Econ 1 Final

If actual reserves in the banking system are $8,000, checkable deposits are $70,000 and the legal reserve ratio is 10%, then excess reserves are: A. zero B. $1,000 C. $2,000 D. $500

B. $1,000

If actual reserves in the banking system are $8,000, checkable deposits are $70,000, and the legal reserve ratio is 10 percent, then excess reserves are: A. zero. B. $1,000. C. $2,000. D. $500.

B. $1,000.

Suppose that the level of GDP increased by $100 billion in a private closed economy where the marginal propensity to consume 0.5. Aggregate expenditures must have increased by: A. $100 billion B. $50 billion C. $500 billion D. $5 billion

B. $50 billion

Suppose that the level of GDP increased by $100 billion in a private closed economy where the marginal propensity to consume is .5. Aggregate expenditures must have increased by: A. $100 billion. B. $50 billion. C. $500 billion. D. $5 billion.

B. $50 billion.

Unemployed: 7 Total population: 146 Employed: 95 Discourage workers: 3 What is the labor force here? A. 95 million B. 102 million C. 105 million D. 145 million

B. 102 million

Answer the question on the basis of the following information about the hypothetical economy of Scoob. All figures are in millions. Unemployed: 7 Total population: 145 Employed: 95 Discouraged workers: 3 Refer to the given information. The labor force in Scoob is: A. 95 million. B. 102 million. C. 105 million. D. 145 million.

B. 102 million.

Which of the following is associated with macroeconomics? A. an examination of the incomes of Harvard Business School grads B. an empirical investigation of the general price level and unemployment rates since 1990. C. a study of the trend of pecan prices since WWII D. a case study of pricing and production in the textbook industry

B. An empirical investigation of the general price level and unemployment rates since 1990.

What two conditions must hold for a competitive market to produce efficient outcomes? A. Demand curves must reflect all costs of production, and supply curves must reflect consumers' fill willingness to pay. B. Supply curves must reflect all costs of production, and demand curves must reflect consumers' full willingness to pay. C. Firms must minimize production costs and consumers must minimize total expenditures. D. Firms must maximize profits, and consumers must all pay prices equal to their maximum willingness to pay.

B. Supply curves must reflect all costs of production, and demand curves must reflect consumers' full willingness to pay.

Other things equal, which of the following might shift the demand curve for gasoline to the left? A. the discovery of vast new oil reserves in Montana. B. The development of a low-cost electric automobile. C. An increase in the price of train and air transportation. D. A large decline in the price of automobiles.

B. The development of a low-cost electric automobile.

Unemployment describes the condition where: A. equipment and machinery are going unused. B. a person cannot get a job but is willing to work and is actively looking. C. a person does not have a job, regardless of whether or not he or she is seeking one. D. any resource sits idle.

B. a person cannot get a job but is willing to work and is actively looking.

Unemployment describes the condition where: A. equipment and machinery are going unused. B. a person cannot get a job but is willing to work and is actively seeking work. C. a person does not have a job, regardless of whether or not he or she wants one. D. any resource sits idle.

B. a person cannot get a job but is willing to work and is actively seeking work.

The assertion that there is no free lunch means that A. there are always trade-offs between economic goals. B. all production involves the use of scarce resources and thus the sacrifice of alternative goods. C. marginal analysis is used in economic reasoning. D. choices need not be made if behavior is rational.

B. all production involves the use of scarce resources and thus the sacrifice of alternative goods.

Countercyclical discretionary fiscal policy calls for: A. surpluses during recessions and deficits during periods of demand-pull inflation. B. deficits during recessions and surpluses during periods of demand-pull inflation. C. surpluses during both recessions and periods of demand-pull inflation. D. deficits during both recessions and periods of demand-pull inflation.

B. deficits during recessions and surpluses during periods of demand-pull inflation.

Countercyclical discretionary fiscal policy calls for: A. surpluses during recessions and deficits during periods of demand-pull inflation. B. deficits during recessions and surpluses during periods of demand-pull inflation. C. surpluses during both recessions and periods of demand-pull inflation. D. deficits during both recessions and periods of demand-pull inflation.

B. deficits during recessions and surpluses during periods of demand-pull inflation.

It is costly to hold money because: A. deflation may reduce its purchasing power. B. in doing so, one sacrifices interest income. C. bond prices are highly variable. D. the rate at which money is spent may decline.

B. in doing so, one sacrifices interest income.

If depreciation (consumption of fixed capital) exceeds gross domestic investment, we can conclude that: A. nominal GDP is rising but real GDP is declining. B. net investment is negative. C. the economy is importing more than it exports. D. the economy's production capacity is expanding.

