Macroeconomics midterm
If M stands for the money stock, P for the price level, and Y for real GDP, then velocity, V, equals: A) (P x M) / Y B) (M x Y) / P C) (P x Y) / M D) (M x P) / Y
C
If a producer is operating at an inefficient point on the production possibilities curve, then that producer... A) is specializing in activities for which it has a comparative advantage B) must be an unattainable point on the PPC C) can produce more of one good without producing less of the other good D) cannot produce more of one good without giving up some of the other good
C
If real GDP equals 1,500 , nominal GDP equals 3,750 , then what is the velocity of money if the money stock equals 1,875? A) 3.8 B) 2.5 C) 2 D) .8
C
If the principle amount of a bond is $20,000, the coupon rate is 6%, and the inflation rate is 4%, then the annual coupon payment made to the holder of the bond is A) 2,000 B) 800 C) 1200 D) 400
C
Jamal and Alex share their household chores. Jamal can clean 5 rooms in an hour or 4 meals cooked Alex can clean 3 rooms in and hour or 3 meals cooked which of the following is true? A) Alex has both an absolute advantage and comparative advantage over Jamal in both B) Alex has comparative advantage over Jamal in cleaning C) Jamal has a comparative advantage over Alex in cleaning D) Jamal has both an absolute advantage and comparative advantage over Alex in both
C
On January 1, 2008, edwardo Invested $10,000 at 5% interest for one year. The CPI on January 1, 2008 was 1.60. On January 1, 2009, the CPI was 1.76. The real interest rate earned by edwardo was ______ A) 5% B) 10% C) - 5% D) 0%
C
"The federal reserve should raise the interest rate in order to keep inflation at an acceptably low level" is a ____ statement about _____ policy A) normative; monetary B) positive ; fiscal C) normative ; fiscal D) positive ; monetary
A
2 countries, Alpha and Beta, have the same nominal and real GDP. Each dollar in Alpha is used more frequently than in Beta. This means that _____ in Alpha than in Beta. A) the money stock is smaller B) the price level in greater C) the velocity is lower D) the rate of inflation is greater
A
2 reasons savers keeps deposits at the bank is to... A) earn a return on their savings and to facilitate making payments B) equalize loan supply and demand to earn interest C) lower interest rates and to increase the money supply D) secure mortgages and to purchase stocks
A
Corey can make 12 pizzas in an hour and can deliver 6 pizzas in an hour. Elena can make 10 pizzas in an hour and can deliver 15 pizzas in an hour. Elenas opportunity cost of delivering a pizza is making.. A) 2/3 of a pizza B) 12 pizzas C) 10 pizzas D) 3/2 pizzas
A
Given the following, complete the GDP gov't purchase of goods and services— 12 consumption expenditures —75 exports — 6 imports — 14 change in inventories — -5 construction of new homes — 15 sale of existing homes — 22 gov't payment to retirees — 18 business fixed investment — 11 The GDP = A) 100 B) 154 C) 146 D) 143
A
If Aaliyah can produce 3 pairs of shoes per hour, while bahjat can produce 2, then __ has a __ advantage in producing shoes. A) Aaliyah;absolute B) Aaliyah;comparative C) Bahjat;absolute D) Bahjat;comparative
A
If real GDP per person = 22,500 and 80% of the population is employed, then the average labor productivity equals A) 34,375 B) 27,500 C) 80,000 D) 22,000
A
If tax revenues = 25% of total output and govt expenditures = 20%, there is a... A) govt budget surplus B) govt budget deficit C) trade deficit D) trade surplus
A
If the desired reserve/deposit ratio is 0.25 and the banking system receives an additional $10 million in reserves, bank deposits will increase by: A) 40 million B) 10 million C) 4 million D) 250 million
A
In Macroland, there is $8,000,000 in currency. The public holds 60 % of the currency and banks hold the rest as reserves. If banks' desired reserve/ deposit ratio is 12.5%, deposits in Macroland equal ____ and money supply equals ____ A) 38,400,000 ; 41,600,000 B) 38,400,000 ; 46,400,000 C) 41,600,000 ; 41,600,000 D) 64,000,000 ; 64,000,000
A
Slower growth in labor demand in combination with increases in labor supply explains ____________ accompanied by __________. A) slowdown in real wage growth , employment growth B) slowdown in real wage growth , decline in employment C) slowdown in real wage growth , increase in wage inequality D) accelerated wage growth , decline in employment
A
Suppose average labor productivity in country C is $5000, and countries C and E have the same GDP. What is the average labor productivity in country E? Country A — population: 100 mil , employed %: 60 Country B — population: 150 mil , 55% employed Country C — population: 150 mil , 50% employed Country D — population: 75 mil , 45% employed Country E — population: 95 mil , 40% employed
