Economics 1101 Final Exam

Katherine gives piano lessons for $15 per hour. She also grows flowers, which she arranges and sells at the local farmers market. One day she spends 5 hrs planting $50 worth of seeds in her garden. Once the seeds have grown into flowers, she can see them for $150 at the farmers market. Accounting profits are:

$100, and her economic profits are $25.

If Darren sells 300 glasses of ices tea at .50 each, his total revenues are:

$150

Cody builds mailboxes. If he charges $20 for each mailbox, his total revenue will be:

$500 if he sells 25 mailboxes

Trevor's Tire Company produced and sold 500 tires. The average cost of production per tire was $50. Each tire sold for a price of $65. Excluding any other costs, Trevor's Tire Company's total profits are:

$7,500

Joy sells 200 glasses of iced tea at .50 each. Her total costs are $25. Her profits are:

$75

Scarcity exists when:

A choice must be made among two or more alternatives.

The principle of fractional reserve banking makes it possible for a:

Bank to make loans.

Price controls:

Can result in inequitable outcomes.

If the US decides to allocate more resources to capital goods and less to consumer goods, the US will obtain a greater degree of:

Economic growth.

A cost that farm subsidies and price floors imposes on the rest of the economy is:

Higher consumer commodity prices.

The following are all determinants of growth except:

The allocation factor.

Average total cost is equal to:

Total cost divided by output.

Profit is defined as:

Total revenue minus total cost.

Grace is a self-employed artist. She can make 20 pieces of pottery per week. She is considering hiring her sister Kate to work for her. Both she and Kate can make 35 pieces of pottery per week. What is Kates marginal product?

15 pieces of pottery.

Which of the following is true?

A bank is insolvent when its net worth becomes negative.

The equilibrium price in a market is established subject to the all other things unchanged condition and, therefore, very well may change due to:

A change in the price of resource inputs used to produce the good.

Which would NOT cause the supply curve to shift?

A change in the price of the good.

If the Fed increases the discount rate, it is pursuing:

A contractionary policy b/c is will be more costly for banks to borrow funds and this puts upward pressure on interest rates in the economy.

Increasing the reserve requirement ratio is:

A contractionary policy because it lowers the amount of excess reserves in the banking system.

Which of the following statement is correct:

A nation acquires more capital by saving some of its income and uses it to invest in plants and equipments.

Which of the following is counted as consumption expenditure?

A person buying a new car.

If the government sets out to help low-income people by establishing a maximum amount for rent:

A price ceiling has been set and a shortage of rental units may occur.

A maximum legal price is called:

A price ceiling.

Since stock prices will shift in response to unpredictable future news, these prices will tend to follow what mathematicians call ______________.

A random walk with a trend.

Which of the following will result in an increased price of milk:

A shift to the right of the demand curve for milk.

According to the textbook, economics is:

A social science.

The functions of money are:

A store of value, a unit of account, and a medium of exchange.

An activity performed by commercial banks that is not performed by insurance companies is:

Accepting deposits and use this to make loans.

A primary function of a central bank is to:

Act as a regulator of banks.

A source of economic growth is:

Advances in technology.

During the Great Depression:

Agriculture was hit particularly hard.

Demand and supply curves are drawn assuming ceteris paribus. This means that:

All other things besides price and quantity are assumed unchanged.

The problem of scarcity is confronted by:

All societies.

Demand deposits are:

All. Called "Checking Account", Part of M2, Part of M1

What causes changes in unemployment over the long run?

All. Economic and social, political forces, structural unemployment

Which of the following are true:

All. One can criticize monopolistic competition because it falls short of the efficiency standards of perfect competition. Monopolistic competition is inefficient because of product differentiation, According to the text, the inefficiency of monopolistic competition may be a small price to pay for the wide range of product choices it offers.

In oligopoly, a firm must realize:

All. That what it does affects the other firms, that it must pursue policies always remembering there will be a reaction to those policies by other firms, that is in in an industry in which one major firm may dominate and the firm will need to judge its actions accordingly.

