Econ test 2

Table 26-3. The following table presents information about a closed economy whose market for loanable funds is in equilibrium. Refer to Table 26-3. Determine the quantity of private saving.

$1.6 trillion

Which of the following is not correct??

Purchases of capital goods are excluded from GDP.

If all quantities produced rise by 10 percent, and all prices fall by 10 percent, which of the following occurs?

Real GDP rises by 10 percent, while nominal GDP is unchanged.

Sam wants to trade eggs for sausage. Sally wants to trade sausage for eggs. Sam and Sally have a double-coincidence of wants.

True

Some degree of unemployment is inevitable in a complex economy.

True

The amount of unemployment that a country typically experiences is a determinant of its standard of living.

True

Institutions that help to match one person's saving with another person's investment are collectively called the

financial system.

If all workers and all jobs were the same such that all workers were equally well suited for all jobs, then there would be no

frictional unemployment.

When a large, well-known corporation wishes to borrow directly from the public, it can

go to a bank for a loan.

A tariff is a tax imposed by a government on

imports.

Sectoral shifts in demand for output

increase unemployment due to job search.

The CPI is a measure of the overall cost of

the goods and services purchased by a typical consumer.

Babe Ruth's 1931 salary was $80,000. Government statistics show a consumer price index of 15.2 for 1931 and 229.6 for 2012. Ruth's 1931 salary was equivalent to a 2012 salary of about

$1,208,421

Which of the following institutions is a central bank?

- the Bank of Japan - the Bank of England - the Federal Reserve System **All the above are correct

Suppose the typical household spends $3,500 on goods and services during the month of January, and $4,300 on the same goods and services in February. Using January as the base period, what is the consumer price index for February?

122.9

If the price of a hot dog is $2 and the price of a hamburger is $4, then 30 hot dogs contribute as much to GDP as _____ hamburgers.

15

Table 24-9 The table below lists the per gallon prices of gas and milk for the months of April, May, and June. Assume that the typical consumer buys 60 gallons of gas and 4 gallons of milk each month, and that April is the base period. Month Price of Gas Price of Milk April $2.00 $3.50 May $3.50 $3.25 June $3.85 $3.58 Refer to Table 24-9. What is the consumer price index for May?

166

) Table 24-9 The table below lists the per gallon prices of gas and milk for the months of April, May, and June. Assume that the typical consumer buys 60 gallons of gas and 4 gallons of milk each month, and that April is the base period. Month Price of Gas Price of Milk April $2.00 $3.50 May $3.50 $3.25 June $3.85 $3.58 Refer to Table 24-9. What is the inflation rate for May?

66.4%

Economists call an institution designed to oversee the banking system and regulate the quantity of money in the economy

a central bank.

Which of the following is not a source of comparative advantage?

a strong foreign currency exchange rate

The primary purpose of measuring the overall level of prices in the economy is to

allow for the comparison of dollar figures from different points in time.

In a system of 100-percent-reserve banking,

banks do not make loans.

When the Federal Reserve conducts open-market operations to increase the money supply, it

buys government bonds from the public.

Which of the following can the Fed do to change the money supply?

change reserves or change the reserve ratio

Refer to Figure 8-2. With the tariff in place, the United States

imports 16 million pounds of rice.

The source of the supply of loanable funds

is saving and the source of demand for loanable funds is investment.

The theory of efficiency wages explains why

it may be in the best interest of firms to offer wages that are above the equilibrium level.

Economists differ in their views of the role of the government in promoting economic growth. At the very least, the government should

lend support to the invisible hand by maintaining property rights and political stability.

For a given year, productivity in a particular country is most closely matched with that country's

level of real GDP divided by hours worked over that year.

The primary economic function of the financial system is to

match one person's saving with another person's investment.

The amount of unemployment that an economy normally experiences is called the

natural rate of unemployment.

The slope of the demand for loanable funds curve represents the

negative relation between the real interest rate and investment.

