Econ Final Exam Review

During year, a firm's gross investment is $7,000 and net investment is $5,600. What is the firm's depreciation?

$1,400

The present value of $200 one year from now when the interest rate is 7 percent is

$187

The money price of a pack of frozen burritos is $.20 and the money price of a pack of microwave popcorn is $.40. The opportunity cost of a pack of microwave popcorn is .

$2.00 pack of frozen burritos, which is relative price of a pack of microwave popcorn

If the present value of $220 one year from now is $200, then the interest rate is

10 percent

Which of the following pairs do not match?

Entrepreneurship; interest

Which of following is NOT an asset of the federal reserve?

Federal Reserve Notes

Facts: In an hour James can catch 10 pounds of tuna or pick 10 pounds of apples In an hour, David can catch 10 pounds of tuna or pick 20 pounds of apples The opportunity cost of catching a pound of tuna is for James than David, and the opportunity cost of picking a pound of apples is for James than for David

Lower; Higher

Consider gardening books. What will happen to the market for these books as gardening becomes more popular and simultaneously printing costs increase?

The price of gardening books definitely increases.

Which of the following will shift the supply of loanable funds curve leftward?

a decrease in disposble income

Which of the following decreases the demand for money?

a decrease in real GDP

A macroeconomic equilibrium in which real GDP equals potential GDP is _____ equilibrium. And one in which real GDP exceeds potential GDP is _____ equilibrium.

a full-employment; an above full-employment

All of the following statements about the Federal Reserve are true expect the fact that it

accepts checking deposits from the nation's residents

Which of the following always raises the equilibrium price?

an increase in demand combined with a decrease in supply

when real GDP exceeds potential GDP, then the economy has

an inflationary gap

An economy is in a long-run equilibrium. An increase in aggregate demand creates _____ gap. A rise in the money wage rate decreases ______ and returns the economy to a full-employment equilibrium.

an inflationary; the quantity of real GDP demanded

If the real GDP is less than potential GDP, then the economy is _______ equilibrium.

at a below- employment

As an economic concept, scarcity applies to

both money and time

Purchasing power parity prices are used to construct GDP data that

can be used to make more valid comparisons between one country and another

The monetary base does NOT include

checking accounts at commercial banks

If the price of a sports car increase, the demand for gasoline will _____. (Compliments)

decrease, and the demand curve for gasoline will shift leftward.

An inferior good is a good for which demand

decreases when income increases

Real GDP

fluctuates around potential GDP

George and Michael can gain from exchange

if each specializes in the production of the good for which he has the lower opportunity cost.

What always raises equilibrium price?

increase in demand combined with increase in supply

a discouraged worker ______ counted as officially unemployed and _______ counted as in the labor force.

is not; is not

Which population category equals the sum of employed and unemployed people?

labor force

If households expect an increase in their future incomes, they will save

less and consume more today

What are the functions of depository institutions?

lowering the cost of borrowing

Facts: In an hour James can catch 10 pounds of tuna or pick 10 pounds of apples In an hour, David can catch 10 pounds of tuna or pick 20 pounds of apples so , has a comparative advantage in producing

marginal cost; an hour of reading, if that is her best alternate use of the time

If the price of a good changes but everything else influencing suppliers' planned sales remains constant, there is a

movement along the supply curve

In calculating GDP, household production is

not included because there is no market transaction

If the demand curve for bikes shifts leftward and the supply curve for bikes shifts rightward, the equilibrium

price of bikes definitely decreases.

As the price of a pound of peanuts falls, the..

quantity of peanuts supplied decreases

Labor productivity is defined as

real GDP per hour of labor.

As the ________ interest rate increases, the quantity of loanable funds demanded ________.

real; decreases

The four parts of the business cycle occur in the following order

recession, trough, expansion, peak

The "double coincidence of wants" problem is

resolved by the use of money

If the supply of spring water decreases and at the same time the demand for spring water increases, the equilibrium price ______ and the equilibrium quantity ______.

rises; might increase, decrease, or stay the same

A supply curve that illustrates the law of supply ______.

shows that the quantity supplied decreases as the price falls

Supply curve that illustrates the law of supply .

shows that the quantity supplied decreases as the price falls.