A study of advertising and the prices of eyeglasses found that the cost of prescription eyeglasses in states that _______ advertising was _______ than in the states that _______ advertising.

Allowed; lower; did not allow

Small companies typically prefer _____________ to borrowing from a bank because it is a source of funding where the company is not obligated to ___________.

An IPO; make interest payments

Decreasing the reserve requirement ratio is:

An expansionary policy because it raises the amount of excess reserves in the banking system.

Using the term "spillover" is a less formal means of describing:

An externality

The amount of money that a wheat farmer could have earned if he had planted barley instead of wheat is:

An implicit cost.

An example of a positive statement is:

An increase in investment spending tends to reduce unemployment.

Given a supply curve that is positively sloped and a demand curve for a normal good that is negatively sloped, an increase in income will most likely result in:

An increase in price and quantity.

A decrease in supply is caused by:

An increase in returns from other alternative activities / goods.

Assuming that pizza is a normal good, if students' income at your college increases substantially, there would be:

An increase in the demand for pizza.

The demand curve for on-demand videos has shifted to the right. What could have caused it?

An increase in the income of buyers.

An increase in supply of a good is sometimes cause by:

An increase in the number of sellers.

Two goods are substitutes if:

An increase in the price of one leads to an increase in demand for the other.

Which of the following would lead to an increase in the supply of health care?

An increase in the productivity of doctors.

The law of demand is illustrated when:

An increase in the purchases of personal computers results from lower prices.

A decrease in the price of a good will, all other things unchanged, result in:

An increase in the quantity demanded.

A shift to the left of a supply curve is caused by:

An increase in the returns from other supply possibilities.

A mutual fund that seeks to imitate the overall behavior of the stock market is called:

An index fund.

After graduation from college you will receive a substantial increase in your income from a new job. If you decide that you will purchase more T-bone steak and less hamburger, then for you hamburger would be considered:

An inferior good.

An entrepreneur's motivation to start a business could arise from:

An innate love for the type of business that he or she starts, a desire to earn a profit, an altruistic desire to provide the world with a good product.

Which of the following is a major problem with deflation?

An unexpected deflation raises the real interest payments for borrowers.

Modern Economic growth began with:

Around 1776 when James Watt perfected the steam engine.

The unit of account function of money means that money is used:

As a consistent means of measuring the value of things.

A feature that distinguishes economists' approach to making choices are:

Assigning opportunity costs a major role in their analyses of choices, assuming individuals make choices to maximize objectives, emphasizing that choices are made at the margin.

Bank regulation is intended to maintain the solvency of banks by avoiding excessive risk. Banks can do except:

Banks are permitted to invest in the stock market or other assets that are perceived as too risky.

Which of the following is not an ironclad rule in the financial markets.

Banks fund small business loans and large firms issue bonds to raise money.

During the recent US recession, some large automakers required bailouts from the federal government to avoid being forced into bankruptcy by their:

Bondholders

A model or theory in economics is:

Built using relevant observations, assumptions, and abstractions.

When society increases the level of capital per person, the result is called ___________.

Capital deepening.

A financial gain earned by purchasing stock in a publically traded company and subsequently selling the investment at higher price is commonly referred to as a:

Capital gain.

Most liquid to least liquid:

Cash, checkable deposits, savings deposits, an office building your father owns.

Two prominent members of the fast growth club are _________, which between them have nearly 40% of the world's population:

China and India

If the only two firms in an industry agree to fix the price at a given level, this is an example of:

Collusion.

The government attempts to reduce the global warming effects caused by the burning of fossil fuels such as oil, coal, and natural gas by establishing a minimum level of fuel efficiency on new cars. The regulatory approach used in the action is:

Command and control.

If an economy's factors of production were owned by the government sector and the coordinating activity was done by a government planning board, the economy would be called:

Command socialism.

When the price of gas goes up and the demand for tires goes down, this means tires and gas are:

Complements

The percentage of total industry output accounted for by the largest firms in the industry is the:

Concentration ratio.

