Macro Test 3
In some East Asian countries, average income, as measured by real GDP per person, has recently grown at an average annual rate that implies output will double about every?
10 years
At an annual interest rate of 10%, about how many years will it take $100 to triple value?
12
Which of the following is Correct?
Economists are usually not able to conduct experiments, so they must rely on natural experiments offered by history
Macroeconomists Study?
Economy-wide phenomena.
In the Long Run?
Inflation depends primarily upon the money supply growth rate
When can two countries gain from trading two goods?
Two countries could gain from trading two goods under all of the above conditions
A result of welfare ecnomics is that the equilibrium price of a product is considered to be the best price because it?
Maximizes the combined welfare of buyers and sellers
The economy's two most important financial markets are?
The bond market and the stock market
Which of the Ten Principles of Economics does welfare economics explain more fully?
Markets are usually a good way to organize economic activity.
If the Fed increases the money supply?
The interest rate decreases, which tends to raise stock prices.
Shifts in the aggregate-demand curve can cause fluctuations in?
The level of output and in the level of prices
Economic Models
are simplifications of reality, and in this respect economic models are no different from other scientific models
The deviation of unemployment from its natural rate is called?
cyclical unemployment
Compounding refers directly to?
interest being earned on previously-earned interest
Suppose the foreign citizens decide to purchase more US pharmaceuticals and US citizens decide to buy more stock in foreign corporations. Other things the same, these actions?
raise both US net exports and US net capital outflows
Factors of production are?
Inputs into the production process
The classical theory of inflation
Is also known as the quantity theory of money, it was developed by some of the earliest economic thinkers, and is used by most modern economists to explain the long fun determinants of the inflation rate
Consumer Surplus?
Is measured using the demand curve for a product
If the government removes a binding price ceiling from a market, then the price paid by buyers will?
Increase, and the quantity sold in the market will increase.
A firm in the United Kingdom hires a firm in the US to train its managers. By itself this transaction?
Increases US exports and increases US net exports
When the price level rises, the number of dollars needed to buy a representative basket of goods?
Increases, and so the value of money falls
The interest-rate effect?
Is the most important reason, in the case of the US, for the downward slope of the aggregate-demand curve
Which of the following does the Federal Reserve not do?
It makes loans to any qualified business that requests one
One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than exports?
Its trade deficit rose
Which of the following is an asset of a bank and a liability for its customers?
Loans of its customers but not the deposits of its customers
A person can benefit from specialization and trade by obtaining a good at a price that is?
Lower than his or her opportunity cost of that good.
An example of a price that changes only infrequently is the price of?
Magazines sold at newsstands
Norberto is opening a bicycle shop, and his monthly expenditures to get the shop up and running exceed his monthly income. Norberto is best describes as?
borrower or as a demander of funds
Josh is a full-time college student who is not working or looking for a job. The bureau of labor statistics counts Josh as?
Neither in the labor force nor unemployed
Consider a small economy in which consumers buy only two goods: apples and pears. In order to compute the consumer price index for this economy for two or more consectutive years, we assem that?
Neither the number of apples nor the number of pears bought by the typical consumer changes from year to year
Data on the unemployment rate in the US since 1960 show that the unemployment rate is?
Never zero
When all market participants are price takers who have no influence over prices, the markets have?
Numerous buyers and sellers
Two individuals engage in the same tow productive activities. In which of the following circumstances would neither individual have a comparative advantage in either activity?
One individuals opportunity costs are the same as the other individuals opportunity costs
If the price of natural gas rises, when is the price elasticity of demand likely to be the highest?
One year after the price increase
Edgar is working part-time. Diane is on temporary layoff. Who is included in the Bureau of Labor Statistics employed category?
Only Edgar
Which types of economies interact with other economies?
Only open economies
Assume, for Singapore, that the domestic price of soybeans without international trade is higher than the world price of soybeans. This suggest that, in the production of soybeans?
Other countries have a comparative advantage over Singapore and Singapore will import soybeans.
In a competitive market, each seller has limited control over the price of his product because?
Other sellers are offering similar products
The BLS counts discouraged workers as?
Out of the labor force. If the were counted as unemployed the unemployment rate would be higher
According to classical macroeconomic theory?
Output is determined by the supplies of capital and labor and the available production technology
The "adage" , There is no such thing as a free lunch, means?