B. net investment is negative.

If the MPS in an economy is 0.4, government could shift the aggregate demand curve leftward by $50 billion by: A. reducing government expenditures by $125 billion B. reducing government expenditures by $20 billion C. increasing taxes by $50 billion D. increasing taxed by $250 billion.

B. reducing government expenditures by $20 billion

If the MPS in an economy is .4, government could shift the aggregate demand curve leftward by $50 billion by: A. reducing government expenditures by $125 billion. B. reducing government expenditures by $20 billion. C. increasing taxes by $50 billion. D. increasing taxes by $250 billion.

B. reducing government expenditures by $20 billion.

At the point where the consumption schedule intersects the 45-degree line: A. the MPC is 1 B. the APC is 1 C. saving is equal to consumptions D. the economy is in equilibrium

B. the APC is 1

At the point where the consumption schedule intersects the 45-degree line: A. the MPC is 1.00. B. the APC is 1.00. C. saving is equal to consumption. D. the economy is in equilibrium.

B. the APC is 1.00.

The presence of market failures implies that: A. money is not an effective tool for exchange in a market system. B. there is an active role for government, even in a market system. C. individuals and firms should strive to be self-sufficient rather than specialize. D. command systems are superior to market systems in the allocation of resources.

B. there is an active role for government, even in a market system.

Real GDP measures the: A. total dollar value of all goods and services produced within the borders of a country using current prices. B. value of final goods and services produced within the borders of a country, corrected for price changes. C. total dollar value of all goods and services consumed within the borders of a country, adjusted for price changes. D. value of all goods and services produced in the world, using current prices.

B. value of final goods and services produced within the borders of a country, corrected for price changes.

Use the list below to answer the following question: 1. Improvements in technology. 2. Increases in the supply (stock) of capital goods. 3. Purchases of expanding output. 4. Obtaining the optimal combination of goods, each at least-cost production. 5. Increases in the quantity and quality of natural resources. 6. Increases in the quantity and quality of human resources. Refer to the list. As distinct from the demand and efficiency factors of economic growth, the supply factors of economic growth are: A. 2, 5, and 6 only. B. 2, 4, 5, and 6 only. C. 1, 2, 5, and 6 only. D. 1, 3, and 4 only.

C. 1, 2, 5, and 6 only.

Which of the following is an example of a supply shock? A. A surge in consumer optimism prompts increased buying of goods and services. B. A surprise tax rebate from the government gives people more money to spend. C. A dramatic increase in energy prices increases production costs for firms in the economy. D. Government increases spending on education.

C. A dramatic increase in energy prices increases production costs for firms in the economy.

Which of the following best measures improvements in the standard of living of a nation? A. Growth of nominal GDP. B. Growth of real GDP. C. Growth of real GDP per capita. D. Growth of national income.

C. Growth of real GDP per capita.

Which of the following is a distinguishing feature of laissez-faire capitalism? A. public ownership of all capital B. central planning C. minimal government intervention D. a circular flow of goods, resources, and money

C. Minimal government intervention.

Which of the following would most likely move the economy into a recession in the short term? A. Invention of a new product that most consumers want to buy. B. Innovations in management that enhance worker productivity. C. The central bank printing less money than was anticipated. D. Congress passing a reduction in personal income tax rates.

C. The central bank printing less money than was anticipated.

Which of the following would most likely move the economy into a recession in the short term? A. Invention of a new product that most consumers want to buy. B. Innovations in management that enhance worker productivity. C. The central bank printing less money than we first anticipated. D. Congress passing a reduction in personal income tax rates.

C. The central bank printing less money than we first anticipated.

The interest rate effect suggests that: A. a decrease in the supply of money will increase interest rates and reduce interest sensitive consumption and investment spending. B. increase in the price level will increase the demand for money reduce interest rates and decrease consumption and investment spending. C. an increase in the price level will increase the demand for money increase interest rates and decrease consumption and investment spending. D. An increase in the price level will decrease the demand for money reduce interest rates and increase consumption and investment spending

C. an increase in the price level will increase the demand for money increase interest rates and decrease consumption and investment spending.

Money is destroyed when: A. loans are made. B. checks written on one bank are deposited in another bank. C. loans are repaid. D. the net worth of the banking system declines.

C. loans are repaid.

Money is destroyed when: A. loans are made. B. checks written on one bank are deposited in another bank. C. loans are repaid. D. the net worth of the banking system declines.

