Econ exam 2 hard questions

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Table 23-1 The following table contains data for Chereaux for the year 2019. GDP $200 Income earned by citizens abroad $9 Income foreigners earn here $5 Losses from depreciation $6 Indirect business taxes $10 Statistical discrepancy $0 Retained earnings $8 Corporate income taxes $12 Social insurance contributions $30 Interest paid to households by government $8 Transfer payments to households from government $55 Personal taxes $60 Nontax payments to government $11 Refer to Table 23-1. Disposable personal income for Chereaux in 2019 is a.$130 b. $211 c. $190 d. $141

a. $130

Table 23-1 The following table contains data for Chereaux for the year 2019. GDP $200 Income earned by citizens abroad $9 Income foreigners earn here $5 Losses from depreciation $6 Indirect business taxes $10 Statistical discrepancy $0 Retained earnings $8 Corporate income taxes $12 Social insurance contributions $30 Interest paid to households by government $8 Transfer payments to households from government $55 Personal taxes $60 Nontax payments to government $11 Refer to Table 23-1. Personal income for Chereaux in 2019 is a. $201 b. $178 c. $196 d. $259

a. $201

Scenario 24-1 Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2017. Suppose the price index was 17.6 in 1944 and 218.4 in the current year Refer to Scenario 24-1. In real terms, Josh Holloway's income amounts to about what percentage of Sue Holloway's income? a. 141 percent b. 198 percent c. 165 percent d. 71 percent

a. 141 percent

Suppose the consumer price index was 184 in Year 1. The nominal interest rate during this period was steady at 5.8 percent. What was the real interest rate during this period? a. 1.2 percent b. -1.9 percent c. 0.4 percent d. -2.6 percent

b. -1.9 percent

Suppose that in a closed economy GDP is equal to 20,000, consumption equal to 15,000, government purchases equal 4,000, and taxes equal 3,000. What are private saving, public saving, and national saving? a. -2,000, 1,000, and 2,000, respectively b. 1,000, 2,000, and 3,000, respectively c. 2,000, -1,000, and 1,000, respectively d. 2,000, 1,000, and 2,000, respectively

c. 2,000, -1,000, and 1,000, respectively

Figure 26-3 The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. Refer to Figure 26-3. Which of the following movements would be consistent with the government budget going from deficit to surplus and the simultaneous enactment of an investment tax credit? a. A movement from Point C to Point B b. A movement from Point B to Point A c. A movement from Point B to Point F d. A movement from Point A to Point C

c. A movement from Point B to Point F

Suppose you win a small lottery and you are given the following choice: You can receive (1) an immediate payment of $5,000 or (2) two annual payments, each in the amount of $2,700, with the first payment coming one year from now, and the second payment coming two years from now. You would choose to take the two annual payments if the interest rate is a. 5 percent, but not if the interest rate is 6 percent b. 3 percent, but not if the interest rate is 4 percent c. 2 percent, but not if the interest rate is 3 percent d. 4 percent, but not if the interest rate is 5 percent

a. 5 percent, but not if the interest rate is 6 percent

Figure 27-3 The following figure shows a utility function for Dexter Refer to Figure 27-3. From the appearance of the utility function, we know that a. Dexter gains more satisfaction when his wealth increase by X dollars than he loses in satisfaction when his wealth decreases by X dollars b. Dexter is risk averse c. Dexter does not enjoy engaging in risky behavior d. the property of decreasing marginal utility applies to Dexter

a. Dexter gains more satisfaction when his wealth increase by X dollars than he loses in satisfaction when his wealth decreases by X dollars