People face tradeoffs
A low P/E for a stock indicates that?
People may expect earning to fall in the future, perhaps because the firm will be faced with increased competition
When the government redistributes income from the wealthy to the poor?
People work less and produce fewer goods and services.
The presence of a price control in a market for a good or service usally is an indication that?
Policymakers believed that the price that prevaild in that market in the absence of price controls was unfair to buyers or sellers.
If Norway sold more goods and services abroad than it purchased from abroad, then it had?
Positive net exports which is trade surplus
Which of the following concepts is most helpful in explaining why investment increases when the interest rate falls?
Present value
In a closed economy, what does (Y-T-C) represent?
Private saving
You observe a closed economy that has a government deficit and positive investment. Which of the following is correct?
Private saving is positive; public saving is negative
In 2001, Congress and President Bush instituted tax cuts. According to the short run Phillips curve, in the short run this change should have?
Raised inflation and reduced unemployment
When a tax is levied on a good, the buyers and sellers of the good share the burden?
Regardless of how the tax is levied.
The overrriding reason why households and societies face many decisions is that?
Resources are scarce
An increase in quantity demanded?
Results in a movement downward and to the right along a demand curve.
If the government raises government expenditures, then in the short run prices?
Rise and unemployment falls
If the central bank increases the money supply, in the short run, output?
Rises so unemployment falls
A company the produces golf clubs is considering buying some new equipment that it expects will increase future profits. If the interest rate falls the present value of these future earnings?
Rises. The company is more likely to buy the equipment
Long term bonds are?
Riskier than short term bonds, and so interest rates on long term bonds are usually higher than interest rates on short term bonds
As an alternative to selling shares of stock as a means of raising funds, a large company could, instead?
Sell Bonds
A monopoly is a market with one?
Seller, and that sellers sets the prices
In which of the following countries has economic growth been sufficiently strong in recent history to propel that country from being amoung the poorest in the world to being amoung the richest in the world?
Singapore
In competitive markets, which of the following is not correct?
Some sellers can set prices
When studying the effects of public policy changes, economists?
Sometimes make different assumptions about the short run and long run
Dollar bills, rare paintings, and emerald necklaces are all?
Stores of value
People who are unemployed because wages are, for some reason, set above the level that brings labor supply and demand into equilibrium are best classified as?
Structurally unemployed
The two words economists use more often are?
Supply and Demand
A tax levied on the sellers of a good shifts the?
Supply curve upward (or to the left)
Assume, for Taiwan, that the domestic price of soybeans without international trade is lower than the world price of soybeans. This suggests that, in the production of soybeans?
Taiwan has a comparative advantage over other countries and Taiwan will export soybeans
For an economy that engages in international trade, GDP is divided into four components. Which of the following items is not one of those components?
Taxes
The length of time until a bond matures is called the?
Term
Which of the following is correct?
The CPI is better than the GDP deflator at reflecting the goods and services bought by consumers
The supply of money increases when?
The Fed makes open-market purchases
The supply of money is determined by?
The Federal Reserve System
The short-run relationship between inflation and unemployment is often called?
The Phillips Curve
Welfare Economics is the study of how?
The allocation of resources affects economic well-being
The key determinant of the standard of living in a country is?
The amount of goods and services produced from each hour of a workers time
The president of each regional Federal Reserve Bank is appointed by?
The board of directors of that regional Federal Reserve Bank
Which of the following agencies calculates the CPI?
The burea of labor statistics
Suppose that in 2010, the producer price index increases by 1.5 percent. As a result, economists most likely will predict that?
The consumer price index will increase in the futre.
If a country allows trade and, for a certain good, the domestic price without trade is lower than the world price?
The country will be an exporter of the good
The interest rate the Fed charges on loans it makes to banks is called?
The discount rate
Which of the following can banks use to borrow from the Federal Reserve?
The discount window or the term auction facility
Liquidity preference refers directly to Keynes Theory concerning?
The effects of changes in money demand and supply on interest rates
Using the liquidity-preference model, when the Federal Reserve increases the money supply?
The equilibrium interest rate decreases
Total income from the domestic production of final goods and services equal?
The expenditures for these goods whoever buys them
Which of the following statements best describes the economists view of finance and the financial system?
The financial system is very important to the functioning of the economy, and the tools of finance are often helpful to us as individuals when we find ourselves making certain decisions
Some people who are employed or who are not making serious effort to find unemployment will report them selves as unemployed. Some people who want to find work will be counted as out of the labor force?
