Econ Questions
Reducing global carbon omissions is difficult because of the public good nature of the climate change policy that exhibits
Non-rivalry and nonexcludability
from 2005 to 2007, the European Union experienced "wine lakes" a surplus of wine brought about by government policies that encouraged overproduction. Which policy would result in a surplus of wine?
Price floor
Which statement is NOT a key principle of economics
Rational thinking requires perfect info
The classical form of the production function states the output is determined by
Some function of available labor or capital.
Labor productivity is not a major determinant of
The money supply
An example of a natural resource is an untapped vein of platinum
True
Which factor would cause a decrease in the demand for coffee?
a decrease in the price of tea (a substitute for coffee)
which of these would not cause a shift in the aggregate demand curve?
a reduction in raw material prices
which of these is not one of the reasons for phenomenal growth of the us economy over the past century
a reduction to capital-to-labor ratio
what does the 45 degree line in the aggregate expenditures model represent?
a reference line where income equals spending
which statement about markets is correct>
all markets involve a transaction of some type
which person would not be considered employed?
an unpaid employee working 10 hours a week?
which statement best illustrates opportunity costs
as more rice is produced
the international monetary fund was founded
as part of the Bretton Wood agreements
The ___ is the amount by which annual gov spending exceeds tax revenues
budget deficit
if the fed wishes to raise the federal funds rate, how would it accomplish this objective>
by selling bonds, which lowers the price of bonds.
in effect, the phillips curve framework implies that to fight inflationary expectations, policymakers must
cause unemployment
Which of these would NOT cause a shift in the aggregate demand curve?
change in the price level
in 2018, the US ran both a ___ account deficit and a ___ account surplus
current; capital
Which factor may adversely affect the ability of purchasing power parity to hold?
custom duties
when the economy is operating at the natural rate of unemployment ___ unemployment is zero.
cyclical
which event will shift the aggregate demand curve to the right
decrease in taxes
Aggregate____ is the output of goods and services demanded at different price levels
demand
A glut of oil in the world market would likely result in ___ in the US
disinflation
The US gross domestic product is equal to the total market value of all
final goods and services produced by resources in the United States.
the concept of intergenerational imbalance refers to
future generations funding the current generation's benefits
Thomas Malthus beloved that population increased ___ and food resources increased ___.
geometrically; arithmetically
Which expenditure component of GDP tends to be the MOST volatile over time?
gross private domestic investment
suppose that an artist has priced his painting at $150, but it remains unsold. we can conclude that the price of $150 is too
high for this painting and should be lowered
which of these is not a problem for policymakers who want to reduce the national debt
high interest rates make it more difficult to pay down debt
which action would reduce frictional unemployment
holding job fairs
Assume that Bob reads an article for class concerning the US labor market that reports an increase in entrepreneurial activity. To verify this info, he could refer to the
household survey
Hannah is not at work because she broke her leg, but she will return once it heals. She is
in the labor force
As income increases, consumption ____
increases at a slower rate
Which asset is NOT included in M2?
large-denomination time deposits
if a country calculates its real GDP using the year 2012 as its base year, the value of its real GDP will be ____ than its nominal GDP as long as prices have risen since 2012
less than
When the interest rate falls, American bonds become ___ attractive to foreign investors, often leading to a __ in the value of the US dollar in foreign exchange markets
less; decrease
If the economy is currently operating below long-run output, what should the Federal Reserve do?
lower interest rates from their current level
___ are all examples of discretionary spending
national defense, income security, and veteran's benefits
if a short term interest rate becomes larger than long-term interest rates, the yield curve becomes _ sloped, and the chance of a recession becomes __ likely
negatively, more
In the US, social security and medicare are examples of
pay-as-you-go programs
a ____ in the business cycle usually means the economy is operating at its capacity
peak
Free trade is known as a __ game because ___.
positive-sum, both parties to a transaction can achieve positive gains
in the short run, the aggregate supply curve is
positively sloped
an example of a less tangible component of a countrys infrastructure is
property rights
Which activity would not qualify a person as being in the labor force?
