ECON 202 Final Exam
(CH. 13) If there are multiplier effects, then an increase in government purchases of $200 billion will shift the AD curve to the right by:
more than $200 billion
(Exam 2) Suppose that the actual unemployment rate is 8% and the natural rate of unemployment is 5.5%. Which of the following is correct?
more than one of the above is correct
(Exam 2) Assume that the MPC is 0.75, actual GDP is $14 trillion and potential GDP is $17 trillion. Policymakers want to use tax cuts to stimulate the economy and get GDP back to its potential level.
$1 trillion
(CH. 13) One reason the government enacts fiscal policy instead of waiting for the economy to correct itself is the automatic adjustment:
can take a very long time
(Exam 1) Your grandparents tell you that in 1965 they paid $0.50 for a cheeseburger. The price index in 1965 was 40. Assume that the price index today is 260. What is the price (approximately) your grandparents paid expressed in today's dollars?
$3.25
(Exam 1) This table shows the price-level adjustment as compared to the United States. A negative sign (as with Australia) means that prices in that country are higher than in the US. A positive sign (as with China and Mexico) means that prices in that country are lower than in the US. According to the information given in the table shown, if someone makes $40,000 in the US, what would her salary need to be in China to maintain the same standard of living?
$30,000
(Exam 1) Bananaland produces only bananas and sunscreen and the quantities and prices for 2010 and 2011 are given in the table above. Nominal GDP in 2011 is equal to
$300
(Exam 2) If the MPC is 0.8, and the government spends an additional $100, the overall effect on GDP will be:
$500
(Exam 1) Bananaland produces only bananas and sunscreen and the quantities and prices for 2010 and 2011 are given in the table above. The base year is 2011. The growth rate of Real GDP from 2010 to 2011 is approximately equal to (choose the closest answer):
+58%
(Exam 1) If 2010 is the base year in the table shown above, what is the price index for the year 2011?
150
(Exam 2) If real GDP per capita for Schruteland grew from $5 trillion to $10 trillion between 1980 and 2015, then which of the following was the approximate annual growth rate?
2%
(Exam 2) Using the growth accounting equation, if the growth rate of output is 5%, the growth rate of labor is 3% and the growth rate of capital is 2% then if a= 0.75 then growth from technology can be estimated to be:
2.75%
(Exam 1) The table above has information about the CPI and nominal wage rate for the country of Syldavia for the years 2000-2002. the reference base year is 2000. In which year was the real wage rate the lowest?
2002
(Exam 1) A firm produces $10 million worth of soccer balls in 2016. It sells $8 million of these balls in 2016, and the other $2 million of balls in 2017. How is this accounted for in the 2016 GDP statistics?
2016 Consumption increases by $8 million, Investment increases by $2 million, and thus GDP increases by $10 million.
(Exam 2) The president of a poor country has announced that he will implement the following measures which he claims are designed to increase long-run growth: 3) Take control of the nation's newspapers and news media sources to ensure that they no longer criticize the government.
3
(Exam 2) In a given year the nominal GDP growth rate is 10% with an inflation rate of 6% and population growth rate of 1%. Thus, the real growth rate of GDP per capita is:
3%
(Exam 2) In the table above, the unemployment rate is approximately
4.8%
(Exam 1) Considering the data in the table shown above and 2010 as the base year, what is the inflation rate between years 2010 and 2011?
50 percent
(Exam 2) In the table above, the labor force participation rate is approximately
52.5%
(Exam 2) If the number of unemployed workers is 14 million, the number in the working age population is 200 million, and the unemployment rate is 10% what is the labor force participation rate?
70%
(Exam 1) Refer to the above figure. Moving from point A to point B indicates
A decrease in quantity supplied
(CH. 13) Assuming the economy is represented by the graph shown, if the government were to enact a partially successful expansionary fiscal policy, it would be most likely to move from equilibrium:
A to B (AD1 to AD2; AD shifts right)
(Exam 2) Consider the mythical economy of "Nelsonville". Suppose that, in 2017, real GDP was $14 trillion and the price level was 150. In 2018, real GDP $15 trillion and the price level was 160. What must have happened in Nelsonville? (Assume that Nelsonville is always in a short-run equilibrium).