Suppose interest of 5% each year for two years can be earned on $1,000 saved today with no risk. What is the least amount a person would need to have a 50% chance of wining to be willing to face a 50% chance of losing $1,000 today and be considered risk averse? a. $1,000.01 to paid in two years b. $1,102.51 to paid in two years c. $1,100.01 to paid in two years d. $907.03 to paid in two years

b. $1,102. 51 to paid in two years

Scenario 24-1 Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2017. Suppose the price index was 17.6 in 1944 and 218.4 in the current year. Refer to Scenario 24-1. In real terms, Sue Holloway's income amounts to about what percentage of Josh Holloway's income? a. 65.2 percent b. 70.9 percent c. 11.0 percent d. 114.7 percent

b. 70.9 percent

On the Internet you find the following offers for opening an online account. Which of them is the best offer if you have $2,000 to save for two years? a. An interest rate of 4.5 percent, with no processing fee and no bonus b. An interest rate of 5 percent, with the bank charging you a $15 processing fee at the time you open your account c.An interest rate of 3.5 percent, with the bank giving you a $35 bonus to open your account d. An interest rate of 4 percent, with the bank giving you a $20 bonus at the time you open your account

b. An interest rate of 5 percent, with the bank charging you a $15 processing fee at the time you open your account

Country A had a population of 1,000, of whom 600 worked an average of 8 hours a day and had a productivity of 2.5. Country B had a population of 800, of whom 560 worked 8 hours a day and had productivity of 3.0 a. Country B had the higher level of real GDP and Country A had the higher level of real GDP per person b. Country B had the higher level of real GDP and real GDP per person c. Country A had the higher level of real GDP and Country B had the higher level of real GDP per person d. Country A had the higher level of real GDP and real GDP per person

b. Country B had the higher level of real GDP and real GDP per person

Suppose that interest rates unexpectedly rise and that FineLine Corporation announces that revenues from last quarter were down but not as much as the public had anticipated they would be down. According to the efficient markets hypothesis, which of the following makes the price of FineLine Corporation Stock fall? a. Neither the interest rate rising nor the revenue announcement b. Only the interest rate rising c. Only the revenue announcement d. Both the interest rate rising and the revenue announcement

b. Only the interest rate rising

Suppose your uncle offers you $100 today or $150 in 10 years. You would prefer to take the $100 today if the interest rate is a. 4 percent b. 5 percent c. 3 percent d. 2 percent

b. 5 percent

Table 23-2 The following table contains data for country A for the year 2019 Household purchases of durable goods $1,293 Household purchases of nondurable goods $1,717 Household purchases of services $301 Household purchases of new housing $704 Purchases of capital equipment $310 Inventory changes $374 Purchases of new structures $611 Depreciation $117 Salaries of government workers $1,422 Government expenditures on public works $553 Transfer payments $777 Foreign purchases of domestically produced goods $88 Domestic purchases of foreign goods $120 Refer to Table 23-2. What were country A's exports in 2019? a. $32 b. -$32 c. $88 d. $120

c.$88

Table 23-2 The following table contains data for country A for the year 2019 Household purchases of durable goods $1,293 Household purchases of nondurable goods $1,717 Household purchases of services $301 Household purchases of new housing $704 Purchases of capital equipment $310 Inventory changes $374 Purchases of new structures $611 Depreciation $117 Salaries of government workers $1,422 Government expenditures on public works $553 Transfer payments $777 Foreign purchases of domestically produced goods $88 Domestic purchases of foreign goods $120 Refer to Table 23-2. What were country A's government purchases in 2019? a. $1,198 b. $553 c. $2,752 d. $1,975

d. $1,975

Table 24-4 Will's expenditures on food for three consecutive years, along with other values, are presented in the following table Year 1 2 3 Expenditures on Food $5,000 $5,800 $6,600 Consumer price index 160.0 168.0 x Refer to Table 24-4. If the nominal interest rate was 8 percent in Year 2, then a. the real interest rate in Year 2 was 4 percent b. Will's Year 1 food expenditures in Year 2 dollars amount to $5,800 c. Will's Year 1 food expenditures in Year 3 dollars amount to $6,200 d. the real interest rate in Year 2 was 3 percent

d. the real interest rate in Year 2 was 3 percent

Figure 27-1 The following figure shows a utility function for Britney. Refer to Figure 27-1. From the appearance of the utility function, we know that a. if Britney owns a house, she would not consider buying fire insurance b. Britney would prefer to hold a portfolio of stocks with an average return of 8 percent and a standard deviation of 2 percent to a portfolio of stocks with an average return of 8 percent and a standard deviation of 5 percent c. Britney is not risk averse d. Britney would prefer to hold a portfolio of stocks with an average return of 8 percent and a standard deviation of 5 percent to a portfolio of stocks with an average return of 6 percent and a standard deviation of 3 percent

b. Britney would prefer to hold a portfolio of stocks with an average return of 8 percent and a standard deviation of 2 percent to a portfolio of stocks with an average return of 8 percent and a standard deviation of 5 percent

