Macro Exam 1-3 Questions

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The figure shows the flows of expenditure and income in EuropaEuropa. In 2011​, flow A was ​$860 billion​, C was ​$192 billion​, B was ​$440 billion​, and E was $ 48 billion. Calculate investment.

$180 billion

In April ​2014: The unemployment rate is _____ percent. The ​employment-to-population ratio is _____ percent. At the end of MayMay ​2014: The number of people unemployed is ______ The number of people employed is ______ The unemployment rate is ______ percent

10.0; 69.2; 1,880; 18,000; 9.5

Amazon.com agreed to pay its workers ​$20 an hour in 1999 and ​$33 an hour in 2001. The CPI in 1999 was 166 and in 2001 it was 180. Calculate the real wage rate in each year​ (to the nearest​ cent). Did these workers really get a pay raise between 1999 and​ 2001? The real wage rate in 1999 was ​$_______ The real wage rate in 2001 was $​_______ Because the real wage rate in 2001 is ______ the real wage rate in​ 1999, the workers _____ really get a raise between 1999 and 200

12.05; 18.33; greater than

The growth rate of real GDP in Pacifica in 2012 is ______ percent. The growth rate of real GDP per person in Pacifica in 2012 is _____ percent.

13; 10

What is the highest acceptable price for​ computers?

2 cheese

What is the lowest acceptable price for​ computers?

2/3 cheese

At which levels of production is Alice producing​ inefficiently?

200 units of lemonade and 50 units of pizza

To keep pace with a growing​ population, approximately​ _______ jobs must be created each month.

200,000

The number of people in the working dash age population in the working-age population is ________ million.

212.6

What is the lowest acceptable price for​ cheese?

3/2 computers

In Blogsville last​ month, ______ million people were in the labor force and​ ______ million people were in the​ working-age population.

39; 70

Eva runs a small bakery in the village of Roggerli. She is debating whether she should extend her hours of operation. Eva figures that her sales revenue will depend on the number of hours the bakery is open as shown in the table to the right. She would have to hire a worker for those hours at a wage rate of​ $12 per hour. Using marginal​ analysis, determine how many hours should Eva extend her​ bakery's hours of​ operations?

4 hours

Choose the statement that is incorrect.

A government budget surplus competes with investment for funds.

​________ behavioral assumption about humans was that people usually act in a​ rational, self−interested way.

Adam​ Smith's

Who would be most likely to recommend to these two nations that they engage in​ trade?

Almost all economists

Which of the following correctly describes how price adjustments eliminate a​ shortage?

As the price​ rises, the quantity demanded decreases while the quantity supplied increases

Jeb makes the following four statements about peanuts. Which statement best describes his quantity demanded in the peanut​ market?

At a price of​ $1 per​ pack, I plan to buy 2 packs of peanuts per week.

Choose the statement that is incorrect.

At full employment, the unemployment is zero

Which of the following statements is​ true?

Both​ life-saving drugs and ice cream are examples of scarce goods.

Choose the correct statement.

Commercial banks are financial institutions that accept​ deposits, provide payment​ services, and make loans to firms and households.

Which of the following is an example of investment​?

Continental buying Airbus planes

Economics promotes which of the following as the way to make the best​ decision?

Continue an enjoyable activity up to the point where its marginal benefit equals its marginal cost

Which of the following is an example of a final good or service​?

Dan bought a Toyota Camry.

If Dani and Emily devote equal amounts of time and effort to making​ pretzels, Dani produces more units than Emily. This information tells us that

Dani has an absolute advantage in producing pretzels

Choose the correct statement.

Deposits are​ money, checks are not​ money, and credit cards are not money.

If it costs Hobie​ $900 to produce 5 lamps and​ $1,200 to produce 6​ lamps, then the difference of​ $300 is the marginal cost of producing the 5th lamp.

False

The central bank of the United States is the​ ______.

Federal Reserve System

The liabilities of the Fed are​ ______, and these liabilities along with​ ______ make up the monetary base.

Federal Reserve notes held by households and businesses and reserves of depository​ institutions; coins issued by the Treasury

Which of the following statements describes a change in the quantity supplied and which describes a change in supply? I Farms are selling less chicken because the price of turkey has increased. II Farms are selling less chicken because the price of chicken has fallen. III Farms are selling more chicken because the price of chicken has risen. IV Farms are selling more chicken because the cost of chicken feed has fallen.