AD must have increased
(CH. 13) Keynesian policy: A) refers to policies that actively shift aggregate demand in an effort to reach full employment. B) promotes spending more and taxing less to boost economic activity to potential GDP. C) refers to fiscal policy
All of these
(Exam 1) Which of the following correctly describes how price adjustments eliminate a shortage?
As the price rises, the quantity demanded decreases while the quantity supplied increases
(Exam 1) Suppose that in 1966, 12 million cars were purchased at $15,000 each, while in 1977, 14 million cars were purchased at $12,000 each. What might have caused this change?
Automobile manufacturing technology increased
(Exam 1) Refer to Figure H. Assume that the graphs in this figure represent the demand and supply curves for shirts. Assume that producers can use basically the same inputs to produce shirts and pants. Which panel best describes what happens in the shirt market when there is an increase in demand for pants (a production substitute for shirts)?
B (demand stays the same, supply shifts to the left)
(Exam 2) Which of the following best describes the subject of the Freakeconomics podcast that you were required to listen to for this exam?
Benefit-cost analyses of various projects which are being considered as possibilities for the United Nations new Development Goals.
(Exam 1) The table above has information about the CPI and nominal wage rate for the country of Syldavia for the years 2000-2002. Which of the following statements id TRUE?
Between 2001 and 2002, nominal wage growth did not keep up with inflation, thus real wages fell.
(Exam 2) In class we discussed a proposal by economist Greg Mankiw involving increasing the US gasoline tax by $1 per gallon. Given our discussion, what is the potential macroeconomic benefit of such a proposal?
By reducing US dependence on oil, the US SRAS curve will shift less dramatically to the left when oil prices rise in the future.
(Exam 1) Which panel of figure 3.4 represents the changes in the market for parking spaces when the student population increases on a college campus and one parking lot has been destroyed to build a new building?
C (Demand shifts to the right, supply shifts to the left)
(Exam 2) The short run aggregate supply curve ____ because as prices of ____ rise, the prices of ____ rise more slowly.
has positive slope; final goods and services; inputs
(Exam 1) The substitution bias in the consumer price index refers to the idea that consumers ____ the quantity of products they buy in response to price, and the CPI does not reflect this and thus ____ the rate of inflation.
change; under-estimates
(Exam 1) Which of the following is an example of a normative statement?
Current US tax rates are too high
(Exam 2) Refer to Figure 12-1. Suppose the economy is at point A. if there is an increase in consumer confidence, then the economy will move to point ____ in the short run, and point ____ in the long run. (Assume that there is no policy pursued by the government).
D (AD shift to right, SRAS stays); C (AD stays, SRAS shifts to left back to LRAS)
(Exam 2) Refer to Figure 10-2. Suppose that an economy begins at point B. If managers of business firms discover new managerial techniques that make their production facilities more efficient, the economy will likely move to point
D (movement up the same production curve)
(Exam 1) The table above gives the production and prices for a small nation (Bananaland) the produces only bananas and sunscreen. The base year is 2011. Even without doing any calculations, we know that real GDP is higher in 2011 than in 2010 because the total quantity of each output (bananas and sunscreen) is higher in 2011 than in 2010.
True
(Exam 2) If a country's income is rapidly increasing, it must:
have a high level of growth
(Exam 2) Which of the following causes the unemployment rate to understate the true extent of joblessness?
Discouraged workers are not counted as unemployed
(Exam 1) Which of the following is the best example of an activity depicted by Arrow J in the Circular Flow Diagram above?
Downward Dog (a local bar) pays a bartender who works there
(Exam 2) Refer to Figure 10-2. Which of the following shows the simultaneous effect of technological growth and an increase in the capital stock (all as equal)?
E to C (production function 1 to up and over to production function 2)
(Exam 1) Which of the following statements concerning economic models is FALSE?
Economic models are based on pure fact and no assumptions
(Exam 1) Which of the following would lead GDP to overstate economic welfare?
Electric utilities that switch to burning coal because of higher natural gas prices and thereby create more acid rain pollution.