Mixster Concrete Company is considering buying a new cement truck. The owners and their accountants decide that this is the profitable thing to do. Before they can buy the truck, the interest rate and price of trucks change. In which case do these changes both make them less likely to buy the truck? a. Interest rates rise and truck prices fall b. Interest rates fall and truck prices fall c. Interest rates fall and truck prices rise d. Interest rates rise and truck prices rise

d. Interest rates rise and truck prices rise

Suppose you win a small lottery and you are given the following choice: You can (1) receive an immediate payment of $10,000 or (2) three annual payments, each in the amount of $3,600, with the first payment coming one year from now, the second two years from now, and the third three years from now. You would choose to take the three annual payments if the interest rate is a. 3 percent, but not if the interest rate is 4 percent b. 5 percent, but not if the interest rate is 6 percent c. 4 percent, but not if the interest rate is 5 percent d. 2 percent, but not if the interest rate is 3 percent

a. 3 percent, but not if the interest rate is 4 percent

Adriana says that the present value of $700 to be received one year from today if the interest rate is 6 percent is less than the present value of $700 to be received two years from today if the interest rate is 3 percent. Cassie says that $700 saved for one year at 6 percent interest has a smaller future value than $700 saved for two years at 3 percent interest. a. Only Cassie is correct b. Both Adriana and Cassie are correct c. Only Adriana is correct d. Both Adriana and Cassie are incorrect

a. Only Cassie is correct

Suppose the price of a quart of milk rises from $1.00 to $1.20 and the price of a T-shirt rises from $8.00 to $9.60. If the CPI rises from 150 to 195, then people likely will buy a. more milk and more T-shirts b. more milk and fewer T-shirts c. less milk and fewer T-shirts d. less milk and more T-shirts

a. more milk and more T-shirts

Mary Beth is risk averse and has $1,000 with which to make a financial investment. She has three options. Option A is a risk-free government bond that pays 5 percent interest each year for two years. Option B is a low-risk stock that analysts expect to be worth about $1,102.50 in two years. Option C is a high-risk stock that is expected to be worth about $1,200 in four years. Mary Beth should choose a. option A b. option B c. option C d. either A or B because they are the same to her

a. option A

If the price index was 90 in Year 1, 100 in Year 2, and 95 in Year 3, then the economy experienced a. 11.1 percent inflation between Years 1 and 2, and 5 percent inflation between Years 2 and 3 b. 11.1 percent inflation between Years 1 and 2, and 5 percent deflation between Years 2 and 3 c. 10 percent inflation between Years 1 and 2, and 5 percent inflation between Years 2 and 3 d. 10 percent inflation between Years 1 and 2, and 5 percent deflation between Years 2 and 3

b. 11.1 percent inflation between Years 1 and 2, and 5 percent deflation between Years 2 and 3

Table 24-4 Will's expenditures on food for three consecutive years, along with other values, are presented in the following table. Year 1 2 3 Expenditures on Food $5,000 $5,800 $6,600 Consumer price index 160.0 168.0 x Refer to Table 24-4. Suppose WIll's Year 2 food expenditures in Year 3 dollars amount to $6,235. Then x, the consumer price index for Year 3, has a value of a. 171.2 b. 180.6 c. 177.5 d. 175.0

b. 180.6

Happy Trails, a bicycle rental company, is considering purchasing three additional bicycles. Each bicycle would cost them $249.66. At the end of the first year the increase to their revenues would be $140 per bicycle. At the end of the second year the increase to their revenues again would be $140 per bicycle. Thereafter, there are no increases to their revenues. At which of the following interest rates is the sum of the present values of the additional revenues closest to the price of a bicycle? a. 7 percent b. 8 percent c. 5 percent d. 6 percent