The larger the public's currency drain from the banking system, the

smaller is the money multiplier

Employees who lack the proper skills due to technological advancements and lose their jobs is an example of

structural unemployment

the idea that a government budget deficit decreases investment is called

the crowding-out effect

U.S. residents come to believe that the dollar will appreciate in the future, that is, the exchange rate in the future will be higher than the current exchange rate. As a result,

the demand curve for dollars shifts rightward

Because of the choices people make in the pursuit of profit, new growth theory argues that

the economy can enjoy a period of indefinite growth.

A financial decision should be pursued when

the net present value is positive

According to the quantity theory of money, in the long run, an increase in the quantity of money results in an equal percentage increase in

the price level

The money price of a pack of frozen burritos is $.20 and the money price of a pack of microwave popcorn is $.40. The relative price of a pack microwave popcorn is an opportunity cost because. .

the relative price tells us how many packs of frozen burritos we must give up to get a pack of microwave popcorn

Which of the following measurements of inflation tracks the rate at which infrequently changed prices are changing?

the sticky-price CPI

Full employment occurs when

the unemployment rate equals the natural unemployment rate

If the price of chocolate chip cookies rises, then

there is a movement upward along the demand curve for chocolate chip cookies.

Business cycles are

unpredictable, but always have two phases and two turning points.

You rank your choices for activities in the following order: go to the library, work out at the gym, have breakfast with friends, and sleep late. Suppose you choose to go to the library. Your opportunity cost is

working out at the gym

Suppose the money market has an equilibrium interest rate of 5 percent. If the actual interest rate is 3 percent, which of the following occurs to bring the money market back to equilibrium?

People sell bonds, the price of bonds falls and the interest rate rises

If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, then the real interest rate is

5 percent

A country's exports were $2,088 billion and imports were $2,666 billion. What was the value of net exports?

-578 billion

Using the rule of 70, if a country's current growth rate of real GDP per person was 10 percent a year, how long would it take the country's real GDP per person to double?

7 years

If, as Adrienne's income increases, her demand for leather gloves increases, then for Adrienne, leather gloves are

a normal good.

If the real interest rate is below equilibrium real interest rate,

a shortage of loanable funds will cause the real interest rate to rise

Potential GDP increases when

an advance in technology occurs

The country of Stanley is at an above-full employment equilibrium. Which of the following events will return Stanley to full employment?

an increase in the money wage rate

If FED sells government securities

commercial banks reserves will decrease

The consumer price index (CPI)

compares the cost in the current period to the cost in a reference base period of a basket of goods typically consumed in the base period.

A rise in the real interest rate

creates a movement upward along the demand for loanable funds curve

Unemployment that is the result of recessions is called

cyclical unemployment

The law of supply states that other things remaining the same, the _____ the price of a good, the _____.

higher; greater is the quatity supplied

The law of supply states that other things remaining the same, the the price of a good, the .

higher; greater quantity supplied

The law of demand states that other things remaining the same, the _____ the price of a good, the _____.

higher; smaller is the quantity demanded

An increase in the demand for computers and a decrease in the number off sellers of computers will ______.

increase the price of a computer

an increase in the demand for computers and a decrease in the number of sellers of computers will.

increase the price of a computer

A decrease in the price of wheat, a compliment in production of straw, will _____ the equilibrium price of straw and _____ the equilibrium quantity of straw.

increase; decrease

In the US interest rate rises while interest rates in the rest of the do not change, the higher US interest rate

increases the demand for dollars

the nominal interest rate minus the real interest rate approximately equals the

inflation rate

A demand curve that illustrates the law of demand _____.

is downward sloping

Because of the biases in calculating the CPI, actual inflation is

less than the measured inflation rate.

Flights to Paris are a normal good and people's incomes rise. At the same time, the price of jet fuel rises. The equilibrium price of a flight to Paris ________ and the equilibrium quantity of flights to Paris ________.

rises; might increase, decrease, or not change

Real GDP is calculated by

summing together the value of the year's production using the prices of the reference base year

An assumption of neoclassical growth theory is that

technological change is random

The key financial institutions in the United States include all of the following except

the U.S. Treasury

A classical economist believes that

the economy is self-regulating and always at full employment

Sarah takes out a loan today for $26,000 at an interest rate of 2% a year. She plans to repay the loan after 5 years. How much will she have to pay?

$28,706

Nominal GDP is

GDP valued at prices of that year

Which graph shows the impact of scientists developing a more powerful fertilizer?

Figure A (Qunatity increases)

The two main official measures of money in the United States today are ______. The two main official measures of money in the United States ______ really money.

M1 and M2; are

________ predicts that real GDP per person can grow indefinitely.

New growth theory