reading help-wanted ads
The Federal Reserve will most likely halt its quantitative easing program by
selling assets from its portfolio
An increase in technology:
shifts the PPF curve outward
All of these are considered monetary policy lags EXCEPT ___lag
speculation
which of these are two things people can do with money received as disposable personal income
spend money or put it into savings
David Ricardo
suggested that countries would benefit from trade
over the past 10 years, laptop computer prices have decrease while their quantity has increased. this indicates that
supply has increased more than demand
A perpetuity bond is sold with the following terms: coupon rate = 5% and face value = $100. 5 years after the bond is issued, the market rate of interest on similar bonds is 6%. Which statement accurately describes the situation if the bond is sold the secondary market at that time (five years after its initial issue)?
the bond will sell for about $833.33 in the secondary market
a perpetuity bond is sold with the following termsL coupon rate = 5% and face value = 1000. five years after the bond is issued, the market rate of interest on similar bonds is 6%. which statement accurately describes the situation if the bonds is sold in the secondary bond market at that time>
the bond will sell for about $833.33 in the secondary market
What happens when desired saving exceeds desired investment?
the economy is not in equilibrium and income will fall
what happens when desired savings exceeds desired investment?
the economy is not in equillibrium and income will fall
Monetary targeting is setting a steady growth rate in
the money supply
labor productivity is not a major determinant of
the money supply
the difference between the nominal and real exchange rate is that
the real exchange rate takes relative purchasing power into account, while the nominal rate does not
which of these is not a problem in measuring consumer prices?
the reference period used for the CPI is 1982-1984.
in the market for designer jeans, surplus is transferred from producers to consumers when
there is a shortage of designer jeans.
which term does not mean the same as the other three
tight money
One of the major limits to trade is
transaction costs
A change in the price of a good will cause a change in the quantity supplied
true
Compounding means that growth builds on prior growth
true
Even though recent legislation has slowed the rise in health care costs, the overall cost of Medicare remains unsustainable in the long term
true
The US exports more services than it imports services
true
if an employer uses an escalator clause to determine an employee's raise each year, in an inflationary environment, the employer is more likely than the employee to want to use the personal consumption expenditures prices index in this clause
true
In the market for cable television fewer people are subscribing to cable while the cost of providing cable television has increased. As a result we can expect
unknown change in the equilibrium price but a decrease in the equilibrium quantity of cable television.
Scarcity is best defined as when
unlimited wants exceed limited resources
If the marginal propensity to consume is .65, the spending multiplier is
2.86
if the marginal propensity to consume if .65, the spending multiplier is
2.86
Which of these will not be included in the GDP?
A cruise on the A cruise on a ship registered in Norway
Which one of these would not lead to higher prices?
An increase in the food supply
Imagine two countries with identical endowments of resources. Using all its resources. Broland can produce 5,000 books or 8,000 forks. using the same resources, Nomia can produce 4,000 books or 7,000 forks. Which country has a comparative advantage producing books?
Broland, because it gives up 1.6 forks for each book produced
When the price of running shoes is higher than the market equilibrium price, which of these occurs
Consumer surplus falls, and deadweight loss rises
The broadest measure of inflation is the
GDP deflator
the broadest measure of inflation is the
GDP deflator
Net domestic product measures
GDP minus depreciation
If aggregate expenditures equal $6200 in aggregate income equals $5800, businesses will produce
More, raising both employment and income
GDP per capita is found by dividing GDP by population
True
Government policy to achieve high employment may cause inflation to rise too quickly
True
in the free market, the main signal to the market that pushes prices towards equilibrium comes from
a surplus or shortage of goods available for sale
If a student were not studying economics, he could be doing one of the following: sleeping in (values at $5), playing cards with his friends (which he values at $10), or working (he would have earned an extra $8). The opportunity cost of studying economics is therefore
$10
most trade is based on specialization, according to
competitive advantage
The difference between the demand curve and the market price is called
consumer surplus
other things equal, if US disposable income falls, imports will___and the current account deficit will__
fall, decrease
The Leading Economic Index fell in July and August, rose in September, and fell again in October. Based on this, we should expect a recession in the near future
false
Which activity is an example of a nonmarket transaction?
growing your own food in a vegetable garden
new Keynesian economics critique rational expectations by arguing that short-term wage stickiness is brought about by
imperfect information and efficiency wages
which of these is not a reason the aggregate demand curve is negatively sloped?
income effect
increases in government spending ____ equilibrium income, and increase in taxes ___ equilibrium income
increase; decrease
in the long run, attempts to expand beyond an economy's natural rate of unemployment tend to result in
increased inflation
the study of economics
is about people making decisions regarding their use of scarce resources
If disposable income is $3000 and saving is $1200, how much is the average propensity to consume?