The first fact tends to make the reported unemployment rate higher than otherwise, while the second fact tends to make the reported unemployment rate lower than otherwise
The CPI is a measure of the overall cost of?
The goods and services purchased by a typical consumer`
Which of the following is a good gauge of economic progress?
The growth rate of real GDP per person, but not the level of real GDP per person
The field of finance primarily studies?
The implications of time and risk for allocating resources over time
According to John Maynard Keynes?
The interest rate adjusts to balance the supply of the demand for money
The present value of a payment to be made in the future falls as?
The interest rate rises and the time until the payment is made increases
A logical starting point from which the study of international trade begins is?
The principle of comparative advantage
When tires are taxed and sellers of tires are required to pay the tax to the governement?
The quantity of tires bought and sold in the market is reduced
Which of the following groups is largely responsible for carrying out the Fed's tasks of regulating banks and ensuring the health of the financial system?
The regional Federal Reserve Banks
As the number of stocks in a person's portfolio increases?
The risk of the portfolio decreases, as indicated by the decreasing value of the standard deviation of the portfolio
Which of the following can be measured by the level of real GDP per person?
The standard of living but not productivity
One surprising thing about the US money stock is that?
There is so much currency per person
If a price ceiling is not binding, then?
There will be no effect on the market price or quantity sold.
When the Federal Reserve sells assets from its portfolio to the public with the intent of changing the money supply?
Those assets are government bonds and the Fed's reason for selling them is to decrease the money supply
Economists use the term "money" refer to?
Those types of wealth that are regularly accepted by sellers in exchange for goods and services
The demand for a good or service is determined by?
Those who buy the good or service
The labor-force participation rate measure the percentage of the?
Total adult population that is in the labor force
Which of the following is an example of using the scientific method a natural experiment?
Tracking the price of oil when a war in the middle east interrupts the flow of crude oil
With which of the Ten principles of economics is the study of international trade most closely connected?
Trade can make everyone better off
GDP is defined as the?
Value of all final goods and services produced within a country in a given period of time.
With the value of money on the vertical axis, the money supply curve is?
Vertical because we assume the central bank controls the money supply
The principle of comparative advantage does not provide answers to certain questions. One of those questions is?
What determines the price at which trade takes place?
An economy's production possibilities frontier is also its consumption possibilities frontier?
When the economy is self-sufficient
If the central bank in some country lowered the reserve requirement, then the money multiplier for that country?
Would increase
When Claudia, a US citizen, purchases a handbag made in France, the purchase is?
a US import and a french export
The Word "Economy" came from Greek Word oikonomos, which mean?
"One who manages a household"
Demand deposits are a type of?
Checking account
A shortage results when a?
Binding price ceiling is imposed on a market.
Credit Cards?
Defer payments
Which of the following is not an example of a public policy?
Equilibrium laws
Fiscal policy affects the economy?
In both the short and long run
A likely example of substitute goods for most people would be?
Pencils and pens
As aggregate demand shifts right along the aggregate supply curve?
Inflation is higher and unemployment is lower
While a television news reporter might state that "Today the Fed lowered the federal funds rate from 5.5% to 5.25%, a more precise account of the Fed's action would be as followed?
"Today the Fed told its bond traders to conduct open-market operations in such a way that the equilibrium federal funds rate would decrease to 5.25%"
What is the present value of a payment of $100 to be made one year from today?
$100(1+r)
Which is the following is the correct way to compute the future value of $X that earns r percent interest for N years?
$X(1+r)N
Over the past 70 years, prices in the US have risen on average about?
4%
If the price elasticity of demand for a good is 1.5, then a 3 percent decrease in price results in a?
4.5 percent increase in the quantity demanded
If the price elasticity of demand for a good is, then a percent increase in price results in a?
40 percent decrease in the quantity demanded
If the consumer price index was 100 in the base year and 107 in the following year, then the inflation was?
7%
Which of the following includes everyone in that adult population that the Bureau of Labor Statistics counts as unemployed?
Anyone who is not employed, is available for work, as looked for work in the past 4 weeks, and anyone who is waiting to be recalled from a job from which they have been laid off.
The members of the Federal Reserve's Board of Governors?
