macroeconomics final exam review

During periods of rapid inflation, money may cease to work as a medium of exchange: A. because people and businesses will not want to accept it in transactions B. because it is too scarce for everyone to have enough transactions C. unless it is backed by gold D. unless it had been desingated legal tender

A

If the Consumer Price Index for a certain year is 120, this means that the average price of consumer items in that year was: A. 20% higher than the average in the base period 1982-84 B. 20% higher than the average price of the preceding years C. about $120 per basket of consumer goods and services D. 120% higher than the average price in the base period 1983-84

A

If the annual growth in a nation's productivity is 2.8% rather that 1.5%, then the nation's standard of living will double in about: A. 25 years instead of 47 years B. 20 years instead of 40 years C. 46 years instead of 70 years D. 55 years instead of 115 years

A

Other things equal, which of the following would increase the rate of economic growth, as measured by changes in real GDP? A. an increase in the size of the working age population B. a decline in the average length of the workweek C. a decline in the amount of capital per worker D. a decrease in the labor force participation rate

A

Property rights are important because: A. encourage cooperation by improving the chances of mutually agreeable transactions B. allow the government to control how resources are allocated C. ensure an equal distribution of income D. guarantee that any exchange will make all parties better off that prior to the exchange

A

Refer to the diagram. A price of $20 in this market will result in a: A. shortage of 50 units B. surplus of 100 units C. surplus of 50 units D. shortage of 100 units

A

The amount by which government expenditures exceed revenues during a particular year is the: A. budget deficit B. full employment C. public debt D. GDP gap

A

The economy has an annual inflation rate of 3.5%. It will take approximately how many years for the price level to double? A. 20 years B. 25 years C. 10 years D. 30 years

A

The federal reserve system of the united states is the country's: A. central bank B. financial advisor C. deposit insurance provider D. comptroller or accountant

A

The main function of the federal reserve system is to: A. control the money supply B. clear checks from memebr banks C. serve as the fiscal agent for the federal government D. set reserve requirements of banks

A

The most important determinant of consumer spending is: A. the level on income B. the stock of wealth C. consumer expectations D. the level of household borrowing

A

When infaltion occurs,: A. the puchasing power of money decreases B. all prices are rising C. the purchasing power of money increases D. each dollar of income will buy more output than before

A

When oil and energy prices rise, the economy tends to experience: A. cost-push inflation B. unanticipated infaltion C. demand-pull inflation D. natural-inflation

A

When tariffs on imported products are removed by a nation, it will result in A. lower prices and higher quantities consumed in that nation B. higher prices and lower quantities consumed in that nation C. lower prices and lower quantities consumed in that nation D. higher prices and higher quantities consumed in that nation

A

Which of the following is a distinguished feature of a command system? A. central planning B. heavy reliance on markets C. widespread dispersion of economic power D. private ownership of all capital

A

Which of the following is not a factor of production? A. money B. entrepreneur C. capital D. labor

A

A price ceiling means: A. government want to stop a defaltionary spital B. government in imposing a legal price that is typically above the equilibrium price C.government in imposing a legal price that is typically below the equilibrium price D. there is currently a surplus of the relevant product

B

A reserve requirement of 20% means a bank much have atleast $1,000 of reserves if its checkable deposits are: A. $100 B. $5,000 C. $1,000 D. $12,000

B

Economic growth is best defined as an increase in A. total consumption expenditures B. either real GRP or real GDP per capita C. wealth in the economy D. nominal GDP

B

GDP excludes: A. positive changes in inventories B. the market value of unpaid work in the home C. the production services D. the production of nondurable goods

B

If the price index rises from 200 to 250, the purchasing power value of the dollar: A. will rise by 25% B. will fall by 20% C. may either rise or fall D. will fall by 25%

B

Money functions as: A. a unit of account B. a medium of exchange C. a sotre value, a unit of account, and a medium of exchange D. a store of value

B

Private property and freedom of choice in a market system have the following implications, except: A. economic agents are allowed to act in their own self-interest B. large firms are allowed to coerce other firms and individuals C. trades that take place in the economy are mutually agreeable transactions among individuals D. individuals are free to take on the financial risks involved in a business

B

Recently a teachers' union argued that the standard of living of teachers working for the school district was falling. The negotiating team for the school board replied that this was not true because the teachers had received significant increases in nominal income through collective bargaining. Could the union statement be correct? A. Yes, because real income may fall if price increases are proportionally smaller than the increases in nominal income B. Yes, because real income may fall if price increases are proportionally greater than the increases in nominal income C. No, because real income may rise if price increases are proportionally greater than the declines in nominal income D. No, because real income may rise if price increases are proportionally greater than the increases in nominal income

