Econ Final

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A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $150. If customers deposit $50 into the bank, what is the value of the money supply?

$150

The price index was 120 in 2012 and 126 in 2013. What was the inflation rate?

5.0 percent

Of the total income earned in the U.S. economy, approximately

67 percent is earned by workers, and 33 percent is earned by owners of land and capital.

Which of the following best illustrates the concept of "derived demand?"

An automobile producer's decision to supply more cars will lead to an increase in the demand for automobile production workers.

Which of the following is not included in U.S. GDP

The market value of an oil change that Ben performs on his own car

Which effect of a price change moves the consumer along the same indifference curve to a point with a new marginal rate of substitution

The substitution effect

If the price of a good increases, all else equal, consumers perceive

a decrease in purchasing power.

A person who is counted as "unemployed" by the Bureau of Labor Statistics

a. is also in the labor force. b. must have recently looked for work or be on temporary layoff. c. must be at least 16 years old. d. All of the above are correct. (CORRECT)

Your college roommate receives a pay raise at her part-time job from $9 to $11 per hour. She used to work 25 hours per week, but now she decides to work 20 hours per week in order to spend more time studying economics. For this price range, her labor supply curve is

backward sloping.

If a firm experiences diminishing marginal productivity of labor, the marginal product

decreases as total product increases

In a fractional-reserve banking system, an increase in reserve requirements

decreases both the money multiplier and the money supply

Other things the same, an increase in population growth

decreases capital per worker. However, a higher population growth rate is associated with a decreased pace of technological progress.

To be counted as "employed" in the U.S. labor force statistics, a person

does not have to be working for pay if they are working for a family business and does not have to be working full time

The money supply decreases if

households decide to hold relatively more currency and relatively fewer deposits and banks decide to hold relatively more excess reserves and make fewer loans

Thomas, a U.S. citizen, works only in Canada. The value of the output he produces is

included in U.S. GNP, but it is not included in U.S. GDP

Consider the labor market for computer programmers. During the late 1990s, the value of the marginal product of all computer programmers increased dramatically. Holding all else equal, what effect did this process have on the labor market for computer programmers? The equilibrium wage

increased, and the equilibrium quantity of labor increased.

Josh is a full-time college student who is not working or looking for a job. The Bureau of Labor Statistics counts Josh as

neither in the labor force nor unemployed

Other things the same, if a country saves more, then

net capital outflow rises, so net exports rise.

According to the assumptions of the quantity theory of money, if the money supply decreases by 7 percent, then

nominal GDP would fall by 7 percent; real GDP would be unchanged.

The price level is a

nominal variable

Economic variables whose values are measured in monetary units are called

nominal variables

unemployment

not part of GDP because it is a transfer payment

when economists talk about growth in the economy, they measure that growth as the

percentage change in real GDP from one period to another

Country A and country B both increase their capital stock by one unit. Output in country A increases by 10 while output in country B increases by 8. Other things the same, diminishing returns implies that country A is

poorer than Country B. If Country A adds another unit of capital, output will increase by less than 10 units.

Nominal GDP will definitely increase when

prices increase and output increases

Inventors often obtain patents on new products and processes, thereby turning new ideas into

private goods and increasing the incentive to engage in research.

Electronics firms may be able to get patents on their ideas. Doing so makes their ideas

private goods rather than public goods. This gives people more incentive to engage in research

More generous unemployment insurance would

raise frictional unemployment

You buy a new car built in Sweden. Other things the same, your purchase by itself

raises U.S. imports and lowers U.S. net exports.

A nation's standard of living is best measured by its

real GDP per person.

​When prices rise

real estate is a better store of value than money

Accumulating capital

requires that society sacrifice consumption goods in the present

Cyclical unemployment refers to

short-run fluctuations around the natural rate of unemployment

A consumer chooses an optimal consumption point where the

slope of the indifference curve equals the slope of the budget constraint.

The amount of unemployment varies

substantially over time and across countries.

Severe adverse-selection problems may result in

too few good used cars being offered for sale

The consumer price index is used to

turn dollar figures into meaningful measures of purchasing power

A competitive, profit-maximizing firm hires workers up to the point where the

value of the marginal product equals the wage.

Because the CPI is based on a fixed basket of goods, the introduction of new goods and services in the economy causes the CPI to overestimate the cost of living. This is so because

when a new good is introduced, it gives consumers greater choice, thus reducing the amount they must spend to maintain their standard of living.

According to behavioral economics, an employee will likely

work less hard if she is a satisficer and if she believes a coworker is overpaid

A car mechanic knowing more about what's wrong with your vehicle than you do is best explained by which of the following concepts:

​Asymmetric information

​Suppose the price of good X increases and consumers purchase more of good Y. Which of the following statements is necessarily true about good Y

​Good Y could be a normal or inferior good

If real output in an economy is 1,000 goods per year, the money supply is $300, and each dollar is spent an average of 4 times per year, then according to the quantity equation, the average price level is

1.20

Which of the following bundles could not lie on the same indifference curve with A and B and satisfy the four properties of indifference curves?

3 movies and 3 books

Suppose the United States unexpectedly decided to pay off its debt by printing new money. Which of the following would happen?

All of the above are correct

Transfer payments

All of the above are correct

Which of the following is included in the consumption component of GDP

All of the above are included in the consumption component of GDP

Which of the following is an example of commodity money

The gold standard

The value of Austria's exports minus the value of Austria's imports is called

Austria's net exports.

Each August many high school and college students visit a doctor's office to have a sports physical. If the price of sports physicals rises, what happens in the market for nurses?