Are appointed by the president of the US and confirmed by the US senate
Specialization and trade are closely linked to?
Comparative advantage
On a graph, the area below a demand curve and above the price measures?
Consumer surplus
Suppose England Exports Cars to Australia and imports cheese from Mexico. This situation suggests that?
England has a comparative advantage relative to Australia in producing cars, and Mexico has a comparative advantage relative to England in producing cheese.
If policymakers decrease aggregate demand, then in the short run the price level?
Falls and unemployment rises
Institutions that help to match one person's saving with another person's investment are collectively called the?
Financial System
If the price of milk rises, when is the price elasticity of demand likely to be the lowest?
Immediately after the price increase
Which of the following statements about the term of a bond is correct?
Interest rates on long-term bonds are usually higher than interest rates on short term bonds
The concept of present value helps explain why?
Investment decreases when the interest rate increases, and it also helps explain why the quantity of loanable funds demanded decreases when the interest rate increases
Which of the following items is included in M2?
Money market mutual funds
The consumer price index is used to?
Monitor changes in the cost of living over time...
Unemployment numbers reported by the Bureau of Labor Statistics are reported based on a?
Monthly survey of about 60,000 households
When a country saves a larger portion of its GDP than it did before, it will have?
More capital and higher productivity
When the money market is drawn with the value of money on the vertical axis, a decrease in the price level causes a?
Movement to the left along the money demand curve
A high price earning ratio for a stock indicates that either the stock is?
Overvalued or people are relatively optimistic about the corporations prospects
If the CPI was 110 this year and 100 last year, then?
The cost of the CPI basket of goods and services increased by 10% this year.
The term inflation is used to describe a situation in which?
The overall level of prices in the economy is increasing
If a tax shifts the supply curve downward, we can infer that the tax was levied on?
We cannot infer anything because the shift described is not consistent with a tax
In a market, the marginal buyer is the buyer?
Who would be the first to leave the market if the were any higher.
The maximum price that a buyer will pay for a good is called the?
Willingness to pay
The price of a good that prevails in a world market is called the?
World Price
Deflation
decreases incomes and reduces the ability of debtors to pay off their debts
A legal minimum on the price at which a good can be sold is called a price?
floor
Net exports of a country are the value of?
goods and services exported minus the value of goods and services imported.
A tradeoff exists between a clean environment and a higher level of income that?
laws that reduce pollution raise costs of production and reduce incomes.
One thing economists do to help them understand how the real world works is?
make assumptions
Inflation can be measured by the?
percentage change in the consumer price index `
In a competitive market free of government regulation?
price adjusts until quantity demanded equals quantity supplied.
M1 equals currency plus demand deposits plus?
traveler's checks plus other checkable deposits
Over the past 100 years, US real GDP per person has doubled about every 35 years. If it continues to double every 35 years, then in 100 years US real GDP per person will be about?
8 times higher than it is now
Imagine that someone offers you $100 today or $200 in 10 years. You would prefer to take the $100 today if the interest rate is?
8%
Suppose that economy produces 40,000 units of units of good A which sells at $4 a unit and 20,000 units of good B which sells at $5 per unit. Production of good A contributes?
8/5 times as much to GDP as the production of good B
Which of the following changes would decrease the present value of a future payment?
A decrease in the size of the payment, an increase in the time until the payment is made, and an increase in the interest rate
Which of the following is an example of a market?
A gas station, garage sales, barber shop
Senator Brown wants to increase taxes on people with high incomes and use the money to help the poor. Senator Johnson argues that such a tax will discourage successful people from working and will therefor make society worse off. An economist would say that?
A good decision requires that we recognize both viewpoints.
Elasticity?
A measure of how much buyers and sellers respond to changes in market conditions
Prisoners sometimes determine a single good to be used as money. This good becomes?
A medium of exchange and a unit of account
Minimum wage laws dictate?
A minimum wage that firms may pay workers.
The use of Theory and observation is more difficult in economics than in sciences such as physics due to the difficulty in?
A performing an experiment in an economic system
Oil is considered to be a non renewable energy resource, Oil is?
A scarce resource
The reported unemployment rate should be viewed as?
A useful but imperfect measure of joblesness
Which of the following statements about the consumers responses to rising gasoline prices is correct?
About half of the long run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel efficient cars
The problem of moral hazard arises because?