I and IV are changes in supply and II and III are changes in the quantity supplied.

Which of the following is TRUE regarding​ markets? I. Economists define a market as a geographic location where trade occurs. II. A market enables buyers and sellers to get information about each other and to buy and sell from each other. III. Markets coordinate decisions through prices.

II and III

Choose the statement that is incorrect.

If the demand for Treasury bonds​ increases, the interest rate on the Treasury bond rises.

What is an economic​ model?

It is a simplified version of some aspect of economic life used to analyze an economic issue.

The opportunity cost to produce 1 pretzel for James is 2 cookies. For​ Carolline, the opportunity cost to produce 1 pretzel is 3 cookies. From this​ information, we know that

James has a comparative advantage in pretzel production.

The components of the 787 Dreamliner that Boeing produces in Japan are part of​ ______ GDP. The aircraft that are assembled in the United States and sold to All Nippon Airways are part of​ ______ GDP.

Japan's; U.S.

Choose the statement about money that is incorrect.

Money in the United States today is made up of notes and coins held by individuals and businesses.

​______ sees the economy as a perpetual motion machine.

New growth theory

1. Which country has the absolute advantage in​ computers?

Norway

Which country has the comparative advantage in​ computers?

Norway

In what product should Norway​ specialize?

Norway should produce​ 12,000 computers

Comparative advantage is based on what kind of economic​ costs?

Opportunity costs

Which of the following statements illustrates structural unemployment​?

Outsourcing resulted in many job losses in the mid 2000s.

Assume that the graphs in this figure represent the demand and supply curves for tuna. Which panel best describes what happens in this market when there is a decrease in the productivity of commercial​ fishermen?

Panel​ (b)

Choose the statement that is incorrect.

Real GDP per person grows whenever real GDP grows.

Which of the following statements best reflects this​ situation?

Regardless of whether a country has one or two of the absolute​ advantages, both countries can benefit from trade.

Olive oil producers want to sell more olive oil at a higher price. Which of the following events would have this​ effect?

Research finds that consumption of olive oil reduces the risk of heart disease.

Choose the statements concerning neoclassical growth theory that are true. 1. As incomes increase both the birth rate and the death rate decrease.As incomes increase both the birth rate and the death rate decrease. nothing 2. Technological change results from chance.Technological change results from chance. nothing 3. Neoclassical growth theory states that growth in real GDP per person can persist indefinitely.Neoclassical growth theory states that growth in real GDP per person can persist indefinitely. 4. Neoclassical growth theory implies that growth rates and income levels per person around the globe will diverge.Neoclassical growth theory implies that growth rates and income levels per person around the globe will diverge.

Statements 1 and 21 and 2 are correct.

I​ = ______.

S​ + ​(T−G​) ​+ ​(M−X​)

Choose the statement that is incorrect.

The Lucas wedge equals real GDP minus potential GDP.

Suppose the United States goes from a​ free-trade policy to a​ no-trade policy with other countries. Which of the following is a result of this new​ policy?

The U.S. no longer consumes outside its production possibilities frontier

In what product should the United States​ specialize?

The US should produce​ 20,000 cheese.

Choose the statement about growth in labor productivity that is incorrect.

The demand for labor​ increases, the production function does not​ change, but a movement occurs along the production function.

Russell studies instead of playing tennis. The opportunity cost to him of studying is

The forgone value of playing tennis.

Choose the correct statement. The CPI in 2009 was 214.5. The CPI in 2010 was 218.1. The inflation rate in 2010 was ______ percent.

The inflation rate is the annual percentage change in the price level. 1.7

Which of the following statements by Tom demonstrates that his buying plans obey the law of demand​?

The only thing​ that's changed is the price of​ textbooks: they've become more expensive and now​ I'm not buying as many.

Choose the option that is an example of government expenditure.

The purchase of telephone service for the House of Representatives

Which of the following will hold true if the market for cameras is in equilibrium at a price of​ $40?

The quantity of cameras produced will equal the quantity of cameras bought in the market.

Which country has the absolute advantage in​ cheese?