Demand increases from D1 to D2

Two economists found empirical evidence that when the price of rice decreased in the Hunan province of China, local residents consumed less rice than before the price decrease. The study provides a real-world example of a(n)

Giffen good

Which of the following is best explained with behavioral economics rather than traditional economics?

How people tend to be overconfident in certain situations

Which of the following causes of unemployment is not associated with a wage rate above the market equilibrium level?

Job Search

Tom is an organic gardener. For several years, he produced only for his own consumption. Last year, he sold his vegetables at a farmer's market. this year, he sold all of his vegetables to a company producing organic vegetable soup. When is the value of Tom's vegetables included in GDP

Only when he sells his vegetables at the farmer's market

Sandra uses her sewing machine, thread, and yards of denim to produce jean skirts. The sewing machine is an example of​

Physical capital

When ranking movies by nominal box office receipts, what important fact is overlooked?

Prices, including those for movie tickets, have been rising over time

In addition to the consumer price index, the Bureau of Labor Statistics also calculates the

Producer price index

On a Sunday morning, Tom sold 300 cups of coffee for a total of $750.

The $750 is a nominal variable. The 300 cups of coffee is a real variable.

Which of the following statements best represents economists' beliefs about the bias in the CPI as a measure of the cost of living?

There is still debate among economists on the severity of the CPI bias and what to do about it

Which of the following is correct? Since 1950

U.S. exports and U.S. imports each about tripled.

When the relative price of a good decreases, consumers respond by buying

a larger quantity of that good and a smaller quantity of substitutes for that good.

The buyer runs a risk of being sold a good of low quality when there is

a problem involving hidden characteristics

Factor markets for chocolate bars are influenced by the

a. demand for chocolate bars. b. marginal productivities of labor and capital. c. market prices for final goods and services. d. All of the above are correct (Correct)

Educated people may generate ideas that increase production. These ideas

a. produce a return to society from education that is greater than the return to the individual. b. could justify government subsides for education. c. are external benefits of education. d. All of the above are correct. (CORRECT)

An optimizing consumer will select the consumption bundle in which the marginal rate of substitution

a. is equal to the price of the least-expensive good. b. exceeds the marginal utility of each good by the greatest amount. c. is less than the slope of the budget constraint. d. None of the above is correct. ( Correct)

For purposes of calculating the CPI, the housing category of consumer spending includes the cost of

a. shelter. b. fuel and other utilities. c. household furnishings and operation. d. All of the above are correct. (CORRECT)

According to the neoclassical theory of distribution, the wages paid to workers depend on the

a. supply of labor. b. demand for labor. c. marginal productivity of labor. d. All of the above are correct. (Correct)

If the exchange rate changes from 148 Kazakhstan tenge per dollar to 155 Kazakhstan tenge per dollar, the dollar has

appreciated. Other things the same, it now takes fewer dollars to buy Kazakhstani goods.

Paper dollars

are fiat money and gold coins are commodity money

When one party is better informed about an economic situation than another party, economists describe the problem as one of

asymmetric information

Which of the following is not an example of a principal trying to solve the moral-hazard problem? The principal

calls the agent's references

Frictional unemployment

can be created both by workers quitting to find more suitable jobs and changes in a country's comparative advantages.

According to the quantity theory of money, a 3 percent increase in the money supply

causes the price level to rise by 3 percent.

Which type of money has intrinsic value

commodity money

When prisoners use cigarettes or some other good as money, cigarettes become

commodity money and function as a unit of account

Productivity

explains most of the differences in the standard of living across countries.

Net Exports equal

exports minus imports

Which of the following are human capital and physical capital, respectively?

for an accounting firm: the accountants' knowledge of tax laws and computer software

The invention of the telegraph led to the loss of jobs for those who had delivered mail by horse but created jobs for telegraph operators and delivery persons. This is an example of

frictional unemployment created by sectoral shifts.

Which of the following items is included in U.S. GDP

goods produced by foreign citizens working in the United States

The primary cause of inflation is

growth in the quantity of money.

A firm with a very good product

has more to gain by signaling (advertising) than does a firm with an inferior product

If citizens of a country are not saving much, it is better to

have foreigners invest in the domestic economy than no one at all.

Net capital outflow

is always equal to net exports.

An efficiency wage

is higher than the equilibrium wage for that position and region

The existence of money

makes trade easier

Commodity money is

money with intrinsic value.

Suppose the only two goods that Charlie consumes are wine and cheese. When wine sells for $10 a bottle and cheese sell for $10 a pound, he buys 6 bottles of wine and 4 pounds of cheese - spending his entire income of $100. One day the price of wine falls to $5 a bottle and the price of cheese increases to $20 a pound, while his income does not change. The bundle of wine and cheese that he purchased at the old prices now costs

more than Charlie's income at the new prices

After 1980 in the United States,

national saving fell below investment and net capital outflow was a large negative number.

Suppose that over the past year, the real interest rate was 3 percent and the inflation rate was 1 percent. It follows that

the dollar value of savings increased at 4 percent, and the purchasing power of savings increased at 3 percent.

The consumer price index is subject to substitution bias because

the law of demand applies to most, if not all, goods.

In American politics, we often observe that during a campaign, the Democratic and Republican positions on many issues are similar, which illustrates

the median voter theorem

In which case below does a person's purchasing power from saving increase the most?

the nominal interest rate = 7% and inflation = 2%

When deflation exists,

the real interest rate is greater than the nominal interest rate.


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