.6
suppose a store sells candy bars for .89 for 1 and 1.5 for two. the marginal cost for the second candy bar is
.61
If the spending multiplier in an economy is 5, what is the corresponding marginal propensity to consume?
.80
If the marginal propensity to consume is .9, what is the size of a multiplier?
10
If the marginal propensity to consume is 0.9, what is the size of the multiplier?
10
The nation of Workovia has a population of 15 mil people, of whom 10 mil are in the labor force and 9 mil are working. Workovia's unemployment rate is
10%
Reducing global carbon emissions is difficult because of the public goods nature of climate change policy that exhibits
nonrivalry and nonexcludability
Demand-pull inflation scenarios took place in the
1960s for the US and from 1985 to 1995 for Japan
How large was the unemployment rate during the great depression?
25%
If your goal was to have the largest amount of money in your bank account as possible in two years, which option would you choose
A beginning deposit of $930, earning 8% per year
the public debt is the
portion of the national debt that is held by individuals, companies, and pension funds, along with foreign entities and foreign governments
Which of these would not cause a shift in the aggregate demand curve
A reduction in the raw material prices
a breakthrough in solar energy research that halves the cost of electricity will
shift the aggregate supply curve to the right
an increase in technology
shifts the production possibilities frontier curve outward
When Mr. Wilson worked full time, he paid a cleaning service to have his house cleaned twice a month. Now that he is retired, Mr. Wilson does his own cleaning. What is the effect on GDP? a.) GDP is unaffected by this change. b.) GDP falls as a result of this change. c.) GDP at first rises but then falls. d.) GDP rises as a result of this change.
B
Two countries specialize in trade based on their comparative advantage
Both countries are able to consume at a point beyond the original PPF
the target federal funds rate is the Fed's primary approach to monetary policy
true
When the economy is operating at the natural rate of unemployment _________ unemployment is zero
Cyclical
Which statement is correct with respect to determining the market price of a product ?
Demand and supply are equally important
the long-run supply curve is
vertical
_________ Is a reduction in the rate of inflation
Disinflation
The balanced budget multiplier is
Equal to one
A change in the quantity of laundry detergent supplied occurs when more sellers enter the laundry detergent market
False
Which statement about economic models is FALSE?
In practice, it is easy for an economist to isolate economic variables
Johnny is 17 and works in his fathers bubblegum store 10 hours a week after school. His father pays him no money but by his video games for him. However, Johnny earns a spot on the high school football team and no longer works in his father store. How is Johnny categorized in the unemployment figures?
Johnny is not part of the labor force
Which statement illustrates what an effective price ceiling does to a market price
Like a helium balloon bumps against a room ceiling, unable to rise to the level to which it would go if it were outside, price ceilings hold price is down below equilibrium.
The change in consumption associated with change in income
Marginal propensity to consume
If the CPI increases from 150 to 153 and a person's monthly retirement benefit has an escalator clause that ties it to the CPI, by how much would the monthly payment increase if the original amount is $750?
$15
Jackie finds a pair of jeans that she likes but the price tag is missing. she is willing to buy them as long as they're not more than $100. the cashier informs Jackie that the price is $72. Jackie buys the jeans, and therefore achieved a consumer surplus of
$28, the difference between what she was willing to pay and the price
The equilibrium price of cocoa beans is $40 per bushel what would be a binding price ceiling?
$30
the equilibrium price of cocoa beans is $40 per bushel. which would be a binding price ceiling
$30
if Kim's salary was $50,000 last year and this year she receives a cost-of-living increase tied to the CPI, what will her salary be this year assuming the CPI has risen from 110 to 114?
$51,818
According to the equation for the Phillips curve, if wages increase by 3% and productivity increases by 5%, then inflation will be
-2%
if the spending multiplier in an economy is 5, what is the corresponding marginal propensity to consume?
.80
How many hours does a person have to work for pay to be counted as employed?
