Macro Final Exam

A bank's reserve ratio is 8 percent and the bank has $1,000 in deposits. Its reserves amount to

$80

The US and Brazil has following opportunity costS. Which of the following terms of trade will benefit boththe US and Brazil?US : opportunity cost of a large jet = 3.5 small jetBrazil : opportunity cost of a large jet = 5 small jet

1 large jet = 4 small jets

which of the following terms of trade benefits both countries in trade

10 apple for 7 tomatoes

The economy produces only one product. The economy has enough resources to produce Y = 800 bushels of corn. Velocity is constant. In 2014, Money Supply (MS)is $2000, Price (P) is $5 per bushel. In 2015, the Fed increases MS by 5%, to $2100 Given the scenario above, suppose technology progress causes Y to increase to 824 bushels in2015. What is the inflation rate in 2015? (select the closest number)

2%

Based on the Figure above, if the production possibilities frontier shown is for two months of production,then which of the following combinations of peanuts and cashews could Brazil produce in two months?

3 pounds of peanuts and 150 pounds of cashews

If the price elasticity of demand for a good is 3.0, then a 10 percent increase in price results in

30 percent decrease in the quantity demanded

Refer to above Table. What is the opportunity cost to Footville of increasing the production of shoes from400 to 600?

300 socks

The nominal interest rate is 6 percent and the real interest rate is 1 percent. What is the inflation rate?

5 percent

The economy produces only one product. The economy hasenough resources to produce Y = 800 bushels of corn. Velocity is constant. In 2014, Money Supply (MS)is $2000, Price (P) is $5 per bushel. In 2015, the Fed increases MS by 5%, to $2100 Given the scenario above, what is the inflation rate in 2015?

5%

Refer to Figure above. In the graph, MS represents the money supply and MD represents money demand. The vertical axis is the value of money measured as 1/P and the horizontal axis is the quantity of money Suppose the relevant money-demand curve is the one labeled MD1; also suppose the velocity ofmoney is 2. If the money market is in equilibrium, then the economy's real GDP amounts to

5,000

The fixed basket of goods contains 500 cans of soda and 100 pizzas. The base year is 2014, and the prices for soda and pizza are given below. Refer to the table above. The values for the CPI in 2015and 2016 are, respectively

90, 115

Refer to Figure above. Which of the following events could explain a shift of the money-supply curve from MS1 to MS2?

An open-market purchase of bonds by the Federal Reserve

Refer to Figure above, the deadweight loss created by the tariff is represented by the area

D + F

Refer to Figure above (Guatemala's coffee market). Relative to the no-trade situation, trade with the rest of the world results in

Guatemalan consumers paying a higher price for coffee

Martin, a U.S. citizen, travels to Mexico and buys a newly manufactured motorcycle made there. Hispurchase is included in

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

You go to the movieplex where movies ordinarily cost $9. You are intending to see a movie for which you have a $3 off coupon good for only that movie at that time. However, when you get there you see a friend who asks if you would rather see a new release. Both movies start and end at the same time. If you decide to see the new release with your friend, what is your opportunity cost?

The amount you value the first movie + $3

for which of the following individuals would the opportunity cost of going to college be highest?

a famous, highly paid actor who wants to take time away from show business to finish college and earn a degree

You bought some shares of stock and, over the next year, the price per share increased by 5percent, as did the price level. Before taxes, you experienced

a nominal gain, but no real gain, and you paid taxes on the nominal gain

Refer to Figure 2. When the supply curve for gasoline shifts from S1 to S2 and the price ceiling isenforced in this market

a shortage will occur at the new market price of P2

In 2015, the minimum wage according to federal law was $7.25 per hour. Increasing minimum wage to $8per hour (approximately a 10% increase) will probably lead to

all of the above

If the demand for a good falls when income increases, then the good is called

an inferior goods

GDP per person ("GDP per capita") tells us the income and expenditure of the

average person in the economy.

Refer to Figure 6-9. In this market, a minimum wage of $7.00 is

binding and creates unemployment

A likely example of complementary goods for most people would be

cellphones and phone apps

You deposit $1000 in the bank for one year. The tax on capital gain is 25%. There are two case scenarios. CASE 1: inflation rate = 0%, nominal interest rate = 10%CASE 2: inflation rate = 10%, nominal interest rate = 20% The idea that nominal variables are heavily influenced by the quantity of money and that money is largely irrelevant for understanding the determinants of real variables is explained by the

classical dichotomy

Real GDP is the yearly production of final goods and services valued

constant prices

The most obvious benefit of specialization and trade is that they allow us to

consume more goods than we otherwise would be able to consume.

Refer to Figure 1. Suppose the government imposes a tax of P' - P'''. The area measured by I + Y represents the

deadweight loss due to the tax

According to the law of demand, an increase in the price of a good will

decrease quantity demanded.

Refer to Figure above (Guatemala's coffee market). When trade in coffee is allowed, consumer surplus in Guatemala

decreases by the area B + D

Refer to the Figure 4. The price ceiling causes quantity

demanded to exceed quantity supplied by 90 units

Refer to Figure above (Guatemala's coffee market). With trade, Guatemala will

export 22 units of coffee

The goal of rent control is to

help the poor by making housing more affordable

Refer to Figure above (Guatemala's coffee market). When trade in coffee is allowed, producer surplus in Guatemala

increases by the area B + D + G

Which of the following statement is correct? Inflation ___________

increases savers' tax burdens

When the price of petroleum goes up, the demand for solar power ______, and the demand for cars______

increases; decreases

if korea is capable of producing either shoes or soccer balls or some combination of the two, then

korea's opportunity cost of shoes is the inverse of its opportunity cost of soccer balls

Goods with many close substitutes tend to have

more elastic demands

the overriding reason why households and societies face many decisions is that

resources are scarce

According to the quantity equation, the price level would change less than proportionately with a rise in the money supply if there were also either a

rise in output or a fall in velocity.

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on aflight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300,the airline should

sell the ticket because the marginal benefit exceeds the marginal cost.

When conducting an open-market sale, the Fed

sells government bonds, and in so doing decreases the money supply

Rent controls cause

shortages of apartments which are larger in the long run than in the short run

The deadweight loss from a tax is likely to be smallest when

supply is inelastic and demand is inelastic

a tax on an imported good is called a

tariff

Refer to Figure 1. Suppose the government imposes a tax of P'-P'''. The area measured by K + L represents

tax revenue

The velocity of money is

the average number of times per year a dollar is spent

Refer to the Figure above, the area C + D + E + F represents

the decrease in consumer surplus caused by the tariff

Suppose demand is perfectly elastic, and the supply of the good in question decreases. As a result,

the equilibrium quantity decreases, and the equilibrium price is unchanged

Refer to Figure above. When the money supply curve shifts from MS1 to MS2,

the equilibrium value of money decreases.

Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that

the nation is not using all available resources or is using

Demand is said to be inelastic if

the quantity demanded changes only slightly when the price of the good changes