that keep new firms out of a monopoly market are...
barriers to entry
Real GDP is nominal GDP adjusted for...
changes in prices
_________ unemployment is the result of changes in the business cycle.
cyclical
What approach to federal finance would you agree with if you wanted the federal government to restrict spending or raise taxes during booms and use surpluses from the booms to offset deficits during recessions.
cyclically balanced budget
When a monopolist practices price discrimination, compared to a single-price monopolist, consumer surplus will...
decrease
In February 2010, the Central Bank of Brazil raised reserve requirements. By raising reserve requirements, Brazil was attempting to...
decrease its money supply
A decrease in supply, with no change in demand, will lead to a(n) ______ in equilibrium quantity and a(n) _______ in equilibrium price
decrease; increase
Ashley Bakery expects its marginal cost curve will eventually slope upward, because as with most production processes, baking has...
diminishing marginal returns
If the rate of inflation decreases from 5% to 3%, the economy is undergoing...
disinflation
In the United States, people are considered UNEMPLOYED if and when they...
do not have a job but are available for work and have ben actively seeking work
Tom is living with his parents. He looks at the help wanted ads but has not replied to any in the past four weeks. Tom is...
do not in the labor force
A price-discriminating firm will adjust prices so that customers with more _____ demand pay _____ than (as) customers with _______ elastic demand.
elastic; less; less
If a steel manufacturer does NOT bear the entire cost of the sulfur dioxide it emits, it will...
emit a higher level of sulfur dioxide than is socially efficient
The short-run aggregate supply curve is positively sloped because...
higher prices lead to higher profit and higher output
Which of the following groups benefits from an unanticipated rise in the inflation rate?
homeowners with fixed-rate mortgages
When home values collapsed in the period that began in 2008, it reduced many Americans...
household wealth
If the marginal propensity to consume is 0.9, by how much will $100 of government spending increase GDP?
$1,000
Austin's total fixed cost is $3,600 a month t his cupcake bakery. Austin employs 20 workers and pays each worker $600 a month. If labor is his only variable cost, what is Austin's total cost?
$15,600
The nation of Workovia has a population rate of 15 million, of whom 10 million are in the labor force and 9 million are working. Workovia's unemployment rate is...
10%
If tortilla chips are a normal good, what happens to equilibrium price and quantity when there is an increase in income?
Equilibrium price increases and equilibrium quantity increases
Which of the following best represents the equation for GDP?
GDP = C + I + G + X - IM
Who is considered to be the father of macroeconomics?
John Maynard Keynes
According to the short-run aggregate supply curve, when the _____ rises, the quantity of ______ rises.
aggregate price level; aggregate output supplied
During the 1970s, some countries stopped oil sales to the United States. As petroleum prices rose...
aggregate supply fell and the aggregate price level rose
The Great Depression was primarily the result of...
an increase in aggregate supply
A major reason for the end of the Great Depression was an increase in government spending...
associated with the war effort
Which of the following assets is the MOST liquid? stocks, currency, money market mutual funds, or checkable bank accounts
currency
M1 includes...
currency in circulation plus checkable deposits plus travelers checks only
Which of the following is an example of contractionary fiscal policy?
cutting spending on the military
De Beers became a monopoly by...
establishing control over diamond mines
Other things equal, an increase in the interest rate leads to a...
fall in investment spending and a rise in comsumer spending
For most restaurants, the average total cost curve _______ at _______ levels of output, then _________ at __________ levels.
falls; low; rises; high
The multiplier is calculated by using the formula 1 divided by the marginal propensity to save.
false
The idea that banks hold only a portion of deposits and lend the rest out is called the...
fractional reserve banking system
The tendency of people to avoid paying for a good's benefits when the benefits can be obtained for free is called the ______ problem.
free-rider
Which of the following is a basic goal of the Federal Reserve System?
full employment
An analytical approach through which strategic choices can be assessed is called...
game theory
An economy is said to have a comparative advantage if it...
has the lowest cost for producing a particular good
The short run in macroeconomic analysis is a period...
in which ma production costs can be taken as fixed
Suppose that the economy is a recessionary gap, the policy makers in the government can...
increase the money supply, lower the interest rate, increase investment and consumption spending and thus increase aggregate demand
Outputs definitely increases if aggregate demand ______ and aggregate supply ______.
increases; increases
Using demand-side fiscal policy to stimulate aggregate demand when the economy is at full employment will primarily result in...
inflation
Expansionary monetary policy increases all of the following EXCEPT...
interest rates
A negative externality...
is an uncompensated cost imposed by an individual or firm on others
Marginal revenue for a monopolist is...
less than price
At a monopoly's profit-maximizing level of output...
marginal revenue equals marginal cost
The functions of money are...
medium of exchange, store of value, and factor of production
The best example of a public good is...
national defense
Most electric, gas, and water companies are examples of...
natural monopolies
To change the money supply, the Fed most frequently uses...
open-market operations
The level of output that the economy would produce if all prices, including nominal wages, were fully flexible is called...
potential output
The purpose of antitrust policy is to...
prevent the exercise of monopoly power
Increased consumer confidence will shift the aggregate demand curve to the _____ and _____ output demanded.
right; increase
When marginal cost is ABOVE average variable cost, average variable cost must be...
rising
A breakthough in solar energy research that halves the cost of electricity will....
shift the aggregate supply curve to the right
If a product becomes obsolete and the workers who produced that product will need additional training to find new jobs, then they are experiencing...
structural unemployment
When the economy is operating at the natural rate of unemployment...
structural unemployment is zero
The marginal product of labor is...
the change in output that occurs when capital increases by one unit
Suppose the Federal Reserve were to engage in open-market operations by buying $100 million of U.S. Treasury Bills. What would be the end result of such an action?
the money supply would increase by more than $100 million
The long-run aggregate supply curve is vertical because in the long run...
the price of labor is flexible, while the price of physical capital is fixed
A shift in the demand curve for thin-crust pizza would NOT be caused by a change in...
the price of thin-crust pizza
A fixed input is one that....
whose quantity cannot be changed in the short run
If deflation occurs and your income is fixed, your real income...
will go up
Decreasing funding to explore space....
will shift the aggregate demand curve to the left
In Market X, the external benefit of consumption is $5. In Market Y, the external cost of consumption is $10. Efficiency in both markets could be achieved by...
taking Market Y and subsidizing Market X
Currently banks are issuing personal loans at an interest rate of 9%. If expected inflation is supposed to be 3%, then...
the real interest rate is 6% and the nominal interest rate is 9%
In 1942, the aggregate price level was still lower than it was in 1929, yet real GDP was much higher. Which of the following is a good explanation of what happened?
the short-run aggregate supply curve shifted to the right over time
The sum of fixed and variable cost is ______ cost.
total
For Heidi, the marginal cost of producing one additional photograph equals the change in ___________ divided by the change in the _________ of photographs.
total cost; number
An input whose quantity can be changed in the short run is a(n) __________ input.
variable