Econ Final Exam T/F

In economics, the term "free market" refers to a market where no sales tax is imposed on products sold.

false

In market economies, income distribution is always going to be completely equitable.

false

The inflation rate measures the average prices of goods and services in the economy.

false

The main goal of monetary policy for recent Fed Chairmen has been to maintain high employment in labor markets.

false

When the federal reserve increases the money supply, people spend more because interest rates fall

true

the marginal propensity to consume is the slope of the consumption function

true

A period of economic expansion ends with a business cycle trough

false

Accumulating a greater number of inputs will ensure that an economy will experience economic growth.

false

An increase in quantity supplied is represented by a rightward shift of the supply curve.

false

An increase in the price level in the United States will shift the aggregate expenditure line upward.

false

Consumers make all economic decisions in a mixed economy

false

Contractionary monetary policy refers to the Fed's decreasing the money supply and decreasing interest rates to decrease real GDP.

false

Countries without well-developed financial systems are able to sustain high levels of economic growth

false

Eliminating frictional unemployment would be good for the economy.

false

If Blake can pick more cherries in one hour than Cody, then Blake has a comparative advantage in cherry picking.

false

If Gladys sells her 2003 Jeep Cherokee for $3,500 in 2018, the sale of her car contributes $3,500 to 2018 GDP.

false

If bankers become more uncertain regarding future deposits and withdrawals and choose to hold more excess reserves against deposits, the money multiplier will increase.

false

If nominal GDP is less than real GDP then the GDP deflator will be greater than 100

false

If planned investment is greater than actual investment, then aggregate expenditure is less than gdp

false

If the CPI falls from 142 to 140 between two consecutive years, this implies that prices fell by 2% between those two years.

false

If the demand curve for a product shifts to the right and the supply curve for a product shifts to the left, equilibrium price and equilibrium quantity will both increase

false

If the demand for a product decreases and the supply of the same product increases, the equilibrium quantity will increase.

false

In the circular flow model, households supply resources such as labor services in the product market.

false

Monetary policy is conducted by the US Treasury Department

false

Most economists believe that labor unions significantly increase the overall unemployment rate in the United States.

false

Nominal GDP measures the value of all final goods and services at base-year prices.

false

Paying efficiency wages are a way for a company to cut costs and become more efficient, and are therefore lower than market wages.

false

Paying efficiency wages are a way for a company to cut costs and become more efficient, and are therefore lower than the market wages

false

Peanut butter and jelly are complements. If the price of peanut butter increases, the demand for jelly will increase.

false

Physical capital refers to stocks and bonds

false

Policies based on normative economic ideas tend to increase economic efficiency and improve equity.

false

Rent control is an example of a price floor

false

Residential investment includes spending by firms on office buildings.

false

The Fed can directly lower the inflation rate.

false

The Fed has complete control over the money supply.

false

The amount of national income in an economy equals the money supply in an economy.

false

The difference between consumer surplus and producer surplus in a market is equal to the deadweight loss.

false

The fed can directly lower the inflation rate

false

The marginal propensity to consume measures the average amount of wealth that a consumer spends in a given period of time.

false

The natural rate of unemployment consists of frictional unemployment plus cyclical unemployment.

false

The term "market" refers only to trading arrangements that have been approved by the government

false

There is a shortage of every good that is scarce.

false

To obtain real average hourly earnings, nominal average hourly earnings are multiplied by the CPI.

false

Transfer payments are subtracted from national income to get to personal income

false

countries without well developed financial systems are able to sustain high levels of economic growth

false

for most goods and services, the burden of a tax is on the sellers

false

the difference between consumer surplus and producer surplus in a market is equal to the dead weight loss

false

when the government faces a budget deficit, which usually causes crowding-in phenomena

false

A surplus is defined as the situation that exists when the quantity of a good supplied is 3eater than the quantity demanded.

true

An increase in the unemployment rate may be represented as a movement from a point on the PPF to a point inside the frontier

true

Consider a country that produces only two goods: pineapples and tractors. Suppose it is possible for this country to increase its production of pineapples without producing fewer tractors. In this case, its current output combination is inefficient.

true

Expansionary monetary policy enacted during a recession will cause the inflation rate to increase.

true

Financial markets and financial intermediaries comprise the financial system.

true

Housing is the largest component of the U.S. CPI market basket.

true

If aggregate expenditure is more than GDP, then inventories fall and GDP rises.

true

If income is unequally distributed in an economy, increases in GDP may not raise well-being in an economy.

true

If inflation expectations are increasing, we would expect that the nominal interest rate would also be increasing, holding all else constant.

true

If inflation is higher than expected, this helps borrowers (by reducing the real interest rate they pay) and hurts lenders (by reducing the real interest rate they receive)

true

If planned AE is less than real GDP, some firms will experience unplanned increases in inventories

true

If planned aggregate expenditure equals GDP, the economy is in macroeconomic equilibrium.

true

If the population increases and input prices increase, the equilibrium price of a product will definitely increase

true

If the rate of growth in real GDP exceeds the rate of growth in the money supply, the quantity theory of money predicts a price deflation.

true

In a two-good, two country world, if one country has an absolute advantage in the production of both goods, it can still benefit by trading with the other country.

true

In an economy with money, as opposed to barter, people are more likely to specialize in the production of goods and services.

true

Increases in capital per hour worked cannot sustain high rates of economic growth unless accompanied by technological change.

true

Money will fail to serve as a medium of exchange if it ceases to be a store of value

true

Most U.S. currency held outside the U.S. banking system is held by foreigners.

true

The additional benefit to a consumer from consuming one more unit of a good or service is the marginal benefit.

true

The division of the burden of a tax between buyers and sellers in a market is called tax incidence

true

The household survey asks adults about their employment status and is used to compile the monthly unemployment rate

true

The household survey asks adults about their employment status and is used to compile the monthly unemployment rate.

true

The quantity equation becomes the basis for a theory when we assume that velocity of money is constant

true

if consumers believe that the price of hybrid vehicles will decrease in the future, this will cause the demand for hybrid vehicles to decrease now.

true

As population declines, scarcity eventually disappears

false