B

Refer to the accompanying data about a hypothetical economy (in billions of dollars). GDP in this economy is: A. $6,230 billion B. $6,400 billion C. $6,080 billlion D. $6,380 billion

B

Research studies indicate that: A. the revenue from tariffs equals the total cost that tariffs impose on consumers B. U.S producers gain more from tariffs that U.S consumers lose C. the cost of trade restrictions are proportionally higher for high-income groups than for low-income groups D. U.S consumers lose more from tariffs than U.S producers gain

B

Specialization in production is important primarily because: A. allows society to avoid the coincidence of wants problem B. results in greater total output C. allows society to have fewer capital goods D. allows society to trade by barter

B

Tariffs and quotas are costly to consumers because: A. the price of the important good falls B. import competition increases for domestic goods C. the supply of the imported good increases D. consumers have to switch to higher-priced domestic goods

B

The best example of a "frictionally unemployed" worker is one who: A. is discouraged and not actively seeking work B. is in the progress of voluntarily switching jobs C. is laid off during a recessionary period in the economy D. reduces productivity by causing friction in the business

B

The largest portion of the U.S debt is held by: A. foreign individuals and institutions B. the U.S C. U.S government agencies D. the Federal Reserve System

B

The two ways of looking at GDP are the: A. output approach and expenditures approach B. expenditures approach and income approach C. oupput approach and consumption approach D. income approach and saving approach

B

A nation's GDP: A. is the dollar value of all final output produced by its citizens, regardless of where they are living B. can be found by summing C+In+S+Xn C. is the dollar value of all final output produced within the borders of the nation during a specific period of time D. is always some amount less than C+Ig+G+Xn

C

Assume an economy that makes only one product and that year 3 is the base year. Output and price data fro a five-year period are shown in the table. Real GDP for year five is: A. $49 B. $64 C. $40 D. $160

C

Consumer surplus: A. is the difference between maximum prices consumers are willing to pay for a product and the lower equilibrium proce B. rises as equilibrium prices rise C. is the difference between the maximum prices consumers are willing to pay for a product and the minimum prices producers are willing to accept D. is the difference between the minimum prices producers are willing to accept for a product and the higher equilibrium price

C

Govenrment purchases include government spending on: A. public capital goods only B. government consumption goods, public capital goods, and transfer payments C. government consumption goods, public capital goods D. government consumption goods only

C

If the nominal interest rate is 18% and the real interest rate is 6%, the infaltion rate is: A. 6% B. 18% C. 12% D. 24%

C

In a two-nation world, comparative advantage in the production of a particular product means that one nation can produce: A. more of the product than the other nation B. the product with fewer imputs than the other nation C. the product at a lower domestic opportunity cost than the other nations D. the produc at lower average cost than the other nation

C

In countries A and B produce only either rubber bands or paper clips, their maximum outputs are shown in the accompanying production possibilities schedules. In country A the opportunity of 1 paper clip is: A. 1/4 rubber band B. 2 rubber bands C. 1/2 rubber band D. 1 rubber band

C

In economics, the pleasure, happiness, or satisfaction received from a product is called: A. status fultillment B. marginal cost C. utility D. rational outcome

C

Market failure is said to occur whenever: A. government intervenes in the functioning of private markets B. some consumers who want a good do not obtain it because the price is higher then they are willing to pay C. private markets do not allocate resources in the most economically desirable way D. prices rise

C

Recurring upswings and downswings in an economy's real GDP over time are called: A. recession B. output yo-yos C. business cycles D. total product oscillations

C

Refer to the diagram. This production possibilites curve is constructed so that: A. the opportunity cost of tractors increases as more bread is produced B. the opportunity costs of both bread and tractors increase as more of each is produced C. resources are presumes to be perfectly shiftable between bread and tractors D. the opportunity cost of bread diminishes as bread is produced

C

Specialization and trade between individuals or between nations leads to: A. greater self-sufficiency B. higher product prices C. higher total output D. higher utilization of resources

C

The basic requirement for an item to function as money is that it be: A. some form of debt or credit B. authorized as legal tender by the central government C. generally accepted as a medium of exchange D. bacled by precious metalsD

C

The crowding-out effect suggests that: A. it is very difficult to have excessive aggregate spending in a capitalist economy B. consumer and investment spending always vary inversely C. government borrowing to finance the public debt increases the real interest rate and reduces private investing D. tax increases are paid primarily out of saving and therefore are not an effective fiscal device

