econ final review

Table 3-11 Assume that Jamaica and Norway can switch between producing coolers and producing radios at a constant rate. -- look at table from the review Refer to Table 3-11. At which of the following prices would both Jamaica and Norway gain from trade with each other?

1 radio for 4 coolers

If the real exchange rate for coal is 1.5, the price of coal in the United States is $50 per ton, and the price of coal in Britain is 20 British pounds per ton, what is the nominal exchange rate?

1.5 = (50e/20) solve for 3/5

If the MPC = 4/5, then the government purchases multiplier is

5

The producer price index measures the cost of a basket of goods and services

Brought by firms

A country's trade balance will fall if either

Either saving falls or investment rises

If total spending rises from one year to the next, then

Either the economy must be producing a larger output of goods and services, or the prices at which goods and services are sold must be higher, or both

The banking system currently has $10 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 10 percent. If the Fed raises the reserve requirement to 12.5 percent and at the same time buys $1 billion worth of bonds, then by how much does the money supply change?

Falls by 12 billion

In recent decades, Americans have increased their purchase of stocks of foreign-based companies. The Americans who have bought these stocks were engaged in

Foreign portfolio investment

Refer to Figure 4-4. The movement from point A to point B on the graph is called

Increase of quantity supplied

Educational attainment tends to be

Low in countries with high population growth

A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it

Maximizes the combined welfare of buyers and sellers

When the Federal Reserve decreases the federal funds target rate, the lower rate is achieved through

Purchases of government bonds, which reduces interest rates and causes people to hold more money

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

Rises but real GDP per person falls

In a market economy, economic activity is guided by

Self interest and prices

Suppose that a small economy that produces mostly agricultural goods experiences a year with exceptionally good conditions for growing crops. The good weather would

Shift SRAS right and SRPC left

While pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms' owners, workers, and customers. This statement illustrates the principle that

That people face tradeoffs there is no such thing as a free lunch

Suppose Congress decides to reduce government expenditures by reducing its purchases of weapons systems. Which of the following would you expect to occur as a result of this change?

The economy will move down and the right along the short-run Philips curve

Who of the following is not included in the Bureau of Labor Statistics' "employed" category?

Those waiting to be recalled to a job from which they had been laid off

While the scientific method is applicable to studying natural sciences, it is not applicable to studying a nation's economy.

false

Yvette buys and sells real estate. Two weeks ago, she paid $300,000 for a house on Pine Street, intending to spend $50,000 on repairs and then sell the house for $400,000. Last week, the city government announced a plan to build a new landfill on Pine Street just down the street from the house Yvette purchased. As a result of the city's announced plan, Yvette is weighing two alternatives: She can go ahead with the $50,000 in repairs and then sell the house for $290,000, or she can forgo the repairs and sell the house as it is for $250,000. She should

forgo the repairs and sell the house as it is for 250,000

What must be given up to obtain an item is called

opportunity cost

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should

sell the ticket because the marginal benefit exceeds the marginal cost

Some, but not all, government economists are employed within the administrative branch of government. Which of the following government agencies employ economists outside of the administrative branch?

the congressional budget office

People who report being unemployed but who, in fact, are working for "under the table" pay to avoid taxes on their earnings are really employed and therefore cause the reported unemployment rate to be higher than it would otherwise be

true

The Federal Open Market Committee is ​

​the group at the Federal Reserve that sets monetary policy.