After people buy insurance, they have less incentive to be careful about their risky behavior
In a simple circular-flow diagram, total income and total expenditure are?
Always equal because every transaction has a buyer and a seller
Which of the following statements is true?
Americans have a higher standard of living than Indonesians because American workers are more productive than indonesian workers
The circular flow diagram is an example of?
An economic model
The Bureau of Labor Statistics places people in the "employed" category if they?
Are temporarily absent from their jobs, are self-employed, work without pay in a family member's business
Ben bakes bread and Shawna knits sweaters. Ben and Shawna both like to eat bread and wear sweaters. In which of the following cases is it impossible for both Ben and Shawna to benefit from trade?
Both Ben and Shawna can benefit from trade in all of the above cases
A price ceiling is binding when it is set?
Below the equilibrium price, causing a shortage.
Which particular interest rate do we attempt to explain using the theory of liquidity preference?
Both the nominal interest rate and the real interest rate
Closely watched indicators such as the inflation rate and unemployment are released each month by the?
Bureau of Labor Statistics
Measuring unemployment is the job of the?
Bureau of Labor Statistics
To increase the money supply, the Fed can?
Buy government bonds or decrease the discount rate
The price elasticity of demand measures?
Buyers responsiveness to a change in the price of a good.
The inflation rate is computed?
By determining the percentage increase in the price index from the preceding period.
Which of the following is the least likely to be a competitive market?
Cable television
In a market economy, supply and demand are important because they?
Can be used to predict the impact on the economy of various events and policies.
An economic theory about international trade that is based on the assumption that there are only two countries trading two goods?
Can be useful in helping economists understand the complex world of international trade involving many countries and many goods.
Public Policy?
Can reduce both frictional unemployment and the natural rate of unemployment
When the consumer price index falls, the typical family?
Can spend fewer dollars to maintain the same standard of living.
A legal maximum on the price at which a good can be sold is called a price?
Ceiling
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.
In the calculation of the CPI, books are given greater weight than magazines if?
Consumers buy more books than magazines
The fact that borrowers sometimes default on their loans by declaring bankruptcy is directly related to the characteristic of a bond called?
Credit Risk
To fully understand how taxes affect economic well-being, we must compare the?
Decrease in total surplus to the increase in revenue raised by the government
In the late summer of 2005 some regions of the country were suffering from drought. What effect would we expect this to have on the stock of companies such as John Deere that manufacture farm equipment?
Decrease the demand for existing shares of the stock, causing the price to fall
According to the Phillips curve, policymaker would reduce inflation but raise unemployment if they?
Decreased the money supply
When the Fed makes open market purchases bank?
Deposits and lending increase
A stocks dividend yield is the?
Dividend as a percentage of the price per share
When a tax is imposed on the buyers of a good, the demand curve shifts?
Downward by the amount of the tax
Samuelson and Solow argued that when unemployment is high, there is?
Downward pressure on wages and prices
Which of the following is correct?3
During the 1990s, US inflation average about 2 percent per year
Economists use the word equality to describe a situation in which?
Each member of society has the same income.
A typical society strives to get the most it can from scarce resources . At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. In other words, the society faces a tradeoff between?
Efficiency and Equaility
Bob traps lobsters in Maine and sells them to a restaurant in Mexico. Other things the same, these sales?
Increase US net exports and decrease Mexican net exports
Elasticity of demand is closely related to the slope of the demand curve. the more responsive buyers are to a change in price, the?
Flatter the demand curve will be.
Unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills is called?
Frictional unemployment
The existence of money leads to?
Greater specialization and to a higher standard of living
Which of the following statistics is usually regarded as the best single measure of a society's economic well-being?
Gross Domestic Product
Which of the following are residents of rich countries likely to have in greater quantities, or better quality, than residents of poor countires?
Housing, healthcare, and life expectancy
If an economy's GDP falls, then it must be the case that the economy's?
Income and expenditure both fall
Gross Domestic Product Measures?
Income and expenditures
For an economy as a whole?
Income must equal expenditure
To fully understand how taxes affect economic well-being, we must?
compare the reduced welfare of buyers and sellers to the amount of revenue the government raises
The principle that people face tradeoffs applies to?
individuals, families, and socities
Over the last ten years productivity grew more slowly in Upland than in Lowland and the population and total hours worked remained the same in both countries. It follows that?
real GDP per person grew more slowly in Upland than in Lowland