1 hour a week
which statements is/are true I. the crowding-out effect can be mitigated if the funds from deficit spending are used for public investment
1 only
For which growth rate with the rule of 70 be most accurate
1% (smallest choice)
Suppose the market basket of goods and services cost 3,500 in 1996 but today cost 4,250. Using 1996 as the base year, the consumer price index for today is
121.4
If nominal GDP in 2014 is $20,000 billion well real GDP is $16,000 billion, then the GDP inflator in 2014 is
125
if nominal gdp in 2014 is $20,000 billion while real GDp is $16,000 then the GDP deflator in 2014 is
125
A bank has $50,000 in deposits from its checking account customers and loans of $49,000. Of the $49,000 loaned out, $43,000 had remained in the checking accounts of the loan recipients but now has been withdrawn as cash by the loan recipients. The bank had $50,000 cash on hand prior to the remaining loan proceeds being converted to cash, and the reserve requirement is 25%. The reserve ratio for this bank after the remaining loan proceeds are converted to cash is___, and it ___meeting its reserve requirement
14%; is not
If the price of shoes is $40 per pair the quantity supplied will be ______ pairs of shoes
20
a bank has 50,000 in checking accounts deposits and loans of 49,000. of the 49,000 loaned, 43,000 remains in the checking accounts of the loan recipients. the bank has 50,000 cash on hand and the reserve requirement is 25%. the amount of its required reserves equals
23,250
If a country's national debt is $50 billion, of which $10 billion is held by gov agencies, $15 billion is held by foreign entities, and $25 billion is held by domestic citizens, what portion of the national debt is externally held?
30%
if the reserve requirement is 25% a new deposit of 1,000 leads to a potential increase in the money supply of
4,000
At equilibrium, if spending increases by $1200 and the corresponding increase in income is $1500, what is the multiplier
5
A bank has $50,000 in deposits from its checking account customers and loans of $49000. Of the $49000 loaned out, $43000 remains in the checking accounts of the loan recipients. The bank has $50000 cash on hand, and the reserve requirement is 25%. The reserve ratio for this bank is__and it___meeting its reserve requirement
53.76%; is
The typical length of a recession has been ___ months and is usually __ than the subsequent period of expansion
8 to 18; shorter
Karl's keychain sold 900,000 keychains. at the end of the business year, the company's inventory was 6,000 keychains. how much did Karl's output contribute to GDP in 2015???
896,000
if gdp was 10 trillion in 2001 and the gdp deflator was 200 in 2000 and 110 in 2001, what was real gdp??
9.09 trillion
which of these is likely to have the smallest impact on a country's growth in real GDP per capita?
A 10% growth in population
Which of these is likely to have the smallest impact on a country's growth in real GDP per capita
A 10% growth in the population
Which of these would not shift the investment demand schedule?
A change in interest rates
Which item is most likely an inferior good
A city bus ticket
Suppose that Japan is a nation of savers with a marginal propensity to consume of .6 and that the US is a nation of spenders with a marginal propensity to consume of .9. Which statement is correct?
A small increase in spending will have a more powerful effect in starting a recovery in the US than in Japan
Which circumstance will cause a decrease in demand
An increase in the price of a complementary good
If demand for a product rises, what happens to consumer surplus, assuming supply does not change and the market sells at the equilibrium price?
Consumer surplus will be larger after the increase in demand
Rising cotton prices have for school tours to switch from fabric to linen. what happened to consumer surplus in the market for linen, assuming supply held steady in the market sells at the equilibrium price?
Consumer surplus will be larger after the increase in demand
Do you creasing the accessibility to college in order to final workers into the workforce faster Will
Decreased productivity of the economy
If the cost of a typical market basket is 420 18, for 10 in 2019, and 415 in 2020, then during this. The economy is undergoing
Disinflation
What is a difference between the typical structure of a retirement savings account (401k) and an individual retirement arrangement (IRA)?
Employers often match 401k contribution, but they do not match IRA contributions
Catherine spends hours each day tending to her garden landscaping, and sweeping leaves from her cul-de-sac. Prospective homebuyers increase their desire to live on the street, increasing all home values on the street. Catherine's neighbors are benefiting from
External benefit
Which of these is not a problem and using the GDP to measure standards of living
Failure to include exports and imports
A market is a physical location that enables buyers and sellers to interact and transact with one another
False
An increase in interest rates will lead to an increase in aggregate demand
False
Country X is practicing expansionary monetary policy. This drives down the price of its imports and drives up the price of its exports
False
During the 2007-2009 recession the Federal Reserve was not able to counteract any of the effects of a falling money multiplier on teh economy
False
Economic models must fully reflect reality
False
If the reserve requirement is 1%, a $10,000 decrease in deposits means that the actual money supply will decrease by more than $1 million
False
Saving is 0 when the economy is in macroeconomic equilibrium in the simple Keynesian model
False
Since 2008, females have had higher unemployment rate than males.