What does the Central Bank do?

Conduct Monetary policy, promote stability of the financial system, provide banking services to commercial banks and other depository institutions, and to provide banking services to the fed gov.

A decrease in the demand for eggs caused by concerns over cholesterol is most likely attributable to which demand shifter:

Consumer preferences.

An example of a demand shifter is:

Consumer preferences.

If inflation is a threat, then the Fed will be expected to engage in:

Contractionary monetary policy

The scientific method is more difficult for economists than, say, chemists, because:

Controlled laboratory conditions are more problematic in economics, it is difficult to hold other factors that may affect the variables being studied constant in economics, economic conditions may change quickly and unexpectedly.

The ability of low GDP/capita countries to "Catch Up" with high GDP/capita countries is called:

Convergence

How has the widespread adoption of debit cards as the preferred method of payment for consumer purchases likely affected bank administration costs?

Costs are reduced because the cost of purchase is immediately debited from purchaser's checking account.

What item was used for money over the broadest geographic area and for the longest period of time?

Cowrie, a mollusk shell

The variation in unemployment caused by the economy moving from expansion to recession or from recession to expansion is known as:

Cyclical unemployment

A decrease in demand, with no change in supply, will lead to ____________ in equilibrium quantity and __________ in equilibrium price.

Decrease; Decease

A negative relationship between the quantity demanded and price is called the law of:

Demand

The principle stating that, for virtually all goods and services, there is a negative relationship between price and quantity demanded, all other things unchanged, is the law of:

Demand

When economists study the behavior of buyers, they are studying:

Demand

An increase in the demand for medical services caused by an increase in the number of people over 65 is most likely attributable to which demand shifter?

Demographic characteristics.

What is Bank Run?

Depositors racing to the bank to withdraw their deposits.

To practice effective price discrimination, a firm must have:

Differences in demand elasticity among buyers.

The old proverb "Don't put all your eggs in one basket" is synonymous with which of the following?

Diversified investments

A _________ is direct payment from a firm to its shareholders:

Dividend

If your ticket wins the lottery, the earnings you receive:

Does not affect GDI or GNP

The law of demand is illustrated by a demand curve that is:

Downward-sloping.

The first determinant of labor productivity is human capital. Human capital is the accumulated knowledge from:

Education and experience, skills, and expertise that the average worker in an economy possesses.

The largest component of factor income in the US is:

Employee Compensation.

When banks hold more reserves than are legally required, such reserves are called:

Excess reserves

A bank is "loaned up" when:

Excess reserves are zero

The problem of determining what goods and services society should produce:

Exists because there are not enough resources to provide all the goods and services that people want to purchase.

A firm's opportunity costs of production are equal to its:

Explicit costs + Implicit costs

If the opportunity cost of manufacturing machinery is higher in the US than in Britain and the opportunity cost of manufacturing sweaters in lower in the US than in Britain, then the US will:

Export sweaters to Britain and import machinery from Britain.

Goods and services produces in the domestic economy and sold abroad are called:

Exports

Product differentiation under monopolistic competition means that each firm:

Faces a downward-sloping demand curve.

Economic resources used in the production process are called:

Factors of production.

Economists generally agree that:

Factors other than money growth may influence the inflation rate from one year to the next, but they are not likely to cause sustained inflation.

Market failure describes a situation in which the market itself _________ in away that balances social costs and benefits:

Fails to allocate resources efficiently.

Money that some authority, generally a government, has ordered to be accepted as a medium of exchange is called ________ money:

Fiat

Currency in the US today is:

Fiat Money

A bond is a form of __________ through which a corporation agrees to repay the amount that was borrowed together with _________ over a period of time in the future:

Financial contract; a rate of interest.

A ___________________ operates directly between a saver with financial assets to invest and an entity who will receive those assets in exchange for paying a ______________.

Financial intermediary; rate of return.

The system in which banks hold reserves whose value is less than the sum of claims on those reserves is called:

Fractional reserve banking.

If an economy is producing a combination of goods that places it on the production possibilities curve, then it has:

Full employment.