b. 8 percent

You have a choice among three options. Option 1: receive $900 immediately. Option 2: receive $1,200 one year from now. Option 3: receive $2,000 five years from now. The interest rate is 15 percent. Rank these three options from highest present value to lowest present value. a. Option 1; Option 2; Option 3 b. Option 2; Option 3; Option 1 c. Option 3; Option 1; Option 2 d. Option 3; Option 2; Option 1

b. Option 2; Option 3; Option 1

In a closed economy, if Y and T remained the same, but G rose and C fell but by less than the rise in G, what would happen to public and national saving? a. Public saving would fall and national saving would rise b. Public and national saving would fall c. Public and national saving would rise d. Public saving would rise and national saving would fall

b. Public and national saving would fall

For an open economy, the equation Y = C + I + G + NX is an identity. If we define national saving, S, as the total income in the economy that is left after paying for consumption and government purchases, then for an open economy, it is true that a. S = I b. S = I + NX c. I = S + NX d. S = 0

b. S = I + NX

An automobile manufacturer unexpectedly announces that it has hired a new chief executive officer. It is widely believed that the presence of this individual will raise the profitability of the corporation. At the same time interest rates unexpectedly rise. Which of the above would tend to make the price of the stock rise? a. The announcement and the rise in interest rates b. The announcement but not the rise in interest rates c. Neither the announcement nor the rise in interest rates d. The rise in interest rates, but not the announcement

b. The announcement but not the rise in interest rates

A newspaper article informs you that most businesses reduced production in the last quarter but also sold from their inventories during the last quarter. Based on this information GDP likely a. increased b. decreased c. stayed on the same d. may have increased, decreased, or stayed the same

b. decreased

During a presidential campaign, the incumbent argues that he should be reelected because nominal GDP grew by 12 percent during his 4-year term in office. You know that population grew by 4 percent over the period and that the GDP deflator increased by 6 percent during the past 4 years. You should conclude that real GDP per person a. grew by more than 12 percent b. grew, but by less than 12 percent c. was unchanged d. decreased

b. grew, but by less than 12 percent

Suppose you are deciding whether or not to buy a particular bond for $5,980.17. If you buy the bond and hold it for 5 years, then at that time you will receive a payment of $10,000. You will buy the bond today if the interest rate is a. no less than 9.48 percent b. no greater than 10.83 percent c. no greater than 9.48 d. no less than 10.83 percent

b. no greater than 10.83

If over a short time there is an increase in the number of people retired and a decrease in the number of people working, then productivity a. and real GDP per person fall b. rises but real GDP per person falls c. falls and real GDP per person rises d. and real GDP per person rise

b. rises but real GDP per person falls

For a closed economy, GDP is $11 trillion, consumption is $7 trillion, taxes are $2.5 trillion and the government runs a surplus of $1 trillion. What are private saving and national saving? a. $1.5 trillion and $1.5 trillion, respectively b. $2.5 trillion and $1.5 trillion, respectively c. $1.5 trillion and $2.5 trillion, respectively d. $2.5 trillion and $2.5 trillion, respectively

c. $1.5 trillion and $2.5 trillion, respectively

Table 23-2 The following table contains data for country A for the year 2019. Refer to Table 23-2. What were country A's imports in Household purchases of durable goods $1,293 Household purchases of nondurable goods $1,717 Household purchases of services $301 Household purchases of new housing $704 Purchases of capital equipment $310 Inventory changes $374 Purchases of new structures $611 Depreciation $117 Salaries of government workers $1,422 Government expenditures on public works $553 Transfer payments $777 Foreign purchases of domestically produced goods $88 Domestic purchases of foreign goods $1202019? a. -$32 b. $32 c. $120 d. $88

c. $120

You are tearing down a building and find $1 in change that someone lost when working on the building 140 years ago. If, instead of being careless with the $1 in change, this person had deposited it into a bank and earned 2 percent interest every year for 140 years, how much would be in the account today according to the rule of 70? a. $4 b. $32 c. $16 d. $8