False
Supply-side fiscal policies have the disadvantage of setting up a tradeoff between low inflation and low unemployment rates
False
Suppose the economy is at full employment and companies suddenly increase their level of investment. A short-run increase in output will be followed by a reduction in output, resulting in an overall decrease in output
False
Surpluses, but not shortages, can exist when a market is in equilibrium
False
The Index of Economic Freedom shows that countries with the fewest economic freedoms have the highest per capita GDP
False
The balanced budget multiplier changes according to the values of the marginal propensity to consume and the marginal propensity to save
False
The consumer price index is a measure of the changes in the cost of production
False
The multiplier effect relates to change it in savings to the resulting changing investment.
False
The national income and product accounts have been used to track the United States economic performance since the Civil War
False
The nonaccelerating inflation rate of unemployment does not change over time
False
Whenever a borrower defaults on a bank loan, the depositor who made those funds available lose their money
False
The __ is/are equal to the total market value of all final goods and services produced in the US
GDP
Which statement is/are true?
I only (if cyclical unemployment is 0%, then the unemployment rate equals the natural rate of unemployment.)
In the market for gasoline, more consumers will begin driving at the onset of nicer weather, while the price of public transportation, a substitute, rises the demand for gasoline should
Increase
Suppose a country faces the following situation: inflation rate =4%; target inflation rate = 2%; current federal funds rate = 3%; and current GDP 4% below full-employment GDP. Which statement correctly describes monetary policy actions that would be recommended according to inflation targeting and the Taylor rule?
Inflation targeting would recommend contractionary policy; the Taylor rule would recommend expansionary policy
If an economy is on the vertical portion of the aggregate supply curve, then it
Is at full employment
Which scenario can occur when specialization in tasks is coupled with trade?
It can lead to gains for all parties
It's government spending falls and taxes rise, both will ________, but the effects of _________
Lower equilibrium income; government spending will be larger
Which statement regarding discretionary and mandatory spending is correct?
Mandatory spending may act as an automatic stabilizing force in the macro economy
If short-term interest rates become larger than long-term interest rates, the yield curve becomes ________ sloped, and the chance of a recession becomes __________ likely
Negatively; more
Jamestown offers a free community bus service to anyone wishing to use it. Is this service a public good?
No, it is not a public good because there are only a limited number of seats on each bus, which can fill up.
Imagine two countries with identical endowments of resources. Using all its resources, Broland can produce 5,000 books or 8,000 forks. Using the same resources, Nomia could produce 4,000 books or 7,000 forks. Which country has a comparative advantage producing forks?
Nomia because it gives up .57 book for each fork produced
Which situation indicates that total output in a country has grown the most when the starting output is the same in all situations?
Output per worker grows by 10% while the labor force grows by 10%
The introduction of the tablet computer to the US economy would best be represented on a production possibilities frontier as a ____ the PPF
Outward shift of
___ occurs when goods are produced at the lowest possible cost, and ___ occurs when individuals who desire a product the most receive those goods and services
Production efficiency; allocative efficiency
Which would best represent a normative question?
Should the minimum age to collect Social Security benefits be raised?
What is the main claim of the aggregate expenditures model?
Spending will generate income, which allows for more spending.
Which transaction would not be included in the GDP calculation of a country
Supplemental income paid by the government to a person with a disability
Suppose the Federal Reserve raises interest rates. Which situation would MOST likely trigger such a policy move?
The US dollar has depreciated, and inflation was high
Which scenario does not fall under the category of microeconomics?
The cost-of-living rise due to the rising housing and food prices
Suppose the national activity index of the federal reserve bank of Chicago dropped to -.83 this month after being above + .36 for the previous three months. This movement in the index indicates
The economy has probably moved into a recession
What happens when desired saving exceeds desired investment?
The economy is not in equilibrium and income will fall
What happens when desired savings exceeds desired investment?
The economy is not in equilibrium and income will fall
Which of these is NOT a concern raised by critics of the government's extensive policy response to the 2007-2009 recession?
The value of US treasury bonds may eventually become worthless as a default risk increases
In which situation is a country LEAST likely to be producing on its production possibilities curve?