A
The money supply in Macroland is currently 2,500, bank reserves are 200, currency held by public is 500, and banks' desired reserve/deposit ratio is 0.10. Assuming the values of the currency held by the public and the desired reserve/deposit ratio do not change, if the Central Bank of Macroland wishes to increase the money supply to 3,000, then it should conduct an open-market ______ government bonds. A) purchase of 50 B) purchase of 500 C) sale of 500 D) sale of 50
A
"If the federal reserve raises interest rates, demand for housing is likely to fall" is a ____ statement about ____ policy A) positive ; fiscal B) positive ; monetary C) normative ; fiscal D) normative ; monetary
B
3 equivalent ways to measure GDP are total _____, total _____, and total _____ A) profits, production, saving B) production, income, expenditure C) investment, consumption, saving D) expenditure, income, profits
B
A govt policy that allows retirement savings to accumulate tax free is an example of a policy that promotes growth by... A) increasing the availability of natural resources B) increasing physical capital C) increasing technology D) increasing human capital
B
An increase in the productivity of labor will... A) decrease labor supply B) increase labor demand C) increase labor supply D) decrease labor demand
B
Bank C promises to pay a compound annual interest rate of 6 percent, while Bank S pays a 10 percent simple annual interest rate on deposits. If you deposit $1,000 in each bank, after 10 years, your deposit in Bank C equals _____, while your deposit in Bank S equals ______. A) 1,600 , 2,594 B) 1,791 , 2,000 C) 1,060 , 1,100 D) 1,600 , 2,000
B
Extremely rapid rates of money growth at are usually the result of... A) rapid population growth B) large govt budget deficit C) excessively high interest rates D) sharp increases in productivity
B
Given the data, what is the value of real GDP in 2020? football quantity— (2019) 200 (2020) 300 football prices — (2019) $20 (2020) $3 baseball quantity — (2019) 500 (2020) 600 baseball prices — (2019) $10 (2020) $1.50 A) 10,000 B) 12,000 C) 9,000 D) 12,500
B
If a linear, 2 good production possibilities curve has a slope of -2, then... A) having an additional unit of the good measured on the vertical axis means giving up 2 units of the good measured on the horizontal axis B) having an additional unit of the good measured on the vertical axis means giving up 1/2 unit of the good measured on the horizontal axis C) you have an absolute advantage in the good measured on the vertical axis D) you have a comparative advantage in the good measured on the vertical axis
B
If living standards in a country decrease, then then total output must have... A) decreased more slowly than the population decreased B) increased more slowly than population increased C) increased more rapidly than population increased D) increased at the same rate that population increased
B
If the United States has a $300 billion net capital inflow, then there must be a... A) trade surplus of 600 billion B) trade deficit of 300 billion C) net capital outflow of 300 billion D) trade surplus of 300 billion
B
In a 2 person, 2 good economy, the gains to specialization will be larger when A) neither person has an absolute advantage B) there are large differences between the individuals in their opportunity cost of producing the 2 goods C) one person has an absolute advantage in both goods D) there are small differences between the individuals and their opportunity cost of producing both goods
B
In a country where there are 200 million people 16 and older, 120 million are in the labor force, 114 million are employed, what is the participation rate? A) 95% B) 60% C) 40% D) 57%
B
In a small town of 100 people, there are 10 children under the age of 16, 10 retired people, 60 people with full time jobs, 3 people with part time jobs, 3 full time students, and 4 full time homemakers. The remaining do not have jobs but wanted jobs. What is the unemployment rate? A) 11.0% B) 13.7% C) 14.5 % D) 10.0%
B
In econland, exports = 25% total output while imports = 20%. Econland has a A) budget deficit B) trade surplus C) trade deficit D) budget surplus
B
In econland, total output is $4 billion, population equals 500,000 people, and of these, 400,000 people are employed workers. Output per person in Econland equals ___ and average labor productivity equals ____. A) 8,000;8,000 B) 8,000;10,000 C) 10,000;8,000 D) 10,000;10,000
B