(Exam 1) The three ways of looking at GDP are the:
Expenditure approach, value-added approach, and income approach
(Exam 1) Carl's Computers buys $400 of computer parts and uses them to produce computers, which are sold to Sam's Installation service for $1000. Sam's Installation service sells the computers to consumers for $1200 each. Which of the following statements is TRUE?
More than one of the above is correct
(Exam 1) Which of the following correctly describes the relationship between the price level and the inflation rate?
Negative rates of inflation imply that prices are falling
(Exam 1) Which of the following could be an example of a question that would be studied in microeconomics (as opposed to macroeconomics)?
How will the legislation of marijuana in Colorado affect the market for cigarettes?
(Exam 1) Which of the following statements concerning "equity" over "efficiency" is true?
It's usually the case that actions which increase equity cause decreases in efficiency.
(Exam 2) Which of the following has a tendency to raise the unemployment rate?
more firms begin offering efficiency wages
(Exam 1) Which of the following statements is consistent with a decrease in supply?
Prices of raw material inputs have increased
(Exam 1) Which of the following is counted as "investment" in the GDP statistics?
Purchase of newly-produced house
(CH. 13) The idea that if governments cut taxes but not spending, people will not change their behavior, and expansionary policy will have little expansionary effect is known as:
Ricardian equivalence
(Exam 1) Suppose that you own a house that was built in 1950. You bought the house in 2002 for $200,000. It is estimated that you could sell the house today (in 2012) for $300,000. It is also estimated that if the house were a rental property, the monthly rent would be $2000. How is the value of this house accounted for in this year's (2012) GDP statistics?
The "imputed rent" of $2000 per month is included in this year's GDP calculations
(Exam 2) Refer to Figure 12-1. Suppose the economy is at point B. Which of the following statements is FALSE?
The automatic mechanism will cause the AD curve to shift to the right
(Exam 1) Suppose the base year for CPI is 2010, and the CPI calculated for 2012 was 102. What is the correct interpretation of this number?
The cost of living for a typical consumer is 2% higher in 2012 than it was in 2010.
(Exam 1) Which of the following statements correctly describes a competitive market?
The market price is determined by the interaction of demand and supply.
(Exam 1) You have paid all expenses to travel to your favorite beach for a vacation. You made these payments early in order to receive a discount and all payments are nonrefundable. Unfortunately, a hurricane is likely to crash into the coast during your vacation dates. What should not be considered as you make a decision to take your trip or not?
The money that has already been spent on the trip
(Exam 1) Which of the following could cause nominal GDP to decrease, but real GDP to increase?
The price level falls and the quantity of final goods and services produced rises
(Exam 2) Which of the following statements concerning "knowledge capital" is FALSE?
When one firm uses a piece of knowledge capital, then there is less knowledge capital available for other firms.
(Exam 1) Which of the following examples best describes the Law of Demand?
When the price of bread doubles, John's consumption of bread falls by 50%
(Exam 1) Purchasing Power Parity (PPP) means that:
a dollar ought to be able to buy the same amount of goods in all countries of the world
(CH. 13) The process of deciding on and passing fiscal policy legislation creates:
a formulation lag
(Exam 1) If the demand and supply curves for a good increase by the same amount, then in comparison to the initial equilibrium, the new equilibrium will be characterized by:
a higher quantity and the same price
(Exam 1) "late registration will result in an additional $30 fee." This is an example of:
a negative incentive
(Exam 2) Suppose that a very poor country finds itself in a situation where its citizens spend all of their time simply trying to survive by searching for food and shelter. As such, there are not resources available for education and infrastructure. This situation is termed ____.
a poverty trap
(CH. 13) Fiscal policy most directly affects the economy by increasing or decreasing:
aggregate demand
(Exam 2) Which of the following would not increase the natural rate of unemployment?
an increase in cyclical unemployment
(Exam 2) Which of the following will shift aggregate demand to the left, ceteris paribus?
an increase in interest rates
(CH. 13) A lack of understanding regarding the current state of the economy creates:
an information lag
(Exam 2) Which of the following is the best example of something that could lead to long-run economic growth as described by New Growth Theory?
an innovation in inventory management
(Exam 1) In every economic system, choices must be made because resources
are limited, but human desires and wants are unlimited
(Exam 2) Consider the Chinese example (i.e. Xiaogang village) of long-run economic growth that was presented in class. What was China's most important source of long-run economic growth depicted in this example?
assignment of private property rights
(Exam 1) Santiago and Jami decide to attend the same concert when they are each given free tickets to it. We know that
both bear an opportunity cost. That cost may be different between Santiago and Jami, because it depends on what each person is giving up to attend the concert.