The following table shows some data for an economy that produces only two goods: milk and honey.

no answer

Other things the same, when the interest rate rises,

people would want to lend more, making the quantity of loanable funds supplied increase.

The slope of the supply of loanable funds curve represents the

positive relation between the real interest rate and saving.

The one variable that stands out as the most significant explanation of large variations in living standards around the world is

productivity.

Given that Monika's income exceeds her expenditures, Monika is best described as a

saver or as a supplier of funds.

At the broadest level, the financial system moves the economy's scarce resources from

savers to borrowers.

Which of the following can be measured by the level of real GDP per person?

the standard of living but not productivity

To maintain their standard of living, most people rely on

their labor earnings.

Economists use the term "money" to refer to

those types of wealth that are regularly accepted by sellers in exchange for goods and services.

Angus the sheep farmer sells $20 worth of wool to Barnaby the knitter. Barnaby makes two sweaters, each of which has a market price of $40. Collette buys one of them, while the other remains on the shelf of Barnaby's store to be sold later. What is GDP here?

$80

"When workers already have a large quantity of capital to use in producing goods and services, giving them an additional unit of capital increases their productivity only slightly." This statement

- represents the traditional view of the production process. - is made under the assumption that the quantities of human capital, natural resources, and technology are being held constant. - is an assertion that capital is subject to diminishing returns. ** All of the above are correct.

If national saving in a closed economy is greater than zero, which of the following must be true?

-Either public saving or private saving must be greater than zero -Y-C-G>0 -Investment is positive **All above are correct

Indicate what components of GDP (if any) each of the following transactions would affect. Check all that apply.

C,I,C And I,C,G,NX,I

Which of the following lists is included in what economists call "money"?

Cash

________ is the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors.

Comparative advantage

Which of the following is not correct?

Countries that have had higher output growth per person have typically done so without higher productivity growth.

Which of the following is a correct way to measure productivity?

Divide the quantity of output by the number of hours worked.

Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 8 -2 shows the impact of this tariff. Refer to Figure 8-2. The tariff revenue collected by the government equals the area

E

Banks and mutual funds are examples of financial markets.

False

The consumer price index is used to monitor changes in an economy's production of goods and services over time.

False

Which of the following statements is not correct?

Minimum wages are the predominant reason for unemployment in the U.S. economy.

An American buys a pair of shoes manufactured in Italy. How do the U.S. national income accounts treat the transaction?

Net exports fall, while GDP is unchanged.

Which of the following is the correct answer?

The amount of unemployment that a country typically experiences is a determinant of that country's standard of living, and some degree of unemployment is inevitable in a complex economy.

Which of the following does NOT add to U.S. gross domestic product?

The federal government sends a Social Security check to your grandmother.

Economists use the term inflation to describe a situation in which the economy's overall price level is rising.

True

In an economy that relies on barter, trade requires a double-coincidence of wants.

True

Matt Fortenberry is the coolest guy on earth

True

The financial system coordinates investment and saving, which are important determinants of long-run real GDP.

True

When a country keeps its workers as fully employed as possible, it achieves a higher level of GDP than if many of its workers were idle.

True

When the consumer price index falls, the typical family has to spend fewer dollars to maintain the same standard of living.

True

As the chapter states, GDP does not include the value of used goods that are resold. True or False: Including the value of used goods that are resold would make GDP a less informative measure of economic well-being. If GDP included goods that are resold, it would...?

True/Double Count

Paying efficiency wages means that wages are

above equilibrium, and profits are higher than otherwise.

Which is the largest component of GDP?

consumption

In an economy where net exports are zero, if saving rises in some period, then in that period

consumption falls and investment rises

Other things the same, when an economy increases its saving rate

consumption falls now and production rises later.

Minimum-wage laws

create unemployment.

The key determinant of the standard of living in a country is

the amount of goods and services produced from each hour of a worker's time.

Minimum wages create unemployment in markets where they create a

surplus of labor. Unemployment of this type is called structural.