United States

Which country has the comparative advantage in​ cheese?

United States

Fast food restaurants produce a range of menu items such as​ hamburgers, chicken​ sandwiches, salads, and french fries. What fundamental economic question are they addressing by offering this range of​ items?

What to​ produce?

When real GDP​ decreases, ______.

a decrease in the demand for money occurs

A changes in which of the following shifts the demand curve for​ hamburgers?

a fall in the price of french​ fries, a complement for hamburgers

A person is in the labor force if any one of the following statements is true except that he or she is​ ______.

aged 16 and over and not in​ jail, hospital, or some other form of institutional care

Mrs. Lovejoy decides to invest in companies which she believes are producing its goods based on the preferences of consumers. Mrs. Lovejoy is investing in companies that are

allocatively efficient.

What does the term​ "marginal" mean in​ economics?

an additional or extra

During the 100 years from 1914 to​ 2014, real GDP per person in the United States grew at​ ______.

an average of 2 percent a year

Consider the figure showing supply curves for soft drinks. Suppose the economy is at point a. A movement to point b could be the result of

an increase in technology.

The​ "law of​ demand" predicts​ that, other things being​ equal,

an increase in the price of pizza decreases the quantity of pizza demanded.

The​ bank's total assets​ ______, its reserves​ ______.

are the same; decrease

Ted quits his ​$60,000−a−year job to be a stay−at−home dad. What is the opportunity cost of his​ decision?

at least​ $60,000

Gross domestic product and gross investment are measured​ ______. Net domestic product and net investment are measured​ ______.

before the depreciation of​ capital; after the depreciation of capital

A depository institution creates liquidity by​ ______.

borrowing short and lending​ long;

As a result of financial​ innovation, ______ have become​ ______.

checking deposits at thrift​ institutions; an increasing percentage of M1

The income approach to measuring GDP sums together​ ______, which equals net domestic income at factor cost.

compensation of​ employees, net​ interest, rental​ income, corporate​ profits, and​ proprietors' income

The expenditure approach to measuring GDP sums together​ ______, and the largest component is​ ______.

consumption​ expenditure, investment, government expenditure on goods and​ services, and net​ exports; consumption expenditure

The main components of money in the United States today are​ ______.

currency and deposits at banks and other depository institutions

Suppose the Fed sells​ $50 million of government securities to the Bank of America. The​ Fed's total assets​ ______ and its total liabilities​ ______.

decrease by​ $50 million; decrease by​ $50 million

In​ 2015, the population increases and labor hours supplied increase by 2020 at each real wage rate. The​ economy's standard of living​ ______ in 2015 because​ ______.

decreased; real GDP per person is smaller in 2015 than in 2014

The monetary base​ ______ and the​ Fed's assets​ ______.

decreases; decrease

When the pace of job creation exceeds the increase in​ population, the unemployment rate sometimes increases because​ _______.

discouraged workers return to the labor force

Real GDP per person is real GDP​ _____.

divided by the population

The Bank of​ America's total assets​ ______ and its total liabilities​ ______.

do not​ change; do not change

Jane produces only corn and cloth. Taking account of her preferences for corn and cloth

does not affect her production possibilities frontier.

Marginal benefit curves generally slope

downward, but not because of increasing opportunity cost.

The​ Ricardo-Barro effect _______ crowding out.

eliminates

Normally when the pace of job creation exceeds the increase in​ population, the unemployment rate ​_______.

falls

Real GDP is the value of​ ______. Potential GDP is ​ ______.

final goods and services produced in a given year when valued at the prices of a reference base​ year; the maximum level of real GDP that can be produced while avoiding shortages of​ labor, capital,​ land, and entrepreneurial ability that would bring rising inflation

Gross domestic product ​(GDP​) is the market value of all the​ _____ goods and services produced​ _____ a country in a given time period.

final; within

The real interest rate​ ______, household saving​ ______,

f​alls; decreases and investment increases

When the unemployment rate is less than the natural unemployment​ rate, real GDP is​ ______ than potential GDP and the output gap is​ ______.

greater; positive

The unemployment rate in May 2008 is​ ______ the estimated natural unemployment rate. This implies that real GDP is​ ______ potential GDP at this time.