There are legal disputes over the ownership of 15% of the factory buildings in the country
A change in the price of a good will cause a change in the quantity supplied
True
A country is said to have an absolute advantage if it can produce more of a good than another country can
True
If a country's rate of population growth increases faster than its real GDP growth, the country's standard of living will decline
True
If foreign countries abandoned the use of the dollar as their only form of legal currency, the US money multiplier would likely increase
True
Nonprice factors that affect demand include income, prices of related goods, the number of buyers, and expectations about future prices, income, and product availability
True
Producer surplus is defined as the gap between the supply curve and the market price
True
The legal enforcement of contract rates is an important component of intangible infrastructure that promote economic growth.
True
The national income and product accounts are really scored a way to ensure the accurate economic information is readily available
True
The total of disposable income must be either spent or saved
True
Thomas Malthus thought that world starvation was inevitable
True
Whispering Valley Furniture hires 5 employees working 8 hours each to produce 80 rocking chairs. Which companys workers are more productive?
Whispering Valley Furnitures workers are more productive
the gold standard was characterized by all these EXCEPT
a system that tied interest rates to exchange rates
Gross Domestic Product is a measure of
a.) an economy's total output
If banks increase excess reserves to increase their ability to absorb a higher rate of defaults, the __ multiplier will __
actual; fall
prices
allow sellers to determine what goods to sell, help buyers find possible substitute goods, and contain info useful for all people involved in a transaction
the maximum amount of a good that may be imported during a specified period of time is called
an import quota
An economy is expected to produce higher profits for business owners at the same time that the country's stock market surges. What changes can be expected in the country's market for loanable funds?
an increase in demand and a decrease in supply
Which of these will shift the short-run aggregate supply curve to the right?
an increase in immigration from other countries
if there is excess demand for a currency, the currency will
appreciate
What are the determinants of short-run aggregate supply?
changes in input prices, taxes, and business and inflationary expectations
according to a cyclically balanced budget, what type of fiscal policies should be used during periods of economic expansion?
contractionary fiscal policy to generate a budget surplus
to counteract a positive demand shock, the federal reserve uses ___ monetary policy, which ___
contractionary; reduces both output and the price level
A solution to the simultaneous emergence of deflation and unemployment is to use policies that shift the aggregate
demand curve to the right
when the increase in price goes from 5% to 2% this is referred to as
disinflation
changes in taxes first cause changes in ____, and thus the government tax multiplier is ___ than the government spending multiplier
disposable income; smaller
with everything else held constant, if 5% of those considered to be frictionally unemployed found work while the number of people considered rot be structurally unemployed increased by 5%, the natural rate of unemployment
does not change
Thelma grows carrots in her garden, but she needs a winter coat. John has an extra coat he does not need but would like to bake a carrot cake. The two find each other and make an exchange. This situation is called the
double coincidence of wants
thelma grows carrots in her garden, but she needs a winter coat. John has an extra coat he does not need but would like to bake a carrot cake. the two find each other and make an e xchange. this situation is called the
double coincidence of wants
which effect does not deal with macroeconomics
effect of Walmart's pricing policies on consumers
Gov funding of Los Alamos National Labs is an example of the gov acting in its role to promote economic growth by
enhancing physical and human capital
Total surplus is maximized when the price is ___ the equilibrium price.
exactly at
which policy tends to be favored most by politicians seeking to be reelected
expansionary fiscal policy such as lower tax rates
in a two-country, two-good model, the
exports of one country must equal the imports of the other country
Kathryn spends hours each day tending to her gardens and landscaping, and sweeping leaves from her cul-de-sac. Prospective homebuyers increase their desire to live on this street, increasing all home values of the street. kathryn's neighbors are benefiting from an
external benefit
one way a stable financial system supports economic growth is that it
facilitates the movement of capital from savings to investment
"the economic wealth of this country was built..." this statement indicates that its author
fails to understand that all voluntary trades benefit both parties involved
assume taxes increase by $200 and the marginal propensity to consume is 0.75. equillibrium income would be likely to
fall by 600
Kim recently purchased a perpetual bond for $1000. The bond pays $50 in interest per year. If market interest rates rise to 7% after her purchase, the price of the bond
falls to $714
For calculations of employee compensation in the national income and product accounts, non monetary benefits, such as in-kind benefits, are excluded
false
The most common type of short-term debt is college loans
false
a microprocessor purchased by Dell is an example of a final good
false
about 10% of US dollars are held outside the US
false
an increase in interest rates will lead to an increase in aggregate demand
false
annually balancing the federal budget has been the prevailing approach since the 1930s
false
if Rodrigo writes a 1,000 check t his landlord and his landlord deposits that money into his or her bank, the money supply can increase by the amount of that check times the money multiplier
false
if a $1000 bond is issued with a coupon rate of 12%, the bondholder will receive $12 per year for the life of the bond
false
if consumer surplus is $6 million and producer surplus is $4 million, then we know that deadweight loss is $2 million
false
in Keynesian macroeconomic equilibrium, there are pressures on the economy to move to a different income level
false
in the US the president, senate, and the chairperson of the fed must agree on spending and tax policies
false
in the balance of payments accounts, the current account includes the purchase and sale of foreign currency
false
increased trade and globalization are both beneficial for all domestic workers
false
it is possible for the fed to change the money supply without influencing the interest rate or influence the interest rate without impacting the money supply.