c. $16

Table 23-2: The following table contains data for country A for the year 2019. Household purchases of durable goods $1,293 Household purchases of nondurable goods $1,717 Household purchases of services $301 Household purchases of new housing $704 Purchases of capital equipment $310 Inventory changes $374 Purchases of new structures $611 Depreciation $117 Salaries of government workers $1,422 Government expenditures on public works $553 Transfer payments $777 Foreign purchases of domestically produced goods $88 Domestic purchases of foreign goods $120 Refer to Table 23-2. What was country A's consumption in 2019? a. $2,018 b. $3,010 c. $3,311 d. $4,015

c. $3,311

The country of Cedarland does not trade with any other country. Its GDP is $17 billion. Its government purchases $4 billion worth of goods and services each year, collects $6 billion in taxes, and provides $1 billion in transfer payments to households. Private saving in Cedarland is $4 billion. For Cedarland, a. investment is $6 billion and consumption is $9 billion. b. investment is $6 billion and consumption is $8 billion. c. investment is $5 billion and consumption is $8 billion. d. investment is $5 billion and consumption is $7 billion.

c. $6 billion and consumption is $6 billion

Table 23-2 The following table contains data for country A for the year 2019. Household purchases of durable goods $1,293 Household purchases of nondurable goods $1,717 Household purchases of services $301 Household purchases of new housing $704 Purchases of capital equipment $310 Inventory changes $374 Purchases of new structures $611 Depreciation $117 Salaries of government workers $1,422 Government expenditures on public works $553 Transfer payments $777 Foreign purchases of domestically produced goods $88 Domestic purchases of foreign goods $120 Refer to Table 23-2. What were country A's net exports in 2019? a. $32 b. $88 c. -$32 d. $120

c. -$32

The price index was 128 in Year 2, and the inflation rate was 24 percent between Year 1 and Year 2. The pice index in Year 1 was a. 158.7 b. 152.0 c. 103.2 d. 104.0

c. 103.2

Two bonds have the same term to maturity. The first issued by a state government and the probability of default is believed to be low. The other was issued by a corporation and the probability of default is believed to be high. Which of the following is correct? a. Because they have the same term to maturity the interest rates should be the same b. Because of the difference in tax treatment and credit risk, the state bond should have the higher interest rate c. Because of the differences in tax treatment and credit risk, the corporate bond should have the higher interest rate d. it is not possible to say if one bond has a higher interest than the other

c. Because of the differences in tax treatment and credit risk, the corporate bond should have the higher interest rate

Fundamental analysis shows that Quadrangle Company is fairly valued. Then Quadrangle Company unexpectedly improves its production techniques and unexpectedly hires a new CEO away from another very successful competitor. Suppose this has no effect on the price of the stock of Quadrangle Company. a. Fundamental analysis would now show the corporation is undervalued. The fact that the price was unchanged is consistent with the efficient markets hypothesis b. Fundamental analysis would now show the corporation is overvalued. The fact that the price was unchanged is not consistent with the efficient markets hypothesis c. Fundamental analysis would now show the corporation is undervalued. The fact that the price was unchanged is not consistent with the efficient markets hypothesis d. Fundamental analysis would now show the corporation is overvalued. The fact that the price was unchanged is consistent with the efficient markets hypothesis

c. Fundamental analysis would now show the corporation is undervalued. The fact that the price was unchanged is not consistent with the efficient markets hypothesis

A firm has three different investment options. Option A will give the firm $10 million at the end of one year, $10 million at the end of two years, and $10 million at the end of three years. Option B will give the firm $15 million at the end of one year, $10 million at the end of two years, and $5 million at the end of three years. Option C will give the firm $30 million at the end of one year, and nothing thereafter. Which of these options has the highest present value? a. Option A b. Option B c. Option C d. The answer depends on the rate of interest, which is not specified here

c. Option C

A Texas household receives a social Security check for $1500, which it uses to purchase a $40 pair of shoes made in Thailand by a Thai firm, a $1240 television made by a Korean firm in Korea, and $220 on groceries from a local store. As a result, U.S. GDP a. increases by $280 b. increases by $1500 c. increases by $220 d. increases by $40

