ECON Final Niga

GDP

Monetary value of all final goods and services produced within a nation in a particular year

Economics involves marginal analysis because

Most decisions involve changes from the present situation

Gross investment

Net investment plus replacement investment

Progressive tax

tax rates are higher the greater one's income

Increase in pizza price would reduce demand for weed. We can conclude that:

they are complementary goods

Part time workers are counted as:

Fully employed and therefore the official unemployment rate may understate the level of unemployment

By an increase in demand we mean that

the quantity demanded at each price in a set of prices is greater

"There is no free lunch" means

All production involves the use of scarce resources and thus the sacrifice of alternative goods

The federal reserve system regulates the money supply primarily by:

Altering the reserves of commercial banks, largely through sales and purchase of gov't bonds

Checkable deposits are:

Included in M1 and in M2

When economists say that people act rationally in their self interest, they mean that individuals:

Look for and pursue opportunities to increase their utility

One reason that the quantity of a good demanded increases when its price falls is that the:

Lower price increases the real incomes of buyers, enabling them to buy more

A tool of monetary policy

Open market operations

The production possibilities curve illustrates the basic principle that:

if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced

National income accountants can avoid multiple counting by:

only counting final goods

The market system does not produce public goods because:

private firms cannot stop customers who are unwilling to pay for such goods from benefiting from them

The Fed can change the money supply by:

1. Changing bank reserves through the sale or purchase of gov't securities 2. Changing the quantities of required and excess reserves by altering the legal reserve ratio 3. Changing the discount rate so as to encourage or discourage commercial banks in borrowing from the central banks

As defined in national income accounting, investment includes:

Business expenditures on machinery and equipment

Study of economics is primarily concerned with

Choices that are made in seeking to use scarce resources efficiently

Holly's break even level of income is $10,000 and her MPC is 0.75. If her actual disposable income is $16,000 her level of:

Consumption spending will be $14,500

What is a correct statement of the impacts of a lump-sum tax

Disposable income will decline by the amount of the tax and consumption at each level of GDP will decline by the amount of tax

Net exports

Exports minus imports

Suppose the MPS=0.25 and autonomous net taxes are increased by $16 in a closed economy. We can predict that:

Planned autonomous expenditures will decrease by $12 16*.25=4 so decrease by 12

If Ben's MPC is .80, this means he will:

Spend eight-tenths of any increase in his disposable income

In a mixed (i.e. private sector & Gov't) closed economy what are the leakages and injections?

Taxes and savings are leakages, while investment and gov't purchases are injections

Assume that a change in gov't policy results in greater production of both consumer goods and investment goods. We can conclude that:

The economy was suffering from unemployment and/or the inefficient use of resources before the policy change

The purchase of gov't securities from the public by the Fed will cause:

The money supply to increase

Natural Rate of Unemployment

The rate of unemployment occurring when the economy is at its potential output

Why is the aggregate demand schedule downward sloping

The real balances effect, the foreign purchases effect, the interest rate effect

If the equation C=20+0.6Y, where C is consumption and Y is disposable income, what would 20 and 6 represent:

Vertical intercept would be 20 and the slope would be 0.6

What will not cause the demand for product k to change

a change in the price of k

Largest component of total expenditures in the US is:

consumption

The consumption schedule (i.e. function) relates:

consumption to the level of disposable income

Spillovers or externalities

relate to both costs and benefits

An effective ceiling price will

result in a product shortage

If the consumption schedule is linear, then the:

saving schedule will also be linear

Economists define saving as

the part of after-tax income which is not consumed

If the required reserve ratio was lowered:

the size of the monetary multiplier would increase