false
market failure occurs only when a market completely stops conducting business
false
over the past few decades, net exports in the US have been a positive percentage of GDP
false
savings deposits are included in M1
false
spending money on research and development hurts a national economy because it increases the average cost of all products
false
stocks and bonds are the most liquid assets
false
the 2007-2009 recession was not as severe as the previous two recessions, in 1991 and 2001
false
the full employment level is greater than the natural rate of unemployment
false
the law of supply states that as the price of a good increase, quantity supplied decreases, ceteris paribus
false
the law of supply states that if prices fall, consumers will purchase fewer products in the market
false
the long-run aggregate supply curve is vertical because of the assumption that all variables are fixed in the long run
false
there is a positive relationship between bond prices and interest rates
false
today, monetary policies are relatively unlikely to be reinforced because of the flexible exchange rate system
false
when aggregate prices rise, US goods become more expensive relative to goods from others countries, which leads to an increase in exports
false
which statement is generally NOT true with regard to the effect of trade on wages in developing countries?
foreign companies tend to reduce the overall number of jobs available in developing countries
Joan is trying to gather information on the membership at her Zen Center. She estimates that it will cost around $1,000 to gather the information but expects the information to lead to increased membership revenue of $1,100. Based on this information, Joan should
gather the information since the net gain will be $100
one of the major limitations of supply side fiscal policies is that they
generally take longer to impact the economy than policies targeting aggregate demand
One of the implications of the supply and demand model is that
government action is not necessary for a market to achieve equilibrium
the efficiency wage theory states that by paying their employees more than the market clearing wage, employers hope to
improve employee morale
Which factor poses the smallest problem with managing the national debt?
increase in foreign individuals and governments holding US dollars in reserve
Increases in gov spending ___ equilibrium income, and increases in taxes ___ equilibrium income
increase; decrease
The largest source of federal gov revenues is ___ taxes
individual income
In Productovia, aggregate demand increases and aggregate supply decreases. Based on the shifts of these 2 curves, which of these is a likely outcome?
inflation
Unanticipated ___ is detrimental to economic growth
inflation or deflation
the twin perils of the modern macro economy are said to be
inflation unemployment
the spending reduction necessary to bring an overheated economy back to full employment is called the
inflationary gap
In Sep. 2013, the Federal Open Market Committee said it would wait for more evidence that progress had been made on the economic recovery before it cut back on open market purchases. The Bureau of Economic Analysis did not release its advanced estimate of the 3rd quarter's GDP growth until a month after the quarter ended. The second estimate was released 2 months after the quarter ended, and a 3rd revised estimate was released about 3 months after the quarter ended. This wait for accurate data to be collected is known as the ___lag
information lag
The price of a bond is equal to
interest payment divided by yield
the price of a bond is equal to
interest payment divided by yield
the effects of expansionary fiscal and monetary policies differ under a flexible exchange rate system because they have different effects on
interest rates
the costs of cyclical unemployment can be minimized by
keeping the economy on a steady,low-inflationary growth path
a stronger dollar will shift the US aggregate demand curve to the ___ and ____ output demanded
left; decrease
Some analyst blame the last economic crisis on Federal Reserve policy. They argue that
low interest rates encouraged excessive mortgage borrowing, leading to the housing bubble
some analyst blame the financial crisis of 2007-2009 on the Fed Reserve policy. they argue that
low interest rates encouraged excessive mortgage borrowing, leading to the housing bubble
consider the market for new homes, ceteris paribus, which event will cause consumer surplus to increase, assuming the market sells at the equilibrium prices?