It takes Paul 3 hours to bake a cake and 2 hours to mow the lawn, and it takes Tom 2 hours to bake a cake and 1 hour to mow the lawn. Which is correct? A) Paul has a comparative advantage in mowing the lawn B) Paul has a comparative advantage in baking cakes C) Paul has the absolute advantage in baking cakes D) Paul has the absolute advantage in mowing the lawns
B
Mike can debone 30 chicken in an hour, while Tom can debone 60 chicken in an hour. What is their average hourly productivity together? A) 60 B) 45 C) 90 D) 30
B
National defense services provided by the military are... A) excluded from GDP bc they are not sold in markets B) included in GDP at cost C) included in GDP at market prices D) excluded from GDP because they are intermediate goods
B
The provision of additional cash to the banking system is an example of _______ policy. A) aggregation B) monetary C) structural D) fiscal
B
The real cost of borrowing is unchanged when the ____ interest rate and the ____ rate increase by the same amount A) nominal, real interest B) nominal, inflation C) real, inflation D) real, nominal interest
B
To ensure your salary maintains its real purchasing power from year to year, your normal salary must be A) hyperinflated B) indexed C) deflated D) aggregated
B
To prevent people from paying a higher % of their income in taxes even when their real income hasn't changed, congress A) deflated the income tax brackets to the CPI B) indexed the income tax brackets to the CPI C) implemented a flat tax D) reduced the capital gains tax
B
When a Peruvian buys a U.S. government bond, from the perspective of the U.S., this is a(n): A) trade deficit B) capital inflow C) trade surplus D) capital outflow
B
Which of the following statements is normative? A) a large budget surplus is likely to lower interest rates B) higher taxes are needed to support education C) the interest rate increases are the result from federal reserve actions to decrease money supply D) trade deficits frequently occur in conjunction with budget deficits
B
Smith can repair 100 calculators per hour or 10 computers per hour. Jones can repair 120 calculators per hour or 6 computers per hour. If smith and Jones are dividing their time efficiently and producing fewer than 10 computers and more than 120 calculators, then smith will __ and jones will __. A) produce only computers ; produce only calculators B) produce only calculators ; split his time between computers and calculators C) split his time between computers and calculators ; produce only calculators D) produce only calculators ; produce only computers
C
The coupon rate on newly issued bonds is usually higher for bonds with ______ terms and ______ risk that the borrower will go bankrupt. A) longer , smaller B) shorter , smaller C) longer , greater D) shorter , greater
C
The price of gas was $1.35 in 2000 when CPI = 1.68. The cost of gas was $2.38 in 2018 when CPI = 2.40. The real cost of gas between 2000-2018: A) decreased B) increased or decreased C) increased D) remained constant
C
When economists use market values to aggregate output, they sum the A) # of items produced B) inputs of each item produced C) price x quantity of each item produced D) quantity of items produced
C
Who is considered unemployed? A) a person willing to work who has not looked for a job in 2 months B) a person with a part time job who is looking for a full time job C) a person who is willing to work and has looked for a job in the past week D) all of the above
C
4 components of aggregate expenditures are: A) consumer durables, investment, govt spending, net exports B) consumption, imports, govt spending, net exports C) consumption, interest payments, govt spending, net exports D) consumption, investment, govt spending, net exports
D
A cost of aggregation is that... A) broad economic trends are obscured B) economy wide totals cant be obtained C) the big picture cannot be studied D) details about individual households and firms are lost
D
All things constant, lower domestic real interest rates ____ capital inflows, _____ capital outflows, and ____ net capital inflows A) increase , increase , decrease B) increase , increase , increase C) increase , decrease , increase D) decrease , increase , decrease
D
An economy produces 1,000,000 computers valued at $2,000 each. Households purchase 200,000 computers, of which 100,000 are imported. Businesses purchase 300,000 domestically produced computers, the gov't purchases 300,000 domestically produced computers, and 100,000 domestically produced computers are sold abroad. At the end of the year, the computer manufacturers hold the unsold inventory. What is the valued investment component of GDP? A) .6 billion B) .9 billion C) .8 billion D) 1 billion