greater​ than; less than

The quantity of labor demanded is the number of labor hours __________ during a given period. The quantity of labor supplied is the number of labor hours ___________ during a given period. The ________ wage rate adjusts to bring the labor market to equilibrium.

hired by all the firms in the economy; that all the households in the economy plan to work; real

The HDI might be better than real GDP as a measure of economic welfare because the HDI​ ______. The HDI includes measurements of​ ______, which are not measured in real GDP.

includes real​ GDP, but also includes other factors that influence our standard of​ living; ​health, life​ expectancy, and education

An economy produces at point a on the PPF shown in the figure. A drought reduces the amount of wheat produced and the economy produces at point b. The opportunity cost of a unit of wheat​ ________.

increases

If an economy experiences a decrease in the money​ supply, short-run unemployment

increases, and​ short-run output decreases.

Assuming that U.S. consumers buy the same number of Lexus RX models and Hondas regardless of where they are​ built, U.S. GDP​ ______ when Toyota builds the Lexus RX in the United States and Honda increases production in the United States because​ ______.

increases; net exports and investment increase

When the Federal Reserve Bank increases the federal funds​ rate, other

interest rates​ rise, and​ consumption, firms' private investment and net exports decrease.

A central bank performs all of the following functions except​ ______.

it acts as a bank to the Congress and Administration

If the HDI is expanded to include items such as​ pollution, resource​ depletion, and political freedom​

it would be difficult to measure

The three main types of markets for financial capital are​ _______.

loan​ markets, bond​ markets, and stock markets

Depository institutions pool risk because they use funds obtained from​ ______ depositors to make loans to​ ______ borrowers.

many; many

In the​ figure, if 2 million computers are produced per year then the​ ________ should be produced to achieve the allocatively efficient use of resources

marginal benefit of a computer exceeds the marginal cost of a​ computer, so more computers

The unemployment rate might underestimate the underutilization of labor resources because it does not include​ ______.

marginally attached workers and​ part-time workers who want​ full-time jobs

Real GDP​ ______ indicator of the standard of living because​ ______.

might be an​ unreliable; the standard of living depends on many​ factors, some of which are not part of real GDP

The key idea of classical growth theory that leads to the dismal outcome is that​ ______.

no matter how much technological change​ occurs, real GDP per person is always pushed back toward the subsistence level

The demand for money is the relationship between the quantity of real money demanded and the __________ when all other influences on the amount of money that people wish to hold remain the same

nominal intrest rate

Currency consists of​ _____.

notes​ (dollar bills) and coins

To increase the money​ supply, the Fed may conduct

open market purchases or decrease the discount rate.

Suppose the U.S. government encouraged new teachers to take jobs in underperforming schools by paying the new teachers a​ $20,000 bonus. These teachers would be exemplifying the economic idea that

people respond to economic incentives

Net domestic income at factor cost ___ indirect taxes less subsidies ____ depreciation gives GDP​ (income approach).

plus, plus

Assume that the preconditions for labor productivity growth are in place. The pace of labor productivity growth is influenced by all of the following except​ ______.

population growth

A substitute in production is a good that is​ _____ another​ good, and a complement in production is a good that is​ _____ another good.

produced in place​ of; produced together with

When economic growth​ occurs, the

production possibilities frontier shifts outward

Domestic product is​ _______. National product is​ _______.

production within a​ country; the value of goods and services produced anywhere in the world by the residents of a nation

Workers in developing Asian economies who work more hours than Americans are not the​ world's most productive workers because​ ______.

productivity depends on how much real GDP each hour of labor can produce

A central bank is a banks bank and a​ _____ authority that regulates a​ nation's depository institutions and conducts​ _____ policy, which means that it adjusts the​ _____ and influences​ _____.

public; monetary; quantity of money in​ circulation; interest​ rates;

Between 2006 and​ 2014, ______.

real GDP and potential GDP​ increased, but potential GDP increased at a steadier pace

In the short​ run, ______ and​ ______ adjusts to achieve equilibrium

real GDP determines the demand for money curve and the Fed determines the quantity of real money​ supplied; the nominal interest rate

Classical growth theory is the view that the growth of​ _____ is temporary and that when it rises above the subsistence​ level, a population explosion​ _____.

real GDP per​ person; eventually brings it back to the subsistence level

The demand for labor is the relationship between the quantity of labor demanded and the​ ______. The supply of labor is the relationship between the quantity of labor supplied and the​ ______.

real wage​ rate; real wage rate

If the price of a hot dog is​ $2 and the price of a hamburger is​ $4, then the

relative price of a hot dog is​ 1/2 of a hamburger.