(Exam 1) Suppose that video game discs are a normal good. If the income of video game players increases, you predict that in the market for video games
both equilibrium price and quantity will increase
(CH. 13) In 2010, the city of Canfield collected $500,000 in taxes and spent $450,000. In 2010, the city of Canfield had a
budget surplus of $50,000
(Exam 1) When two variables have been observed to have a tendency to occur at the same time, we can say there is ____ but not necessarily ____.
correlation; causation
(Exam 2) Last week, one US dollar could purchase 10 Mexican pesos (the Mexican currency). This week, one US dollar is worth 20 Mexican pesos. This change in the value of the dollar will ____ exports from the US to Mexico, ____ imports from Mexico to the US, and ____ US aggregate demand.
decrease; increase; decrease
(CH. 13) Decreasing government spending ____ the price level and ____ equilibrium real GDP in the short run.
decreases; decreases
(Exam 2) The convergence theory is based partially on the idea of:
decreasing marginal returns
(Exam 1) Refer to Figure 4.12. Assume that the pizza market is initially in equilibrium at Point B. If pizza and hamburgers are consumption substitutes, an increase in the price of hamburgers will cause a movement from Point B on demand curve D2 to:
demand curve D3 (shift to the right)
(Exam 2) Fill in the blanks in the following sentences to correctly explain how cyclical unemployment occurs in an economic recession. The recession causes labor ____ to decrease. Wages ____ which causes the quantity demanded of labor ____ the quantity supplied of labor.
demand; remain stuck at their original level; to be less than
(Exam 1) In the circular flow model, the amount of money spent on goods and services is ____ the amount of incomes generated by the production.
equal to
(CH. 13) Increased government spending is an example of:
expansionary fiscal policy
(Exam 2) Which of the following could be a cause of consumption increasing?
expected future income increases
(Exam 2) When institutions benefit the elite at the expense of the majority of the population, they are referred to as:
extractive economic institutions
(CH. 13) The stimulus strategy behind tax cuts will only be effective if Ricardian equivalence:
fails to hold, and people increase their spending
(Exam 1) Consider the market for tacos. If a new report warns that taco consumption is an unhealthy behavior at the same time that the price of beef (input to taco production) falls, the price of tacos will ____ and the quality of tacos will ____.
fall; rise, fall, or not change
(Exam 2) Ameer just quit his job as shoe salesman and is looking for work as an accountant, which is what his college degree is in. Ameer would be considered:
frictionally unemployed
(Exam 1) Suppose that the prices of imported goods rise dramatically. Ceteris paribus, the inflation rate measured by the CPI will be ____ the inflation rate measured by the GDP deflator.
greater than
(Exam 2) If a natural disaster were to cause a negative long-run supply shock to the economy, once the economy adjusts, the new equilibrium will be at a:
higher price level and lower level of output
(Exam 2) When foreign incomes decrease, then in the domestic economy, ____ will rise, ____ will fall, and net exports will ____.
imports; exports; fall
(Exam 2) When a country continually adds more capital to its economy, productivity will:
increase at a decreasing rate
(CH. 13) Refer to Figure 12-1. Suppose the economy is at point B (to the left of LRAS). Which of the following is a possible fiscal policy stabilization option? (That is, the policy option must be fiscal and must be stabilizing).
increase government spending
(Exam 2) Which of the following would cause an increase in investment spending?
increase in the expected profitability of businesses
(CH. 13) Refer to Figure 12-1. Suppose the economy is at point D (to the right of LRAS). Which of the following is a possible fiscal policy stabilization option? (That is, the policy option must be fiscal and must be stabilizing).