D
An example of a govt policy that provides framework which the private sector can operate productively is A) taxation of savings B) suppression of political dissent C) govt ownership of capital D) establishing well defined property rights
D
An increase in # of buyers in the market for the product produced by labor will... A) increase supply of labor B) decrease demand for labor C) decrease supply of labor D) increase demand for labor
D
An increase in riskiness of a company's stock ____ the risk premium investors require to purchase the stock and _____ the price of the stock. A) decreases , increases B) increases , increases C) decreases , decreases D) increases , decreases
D
Each pizza at Joes pizza shop sells for $5 each. How many workers will Joe want to hire if he has to pay each employee $35 a day? 1 worker —> 10 pizzas per day 2 workers —> 18 pizzas per day 3 workers —> 24 pizzas per day 4 workers —> 30 pizzas per day 5 workers —> 32 pizzas per day A) 1 B) 3 C) 4 D) 2
D
If real GDP equals 6,000, nominal GDP equals 15,000, and the price level equals 2.5, what is velocity if the money stock equals 1500? A) 2.5 B) 4 C) 15 D) 10
D
If total output increases from $1 trillion to $2 trillion as population increases from 100 million to 200 million, then output per person: A) increases, but by less than 100% B) remains constant C) doubles D) decreases
D
In an open economy, the domestic real interest rate is determined by A) domestic saving and domestic investment B) domestic saving and net capital Inflows C) domestic investment D) domestic saving, domestic investment, net capital inflows
D
Jordan has the following: two cars — $10,000 house — 200,000 mortgage — 100,000 cash — 1,000 car loans — 3,000 checking account balance — 2,000 credit card balance — 1,000 what is the value of Jordans liabilities? A) 100,000 B) 317,000 C) 213,000 D) 104,000
D
Kate can make a pie in 60 minutes and a cake in 80 minutes. Julia can make a pie in 50 minutes and a cake in 60 minutes. Kates opportunity cost of making a pie is ... A) 5/6 of a cake B) 6/5 of a cake C) 4/3 of a cake D) 3/4 of a cake
D
Major macroeconomic questions include all of the following EXCEPT: A) can inflation be reduced without generating additional unemployment? B) what causes slowdowns in economic growth? C) are free trade agreements beneficial? D) how do monopoly firms set prices?
D
Northland produces 1,000 billion in one year. The population is 60 million, of whom 20 million were employed. What's the average labor productivity? A) 40 B) 50 C) 20,000 D) 50,000
D
The discovery and utilization of vast, previously unknown oil and mineral deposits in a country will increase: A) the quantity of human capital B) the share of the population employed C) the unemployment rate D) average labor productivity
D
The main disadvantage of using money as a store of value is that... A) barter is a more efficient way to conduct transactions than using money B) unlike other assets, money serves as a medium of exchange C) other assets provide greater anonymity than cash D) other assets pay relatively higher rates of interest than money
D
The real cost of inflation to society include: A) lost purchasing power of income B) higher relative prices C) an increase in the general level of prices D) interference with long term planning
D
When a U.S. restaurant purchases French wine and the French wine company uses the proceeds to buy U.S. government debt, U.S. ______ and there is a capital ______ the United States. A) imports decrease , inflow to B) exports increase , outflow from C) imports increase , outflow from D) imports increase , inflow to
D
When staticians fail to allow the possibility that consumers switch from products with rising prices to prices that are stable or falling, the CPI will tend to _____ the rate of inflation A) be unrelated to B) understate C) precisely measure D) overstate
D
When the central bank buys $1,000,000 worth of govt bonds from the public, the money supply A) increases by 1,000,000 B) increases by less than 1,000,000 C) decreases by 1,000,000 D) increases by more than 1,000,000
D
You are president of a trade for a small island with the following PPC: coconut (500) fish (1500) you are negotiating with another island with the following PPC: coconut (500) fish (2500) what's the minimum fish you would accept for 1 coconut? A) 4 B) 2 C) 5 D) 3
D
the shoe leather costs of inflation include all of the following except: A) the installation of a new cash management system B) the cost of more frequent trips to the bank C) the extra costs incurred to avoid holding cash D) the lost purchasing power of cash
D