An analytical framework used in the analysis of strategic choices is:

Game theory.

Since 1980 in the US, air quality has _________, and water quality has __________.

Generally improved; improved in some areas and deteriorated in others

Public goods may be efficiently provided if they are financed through:

Government tax revenues.

In general, if the most prices are falling in the economy it is know as deflation or negative inflation. The period of lowest inflation in 20th century for US was:

Great depression of 1930

The value, at current market prices, of the final goods and services produced during a particular period it:

Gross domestic product.

Critics of growth argues the following, except:

Growth cannot be controlled.

Disposable personal income is that part of income that households:

Have available to spend on goods and services.

A criticism of oligopolistic firms is that they:

Have high concentration ratios

The bottom line on investing in individual stocks is: ___________ on average over lengthy periods of time; ___________, especially in the short run; _____________, since stock does need to be sold to turn gains into spendable money.

High rate of return; moderate risk; low liquidity

When economies shift from a controlled economy to a market-oriented economy an outburst of high inflation that is often seen is termed as:

Hyperinflation.

In the 1960s the dominant maker of mainframe computers was:

IBM

According to the Coase theorem, the private market can achieve an efficient outcome:

If property rights are well defined and bargaining is costless.

A tradeoff between two economic goals means that:

If you achieve more of one, you will achieve less of the other.

All of the following factors are critical for economic growth, except:

Imminent domain.

A difference between explicit and implicit costs is that:

Implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do.

Goods and services produced abroad and sold in the domestic economy are called:

Imports

Damage to the environment occurs because:

In the process of obtaining goods and services we enjoy, pollution occurs.

The marginal product of labor is equal to the:

Increase in output obtained from a one unit increase in labor.

Economists know that a particular good can be classified as an inferior good if ______________ in buyers' income causes __________.

Increase; Decrease in demand.

A market price floor for wheat:

Increased the price paid by consumers.

If you withdraw currency from your savings acct, you are

Increasing M1, but not affecting M2

Institutional structure which promotes "Modern Economic Growth" are except:

Inefficient financial institutions

A period marked by ongoing rise in the level of prices in an economy is:

Inflationary phase

Third-party payers for health-care services include payments made by:

Insurance companies.

Oligopoly is a market structure characterized by:

Interdependence in decision making.

If the quantity of housing supplied in a community is greater than the quantity of houses demanded, the existing price:

Is above the market equilibrium price.

The world of imperfect competition:

Is described by all of the above: lies between the extremes of perfect competition and monopoly, is a world where firms battle over market shares, is a world where economic profits may or may not persist in the long run.

The city of Washington needs to upgrade its levies and its water drainage systems. The cost will exceed the amount of tax revenue the City expects to receive over the next 10 yrs. How will the City be able to raise the funds needed to finance this upgrade?

Issue municipal bonds.

How would a sustained increase in the market price of its shares directly benefit a publically traded company?

It could sell any shares it owns in itself at the higher valuation.

Which of the following is not a function of the Federal Reserve System?

It determines tax levels in conjunction with the US Treasury.

Although water is very abundant in most places, it is scarce because:

It has two or more alternative uses.

Which of the following statements is true?

It is always in the interest of the firm to engage in price discrimination if possible.

Frictional unemployment exists because:

It takes time for people seeking jobs and employers seeking workers to find each other.

Structural unemployment is best reduced by:

Job training programs to retool workers with new skills.

Human effort that can be applied in the production process is called:

Labor

Suppose a dog day care firm uses only two inputs: hourly workers (labor) and a building (capital). In the short run, the firm most likely considers:

Labor to be variable and capital to be fixed.

All other things unchanged, a tax on a product that leads to an increase in the cost of production would:

Lead to a decrease in supply.

Increasing the level of education in the US will:

Lead to workers possessing greater human capital.

Suppose Jan started up a small lemonade stand business last month. Variable costs for Jan's lemonade stand now include the cost of:

Lemons and sugar, wages paid to her hourly workers, paper cups

Which of the following is a criticism that has been raised of government spending in support of cornbased ethanol?