increase taxes
(CH. 13) An increase in government spending causes interest rates to ____, which causes investment spending to ____. This is known as "crowding out".
increase; decrease
(Exam 1) Bananaland produces only bananas and sunscreen and the quantities and prices for 2010 and 2011 are given in the table above. The base year is 2011. Between 2010 and 2011, the price level in Bananaland (choose the closest answer):
increases by 18.8%
(Exam 2) Suppose that an economy moves from good economic times to a recession. As the economy enters the recession, the number of discouraged workers likely ____. This change in the number of discouraged workers, other things equal, causes the unemployment rate to ____.
increases; decrease
(CH. 13) In the short run, expansionary fiscal policy ____ the price level and ____ equilibrium real GDP.
increases; increases
(CH. 13) Contractionary fiscal policy is so named because it:
is aimed at reducing aggregate demand
(Exam 2) The long-run aggregate supply curve represents the level of output possible if the economy:
is operating at potential GDP
(CH. 13) What is a benefit of giving the government freedom to spend more than they receive in taxes and run a deficit?
it allows the government to be flexible if something unexpected happens
(CH. 13) When a government runs a deficit
its debt increases
(Exam 2) The single most important determinant of long-run economic growth is the growth rate of
labor productivity
(CH. 13) The presence of automatic stabilizers means that the federal budget deficit is ____ than it otherwise would be in a recession and ____ than it otherwise would be in an expansion.
larger; smaller
(Exam 2) Policies that make it more difficult to fire an employee are likely to:
lead to greater unemployment
(Exam 2) We would expect, all else equal, that:
lower income taxes would reduce unemployment
(CH. 13) When an economy is in a recession, discretionary fiscal policy would call for ____, and the automatic stabilizers would ____.
lowering tax rates; lower tax revenues
(Exam 2) The amount by which consumption increases when after-tax income increases by $1 is called the:
marginal prosperity to consume
(Exam 1) Gross Domestic Product (GDP) measures the
market value of all final goods and services produced in the economy in a given time period
(Exam 2) Suppose that the economy begins at a long-run equilibrium, but a shock pushes the economy in a recession. Likewise, we observe that the inflation rate is negative during the recession. Which of the following is most likely the shock that caused the recession?
negative demand shock
(Exam 2) The wealth effect explains the:
negative relationship that exists between consumer spending and overall price level
(Exam 1) Now that Social Security payments are indexed, the:
nominal value is adjusted to maintain a constant real value
(Exam 1) The word "final" in the definition of GDP refers to
not counting intermediate goods or services
(Exam 2) Suppose the economy is at short-run equilibrium GDP that lies beyond potential GDP. Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?
prices will increase
(Exam 2) When we speak of long-run economic growth in an economy, we typically focus on the growth rate of which variable?
real GDP per capita
(CH. 13) Government budget deficits are most likely to increase during economic
recessions
(CH. 13) During recessions, government expenditure automatically
rises, because of programs such as unemployment insurance and Medicaid
(CH. 13) The US government generally finances its debt by:
selling US securities
(Exam 2) In class we discussed the problem of long-term unemployment. The worry is that regardless of the original reason for unemployment, if the spell of unemployment goes on for a long time, it can turn into ____ unemployment.
structural
(Exam 2) Don worked as a mechanist all his life, and was recently laid off because his plant closed and the jobs were outsourced to India. He's looking for work, but there doesn't seem to be any machinist jobs in the area anymore. Don would be considered:
structurally unemployed
(CH. 13) During a recession, what automatically (due to "automatic stabilizers") happens to the government's budget situation?
tax revenues fall, government spending increases, and the budget deficit gets larger
(Exam 1) Which of the following causes reported GDP to understate the value of total economic production?
the exclusion of household production
(Exam 1) Refer to figure 3-2. If the price is $25,
there is a surplus of 300 units.
(CH. 13) Which of the following is incorrect regarding tax revenues?
they increase during recessions
(Exam 2) Refer to Figure 12-1. Which of the following is FALSE if the economy is at point D?
unemployment is above its natural rate