c. increases by $220

Recently, Venus's wealth increased by $500. If her wealth were to increase by another $500 in the near future, then her utility would increase, but not by as much as it increased with the recent increase to her wealth. Based on this information, and graphing wealth on each horizontal axis, Venus's utility function a. is downward sloping and her marginal utility function is upward sloping b. and marginal utility function are both upward sloping c. is upward sloping and her marginal utility function is downward sloping d. and marginal utility function are both downward sloping

c. is upward sloping and her marginal utility function is downward sloping

Table 24-4 Will's expenditures on food for three consecutive years, along with other values, are presented in the following table Year 1 2 3 Expenditures on Food $5,000 $5,800 $6,600 Consumer price index 160.0 168.0 x Refer to Table 24-4. Suppose Will's Year 1 food expenditures in Year 3 dollars amounted to $5,670. Suppose also that the real interest rate in Year 3 was 3 percent. Then, in Year 3, a. the inflation rate was 9 percent and the nominal interest rate was 6 percent b. the inflation rate was 9 percent and the nominal interest rate was 12 percent c. the inflation rate was 8 percent and the nominal interest rate was 11 percent d. the inflation rate was 8 percent and the nominal rate was 5 percent

c. the inflation rate was 8 percent and the nominal interest rate was 11 percent

Table 23-2 The following table contains data for country A for the year 2019 Household purchases of durable goods $1,293 Household purchases of nondurable goods $1,717 Household purchases of services $301 Household purchases of new housing $704 Purchases of capital equipment $310 Inventory changes $374 Purchases of new structures $611 Depreciation $117 Salaries of government workers $1,422 Government expenditures on public works $553 Transfer payments $777 Foreign purchases of domestically produced goods $88 Domestic purchases of foreign goods $120 Refer to Table 23-2. What was country A's investment in 2019? a. $1,882 b. $1,295 c. $1,178 d. $1,999

d. $1,999

Table 23-2 The following table contains data for country A for the year 2019 Household purchases of durable goods $1,293 Household purchases of nondurable goods $1,717 Household purchases of services $301 Household purchases of new housing $704 Purchases of capital equipment $310 Inventory changes $374 Purchases of new structures $611 Depreciation $117 Salaries of government workers $1,422 Government expenditures on public works $553 Transfer payments $777 Foreign purchases of domestically produced goods $88 Domestic purchases of foreign goods $120 Refer to Table 23-2. What was country A's GDP in 2019? a. $8,147 b. $6,359 c. $7,136 d. $7,253

d. $7,253

A University of Iowa baseball standout is offered a choice of contracts by the New York Liberty. The first one gives her $100,000 one year from today and $100,000 two years from today. The second one gives her $132,000 one year from today and $66,000 two years from today. As her agent, you must compute the present value of each contract. Which of the following interest rates is the lowest one at which the present value of the second contract exceeds that of the first? a. 8 percent b. 9 percent c. 10 percent d. 7 percent

d. 7 percent

Figure 27-3 The following figure shows a utility function for Dexter Refer to Figure 27-3. From the appearance of the graph, we know that a. Dexter's level of satisfaction increases by the same amount when his wealth increases from $1,001 to $1,002 than it does when his wealth increases from $1,000 to $1,001 b. Dexter's level of satisfaction increases by less when his wealth increases from $1,001 to $1,002 than it does when his wealth increases from $1,000 to $1,001 c. the change in Dexter's level of satisfaction is constant as wealth increases d. Dexter's level of satisfaction increases by more than his wealth increases from $1,001 to $1,002 than it does when his wealth increases from $1,000 to $1,001

d. Dexter's level of satisfaction increases by more than his wealth increases from $1,001 to $1,002 than it does when his wealth increases from $1,000 to $1,001

Suppose an economy experiences an increase in its saving rate. The higher saving rate leads to a higher growth rate of productivity a. in neither the short run nor the long run b. in both the short run and the long run c. more in the long run than in the short run d. more in the short run than in the long run

d. more in the short run than in the long run


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