Limited reduction in dependence on foreign oil, detrimental effects on the environment, increased food prices and an increase in world hunger.

The ___________ of an investment is determined by how easy it is to sell an asset at any given time:

Liquidity

The east with which an asset can be converted to money is its:

Liquidity

A checking account typically pays ____________, but gives easy access to your money, either by writing a check or by using ____________.

Little or no interest; a debit card.

Which of the following is an example of a banks assets?

Loans made to customers

Unemployment and inflation are:

Major topics in macroeconomics.

In banks were required to keep 100% of deposits in reserves, they could:

Make no loans

If marginal cost is rising:

Marginal product must be falling.

A concentration ratio is used to measure:

Market dominance.

Total costs is the:

Market value of all inputs that a firm uses in production.

An incentive approach to pollution control is:

Marketable pollution permits.

Economists assume that the typical person who starts her own business does so with the intention of:

Maximizing profits.

Which of the following statements is true?

Measuring the costs and benefits of pollution is generally more difficult than measuring the prices of marketable goods.

Stock markets often experience a frenzy of buying or selling when investors are ___________ by following the current trend in a very actively traded company.

Momentum trading.

Any item that serves as a medium of exchange is called:

Money

When the Fed buys bonds in the open market, we can expect:

Money is flowing from the central bank to individual banks in the economy, increasing the supply of money in circulation.

In large shopping areas, the retail market is most illustrative of:

Monopolistic Competition.

An industry characterized by many firms, producing similar but differentiated products, in a market with easy entry and exit is called:

Monopolistic competition.

The Case in Point on Craft Brewers suggested that this industry is an example of:

Monopolistic competition.

The effort to change people's behavior by appealing to their sense of values is:

Moral suasion.

Economists agree that, in general, a world with advertising is _______ than would be a world without advertising.

More competitive.

The market for plumbing is a city can be characterized by the model of monopolistic competition. Suppose that the market is initially in long-run equilibrium, and then there is an increase in demand for plumbing services. We expect that in the long run.

New firms will enter the plumbing market.

Credit cards are:

Not considered money.

According to the text, the command-and-control approach to pollution abatement is:

Not favored by economists.

A well-known example of an international cartel is:

OPEC

An example of a natural resource is:

Oil in the ground.

Consider a bakery that buys flour to bake cakes. Which of the following statements is true?

Only the value of the cake is counted in GDP.

The 3 main monetary policy instruments are:

Open market operations, reserve requirement ration, and the discount rate.

The Fed's most important and most frequently used tool of monetary policy is:

Open-Market operations

The monetary policy tool that involves the buying and selling of government bonds is:

Open-Market operations

The value of the next best alternative things that must be lost to acquire a good are called:

Opportunity cost

Wiladee used to work as an office manager, earning $45,000 per year. She gave up that job to start a tailoring business. In calculating the economic profit of her tailoring business, the $45,000 income that she gave up is not counted as part of the tailoring firm's:

Opportunity costs.

Which of the following statements is false?

Out of labor force: Out of paid work and looking for a job.

A cartel is an example of:

Overt collusion.

Which of the following will provide an investor with a legally valid claim of partial ownership of a firm?

Ownership of stock

Transfer payments are:

Payments that do not require a good or service in exchange.

Individuals fall under the umbrella of the term "hidden unemployment" are except:

Permanent employed

GPD is the sum of:

Person consumption, private investment, government purchases, and net exports.

Which is not one of important areas that governments around the world have chosen to invest in the facilitate capital deepening and technology:

Pollution control

The theory underlying demand and supply curves assumes that, all other things unchanged, the primary variable that assures the equality of the quantities demanded and supplied it:

Price

A minimum price set above the equilibrium price is a:

Price floor.

A price that the government guarantees farmers will receive for a particular crop is a:

Price support.