How will the labor force participation rate change if Kevin starts creating football apps in his garage and they turn out to be very​ popular? The labor force participation will​ _____ Kevin starts creating football apps in his garage and they turn out to be very popular.

rise

How will the unemployment rate change if Sarah quits and starts to search for a​ full-time job? The unemployment rate will​ _____ if Sarah quits and starts to search for a​ full-time job.

rise

As output moves from point a to point b to point c along the PPF in the​ figure, the opportunity cost of one more unit of good X

rises. The opportunity cost of one more unit of good Y falls.

The demand for loanable funds increases and the supply of loanable funds decreases. As a​ result, the equilibrium real interest rate​ ______ and the equilibrium quantity of loanable funds​ ______.

rises; increases,​ decreases, or remains the same

A critical function of the government in facilitating the operation of a market economy is

setting up and enforcing private property rights.

People buy more of good 1 when the price of good 2 rises. These goods are

substitutes.

A government budget surplus​ occurs, which increases the ________ loanable funds.

supply of

According to the expenditure approach for calculating​ China's GDP,​ "each one percent drop in the U.S. economy will shave 1.3 percent off​ China's growth" because as the U.S. economy​ shrinks, ______. ​China's ______ and​ China's real GDP decreases.

the United States imports less from​ China; exports decrease

Comparative advantage is

the ability to perform an activity at a lower opportunity cost than anyone else.

Other influences on economic welfare that could be included in a comprehensive measure include all of the following except​ ______.

the beauty of local scenery

The velocity of circulation is the average number of times a dollar of money is used annually to buy​ ______. The formula used to measure the velocity of​ circulation, V​, is​ ______, where P is the price​ level, Y is real​ GDP, and M is the quantity of money.

the goods and services that make up​ GDP; V​ = ​(P×Y​)÷M

When the price of an asset​ rises, ______.

the interest rate falls

When cyclical unemployment increases and other things remain the​ same, ______.

the natural unemployment rate does not change

The supply of loanable funds is the relationship between​ _____ supplied and the​ _____ when all other influences on lending plans remain the same.

the quantity of loanable​ funds; real interest rate

The amount by which​ _____ is called net investment.

the value of capital increases

An economy is at full employment when​ ______.

there is no cyclical unemployment

After you​ graduate, you have decided to accept a position working at the Bureau of Labor Statistics for​ $45,000.00 a year. The two other offers you received were working for Walminus−Mart for​ $38,000 and working for Ernst and Young consulting for​ $42,000. Of these two​ offers, you would have preferred the job at Ernst and Young. What is the opportunity cost of accepting the position at the Bureau of Labor​ Statistics?

the​ $42,000 you would have been paid working for Ernst and Young

When the Fed buys securities from a​ bank, ______.

the​ bank's reserves increase but its deposits do not change

Depository institutions minimize the cost of monitoring borrowers by​ ______.

using specialized resources that have a much lower cost than what households would incur if they had to undertake the activity individually

Allocative efficiency is a situation in which the quantities of goods and services produced are those that people​ _____ - it is not possible to produce more of a good or service​ _____ some of another good that people​ _____.

value most​ highly; without giving​ up; value more highly

Nominal GDP is​ ______. Real GDP is​ ______.

​a more precise name for GDP; the value of final goods and services produced in a given year when valued at the prices of a reference base year

Net worth is the total market value of what a financial institution has​ _____ minus the market value of what it has​ _____.

​lent; borrowed

The demand for loanable funds increases and the supply of loanable funds increases. As a​ result, the equilibrium real interest rate​ ______ and the equilibrium quantity of loanable funds​ ______.

​rises, falls, or remains the​ same; increases

When the nominal interest rate​ rises, the opportunity cost of holding money​ ______ and the quantity of real money demanded​ ______.

​rises; decreases


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