low mortgage interest rates provide an incentive for potential homeowners to buy now
if a price floor is set above the equilibrium price in the market, consumer surplus will be
lower than it would be without the price floor
According to the Taylor rule, the more GDP falls below potential GDP, other things equal, the
lower the federal funds target rate
Student loans funded by the gov typically offer___interest rates than similar bank loans and ___
lower; can be paid back later
if mangos were widely accepted for purposes of exchange
mangos would be money
Physical capital includes
manufactured products that are used to produce other goods and services
The extra cost associated with undertaking some action is the a. marginal benefit. b. marginal cost. c. total net loss. d. total loss. e. total cost.
marginal cost
Jamestown offers a free community bus service to anyone wishing to use it. is this service a public good>
no, it is not a public good because there are only a limited number of seats on each bus, which can fill up
The introduction of the tablet computer to the US economy would BEST be represented on a production possibilities frontier (PPF) as an ___ outward shift of the PPF
outward shift of
the introduction of the tablet computer to the US economy would best be represented on a production possibilities fronton as a ____ the PPF
outward shift of
One argument against using taxation to pay off the public debt is that it will redistribute wealth from
poorer people who do not own bonds to richer bondholders
one argument against using taxation to pay off the public debt is that it will redistribute wealth from
poorer people who do not own bonds to richer bondholders
according to Malthus, what part of the economy might increase at a rate such that the data would show an increase from 1000 t0 2000 to 4000 to 16000?
population
which is not a purpose that prices play in a market?
prices rarely change, which allows markets to be more stable
a country has an absolute advantage in the production of a good if it can ___ of the good than another country
produce more
Actions taken by the European Central Bank to address the European Union's financial crisis from 2009 to 2013 include all of these EXCEPT
reducing taxes to provide stimulus packages
if firms' product demand increase, then the demand for loanable funds will shift to the ___ and the real interest rate will ___
right; increase
if national incomes of foreign countries fall at the same time the dollar appreciates, then in the US, the aggregate demand curve
shifts to the left
if a country's currency appreciates, what impact will it have on aggregate demand or aggregate supply?
short-run aggregate supply will rise due to lower prices on imported inputs
The Taylor rule
targets the federal funds rate
which assumption is not a problem related to using the CPI to accurately state the rate of inflation?
the CPI does not deal with producer prices
the sum of the balance of trade, the balance of income, and net transfers is
the current account
In a global economy, a problem with using expansionary fiscal and monetary policies to fix the problems in our country is that they can lead to retaliatory actions by other nations
true
One difficulty with the infant industry arrangement is deciding when to wean the firm off protection
true
The federal reserve risks aborting a recovery if it halts its quantitative easing programs too soon
true
When the economy booms, tax revenues rise faster than income
true
a price floor is binding if it is set above the market price
true
a rise in real GDP is associated with increased employment
true
barriers to free trade create inefficiencies in the allocation of foreign resources
true
discretionary spending by the federal gov must work its way through appropriations process of congress each year
true
environmental protection typically improves when a country's economy grows
true
human capital can increase by providing more educational opportunities
true
if a person borrows 2,000 at 5% interest and never makes any payments, the loan balance will be 2,205 after two years
true
if the economy is in a jobless recovery, output grows with little growth in employment
true
it can be said that macroeconomics was born during the Great Depression
true
leverage occurs when investors borrow money at low interest rates to purchase investments that may provide higher rates of return
true
macroeconomics focuses on issues such as job growth, economic growth, and inflation rates
true
money leakage make it more difficult to use monetary policy to putt the economy our of a recession
true
the fed works independently of political parties
true
the national income and product accounts are released quarterly to ensure that accurate economic information is readily available
true
the recessionary gap is equal to the GDP gap divided by the multiplier
true
the rule of 70 is fairly accurate for small growth rates
true
the rule of 70 states that the number of years required for a value (such as a nations GDP) to double in size is 70/ by the growth rate
true
thomas malthus thought that world starvation was inevitable
true
when a scarce good or resource is consumed by the person who does not value it most, economists refer to the situation as a misallocation of resources
true
when the OMC buys $1 million worth of bonds, $1 million of reserves is instantly put into the banking system
true
About ___ of US currency is held outside the US
two-thirds
In the market for electric vehicles (EVs), more vehicle manufacturers are releasing electric models at the same time that consumer preferences are changing toward EVs. As a result, we can expect an
unknown change in the equilibrium price but an increase in the equilibrium quantity of EVs
which is not a basic economic question that societies must answer?
why are these goods and services being produced?