Only national governments have the power to cause hyperinflation. Hyperinflation typically happens when government faces extraordinary demands for spending, which it cannot finance by taxes or borrowing. The only option is to:

Print more money

In order to be classified as a ___________, a firm must be owned by the people who run it on a day to day basis:

Private company.

An economy is said to have a comparative advantage in the production of a good if it can:

Produce the good at a lower opportunity cost than another economy.

Defenders of advertising argue that it:

Provides education and information about products.

A _________ is a firm that has sold its stock by making it available to be bought and sold by outside investors:

Public company.

Price discrimination is:

Quite common in the US economy.

The principle measurement of the economic success of a nation is:

Real GDP per capita

Which of the following is the best measure of a nations standard of living?

Real GDP per capita

Economic data that are adjusted for price-level changes are said to be expressed in terms of:

Real dollars.

The concept of comparative advantage is based upon:

Relative opportunity costs.

Monopolistic competition is an industry characterized by:

Relatively easy entry and exit.

The affordable Health Care Act of 2010:

Requires that individuals purchase health insurance, requires that insurance companies provide coverage for children on their parents policies up to the age of 26, bars insurance companies from denying coverage based on pre-existing conditions.

Which of the following will not lead to economic growth:

Restrictions on international trade.

Critics of advertising argue that it:

Results in higher prices to consumers.

Toward the end of 2008, the US economy was characterized by all of the following except:

Rising Inflation

Since the civil war, the US economy has been transformed from primarily _____________ economy to __________ and __________:

Rural and agriculture, services, technology

Area of a country, usually with access to a port where, among other benefits, the government does not tax trade:

SEZ (Special Economic Zone)

The quality of Human Capital included all of the follow except:

Size of population

____________ include both the private costs incurred by firms and also costs incurred by third parties outside the production process:

Social costs.

Most firms in the US today are:

Sole proprietorships and partnerships.

The term __________ refers to a market exchange that affects a third party who is outside or external to the exchange:

Spillover

Inflation reduces the ability of money to function as a:

Store of value.

A decision based on the recognition that the actions of others will affect the outcome of the choice, and that takes these actions into account is a:

Strategic choice.

The basic concern of economics is to:

Study the choices people make.

A curve that shows the relationship between the price and quantity supplied during a particular period, all other things unchanged, is the:

Supply curve.

Factor prices, returns from alternative activities, technology, number of firms, producer expectations and natural events are often termed:

Supply shifters.

Which of the following belongs in the range of financial investment options available to US households:

Tangible Assets

The largest contributor to productivity growth are:

Technological advances.

Structural unemployment exists because:

Technological changes make the skills of the workers incompatible with the skills used on the job.

An example of a supply shifter is:

Technology

The development of new __________________ can provide a way for an economy to sidestep the diminishing marginal returns of capital deepening:

Technology

The substitution bias:

Tends to overstate the rise in a consumer's true cost of living.

A feature of the healthcare market is:

That demand has increased relative to supply.

Falling inflation means:

That the price level is increasing at a decreasing rate.

Rising inflation means:

That the price level is rising at an increasing rate.

For a construction company that builds houses, which of the following costs would be a fixed cost:

The $30,000 per year salary paid to the company's bookkeeper.

At the national level who runs the Fed Reserve?

The Board of Governors

Macroeconomics deals with:

The analysis of the aggregate values in the economy.

The Federal Depository Insurance Corporation (FDIC) has the power to close a bank with:

The banks net worth falls below a certain level.

The Federal Reserve is:

The central bank of the US

The cost of producing goods and services includes:

The cost of factors of production, depreciation, and other production-related taxes.

The excess capacity in monopolistic competition may be viewed as:

The cost of product diversity.

Plastic and steel are substitutes in the production of automobiles. If steel prices go up, all other things unchanged:

The demand curve for plastic will shift to the right.

Which of the following is an interest rate that is set directly by the Fed?

The discount rate

Given that milk and cookies are complements, suppose the price of flour (an ingredient in cookies) rises. What happens in the market for cookies?

The equilibrium price rises, and the equilibrium quantity falls.