C

The goldsmith's ability to create money was based on the fact that: A. withdrawals of goal tended to exceed deposits of gold in any given time period B. the goldsmith was required to keep 100% gold reserves C. paper money in the form of gold receipts was rarely redeemed for gold D. consumers and merchants preferred to use gold for transactions, rather than paper money

C

The paper money used in the U.S is: A. United Stated notes B. National Bank notes C. Federal Reserve notes D. Treasury notes

C

The reserve ratio refers to the ration of a bank's A. checkable deposits to its total liabilities B. reserves to its liabilities and net worth C. required reserves to its checkable-deposit liabilities D. capital stock to its total assets

C

What "backs" the money supply of the United States? A. the fact that the intrinsic value of coins in circulation is greater than their face value B. the aount of gold the U.S government has on deposit at its banks C. the U.S government's ability to keep the value of money relatively stable D. the fact that currency is issued by the Federal Reserve System

C

Which of the following represents the most expansionary fiscal policy? A. a $10 billion tax cut B. a $10 billion decrease in government spending C. a $10 billion increase in government spending D. a $10 billion tax increase

C

a production possibilities curve illustrates: A. the distribution of income B consumer preferences C. scarcity D. market prices

C

as a consequence of the problem of scarcity: A. things which are plentiful have relatively high prices B. there is never enough of anything C. only some people "have it all" D. individuals have to make choices from among alternatives

C

A market: A. entails the exchange the goods, but not the services B. always requires face to face contact between buyer and seller C. reflects upsloping demand and downsloping supply curves D. is an institution that brings together buyers and sellers

D

A statement that is often used to describe demand-pull inflation is: A. "money is easily earned, but not easily saved" B. "a rising tide lifts all boats" C. "there is no such thing as a free lunch" D. 'too much money chasing too few goods"

D

A tariff can be best described as: A. a government payment to domestic producers to enable them to sell competitively in world markets B. a law that sets a limit on the amount of a good that can be imported C. an excise tax on an exported good D. an excise tax on an imported good

D

Allocative efficiency is concerned with: A. achieving the full employment of all available resources B. producing every good with the least cost combination of inouts C. producing the combination of goods most desired by society D. reducing the concavity of the production possibilities curve

D

Environment pollution is accounted for in: A. DI B. PI C. GDP D. none of these

D

If there was a surplus of the product, its price: A. is above the equilibrium line B. will rise in the near future C. is in equilibrium D. is below the equilibrium line

D

Infaltion is a rise in: A. the standard of living over time B. unemployment over time C. real GDP over time D. the general level of prices over time

D

Refer to tha table. If the economy is producing at production alternative C, the opportunity cost of the 10th units will be: A. 3 units of capital goods B. 4 units of capital goods C. 2 units of capital goods D. 1/3 of a unit of capital goods

D

Refer to the diagram, which shows the domestic demand and supply cirves for a specific standardized product in a particular nation. If the world price for this product is $.50, this nation will experience a domestic:: A. surplus of 160 units, which will reduce the world price to $1.00 B. shortage of 160 units, which will increase the domestic price to $1.60 C. shortage of 160 units, which will meet with 160 units of imports D. surplus of 160 units, which it will export

D

Refer to the diagram. A shortage of 160 unites would be encountered if price was: A. $1.60 B. $1.10, that is, $1.60 minus $.50 C. $1.00 D $0.50

D

Refer to the digram. Other things equal, this economy will shift its production possibilits curves outward the most if: A. it chooses point C B. the ratio of capital to consumer goods is minimized C. it chooses point B D. it chooses point A

D

The Federal Reserve Banks are owned by the: A. United States Treasury B. federal government C. board of governors D. member banks

D

The benefits to trading nations based on comparative advantage accrue from: A. trading only B. protection of domestic industries C. specialization only D. specialization and trading

D

The federal reserve system performs the following functions except: A. issuing the paper currency in the economy B. providing financial services to the Federal government C. lending money to banks and thrifts D. providing banking services to the general public

D

Which of the following does not explain what backs the money supply in the U.S? A. it is widely accepted in transactions B. it is relatively scarce C. it is designated "legal tender" by the federal government D. it is backed by gold

D

unemployment A. causes the priduction possiblities curve to shift outward B.is illustrated by a point outside the production possibilites curve C. can exist at any point on a production possibilities curve D. is illustrated by a point inside the production possibilities curve

D

which of the following is not a typical characteristic of a market system? A. competition in product and resource market B. freedom enterprise C. private property D. government ownership of most property resources

D