In choosing between the range of alternative investments typically available to US households, which of the following will play a role in influencing their selection of a particular investment type?

The expected rate of return, risk, and liquidity of each kind of investment.

A persistent shortage may occur if:

The government imposes a price ceiling.

In the 1980s, the federal government undertook a major build up of the military sector, leading to reports that prices charged by military contractors were spiraling upward. According to production possibilities analysis, this result is not surprising due to:

The law of increasing opportunity cost.

Given the events listed below that take place in the bread market, decide if demand changes or quantity demanded changes and determine the direction of change:

The price of bread increases.

Which statement best illustrates complementary goods:

The price of tennis rackets declines so your economics instructor decides to take tennis lessons and purchases several cans of new tennis balls.

The efficient level of pollution is:

The quantity at which its total benefits exceeds its total costs by the greatest possible amount.

The lowest wage that a worker would accept, if offered a job, is called:

The reservation wage

Factors of production are:

The resources the economy has available to produce goods and services.

Government purchases are defined as:

The sum of purchases of goods and services from firms by government agencies and the total value of output produced by government agencies.

As households eat out more, purchase more prepared foods at the grocery store, hire out child care services that they once performed themselves, what is likely to happen to the value in GDP?

The value of GDP is likely to increase.

A bank's reserves could be except:

The value of federal securities it is required to have as reserves against loans.

To say that coins are "token money" means that:

Their face value is more than their commodity value.

What do stocks, bonds, securitized mortgage assets and other financial investments all have in common?

They can only be purchased in financial markets.

When on firm responds to a rival's cheating by cheating and to a rival's cooperation by cooperating, that firm is practicing a:

Tit-for-tat strategy.

If a copper mining operation discharges waste products into a river and causes higher costs and discomfort to downstream users of the water for which they are not compensated, then:

Too many of society's resources are being used to produce copper.

Social security payments to US citizens are considered:

Transfer payments and are not included in GDP.

A threat to respond to a rival's cheating by permanently revoking an agreement is a:

Trigger strategy.

In the late 19th century and early 20th century, bank runs were typically not the original cause of a recession-but they could make a recession much worse. T or F

True

The central bank should be on guard against deflation and, if necessary, use expansionary monetary policy to prevent any long-lasting or extreme deflation from occurring. Except in severe cases like the Great Depression, deflation does not guarantee economic disaster. T or F

True

Treasury bonds are issued by the federal government through the ______________:

US Dept of the Treasury.

Which is not component of Aggregate production function:

Unemployment

Any point inside a production possibilities curve indicates:

Unemployment and/or inefficiency.

To identify the onset of a recession, the National Bureau of Economic Research Business Cycle Dating Committee:

Uses a range of indicators including real GDP, employment and income.

Velocity is a term that economists use to describe how quickly money circulates through the economy. The velocity of money in a year is defined as:

Velocity=nominal GDP / money supply

Analyzing the behavior of the firm enhances our understanding of:

What decisions lie behind the market supply curve.

Suppose that voters in your community pass a one-cent sales tax increase to fund education, knowing full well they will have to forgo other goods they typically consume. This primarily addresses the economic question of:

What goods and services should a society produce.

The opportunity cost of something is:

What is given up to acquire it.

A shift in the demand curve to the left, all other things unchanged:

Will cause a movement downward along the supply curve and a lower equilibrium quantity.

Price ceiling which lead to shortages will impose costs on society because they:

Will lead to waiting lines, may result in black market prices, lead to a smaller quantity offered on the market.

The US experienced ___________ workers tend to have higher unemployment.

Younger age

Evidence suggest that all countries with very high

inflation rates also have very high money growth rates.

When a member bank borrows reserves from the Fed:

it pays an interest rate called the discount rate.

An overall pattern of convergence is clear. The _______ countries have GDP growth that is _______ than that of the middle-income countries.

low-income; faster

A feature on monopolistic competition that makes it different from monopoly is the:

number of firms in the industry.

A total cost curve shows the relationship between the:

quantity of output produced and the total cost of production.