C. loans are repaid.

The two main characteristics of a public good are: A. production at constant marginal cost and rising demand. B. non excludability and production at rising marginal cost. C. non rivalry and non excludability. D. non rivalry and large negative externalities.

C. non rivalry and non excludability

The two main characteristics of a public good are: A. production at constant marginal cost and rising demand. B. nonexcludability and production at rising marginal cost. C. nonrivalry and nonexcludability. D. nonrivalry and large negative externalities.

C. nonrivalry and nonexcludability.

The four main tools of monetary policy are: A. tax rate changes, the discount rate, open-market operations, and the federal funds rate. B. tax rate changes, changes in government expenditures, open-market operations, and interest on reserves. C. the discount rate, the reserve ratio, interest on reserves, and open-market operations. D. changes in government expenditures, the reserve ratio, the federal funds rate, and the discount rate.

C. the discount rate, the reserve ratio, interest on reserves, and open-market operations.

The four main tools of monetary policy are: A. tax rate changes, the discount rate, open-market operations, and the federal funds rate. B. tax rate changes, changes in government expenditures, open-market operations, and interest on reserves. C. the discount rate, the reserve ratio, interest on reserves, and open-market operations. D. changes in government expenditures, the reserve ratio, the federal funds rate, and the discount rate.

C. the discount rate, the reserve ratio, interest on reserves, and open-market operations.

In the aggregate expenditures model technological progress will shift the investment schedule: A. downward and increase aggregate expenditures B. downward and decrease aggregate expenditures C. upward and increase aggregate expenditures D. upward and decrease aggregate expenditures

C. upward and increase aggregate expenditures

In the aggregate expenditures model, technological progress will shift the investment schedule: A. downward and increase aggregate expenditures. B. downward and decrease aggregate expenditures. C. upward and increase aggregate expenditures. D. upward and decrease aggregate expenditures.

C. upward and increase aggregate expenditures.

Increasing marginal cost of production explains: A. the law of demand B. the income effect C. why the supply curve is up sloping D. why the demand curve is down sloping

C. why the supply curve is upsloping.

Suppose that GDP was $200 billion in year 1 and that all other components of expenditures remained the same in year 2 except that business inventories increased by $10 billion. GDP in year 2 is: A. $180 billion B. $190 million C. $200 billion. D. $210 billion.

D. $210 billion.

Suppose that GDP was $200 billion in year 1 and that all other components of expenditures remained the same in year 2 except that business inventories increased by $10 billion. GDP in year 2 is: A. $180 billion. B. $190 billion. C. $200 billion. D. $210 billion.

D. $210 billion.

Suppose a commercial banking system has $100,000 of outstanding checkable deposits and actual reserves of $35,000. If the reserve ratio is 20 percent, the banking system can expand the supply of money by the maximum amount of: A. $122,000. B. $175,000 C. $300,000 D. $75,000

D. $75,000

Suppose a commercial banking system has $100,000 of outstanding checkable deposits and actual reserves of $35,000. If the reserve ratio is 20 percent, the banking system can expand the supply of money by the maximum amount of: A. $122,000. B. $175,000. C. $300,000. D. $75,000.

D. $75,000.

Suppose that a new machine tool having a useful life of only one year costs $80,000. Suppose, also, that the net additional revenue resulting from buying this tool is expected to be $96,000. The expected rate of return on this tool is: A. 80 percent. B. 8 percent. C. 2 percent. D. 20 percent.

D. 20 percent.

Suppose that a new machine tool having a useful life of only one year costs $80,000. Suppose also that the net additional revenue resulting from buying this tool is expected to be $96,000. The expected rate of return on this tool is: A. 80% B. 8% C. 2% D. 20%

D. 20%

Which of the following is an example of market failure? A. negative externalities B. positive externalities C. public goods D. all of these

D. All of these.

Which of the following transactions would be included in GDP? A. Mary buys a used book for $5 at a garage sale. B. Nick buys $5,000 worth of stock in Microsoft. C. Olivia receives a tax refund of $500. D. Peter buys a newly constructed house.

D. Peter buys a newly constructed house.

Money functions as: A. a store of value. B. a unit of account. C. a medium of exchange. D. all of these.

D. all of these.

Money functions as: A. a store of value. B. a unit of account. C. a medium of exchange. D. all of these.

D. all of these.

The industries or sectors of the economy in which business cycle fluctuations tend to affect output most are: A. military goods and capital goods B. services and nondurable consumer goods. C. clothing and education D. capital goods and durable consumer goods.

D. capital goods and durable consumer goods.

A public good: A. can be profitably produced by private firms B. is characterized by rivalry and excludability. C. produces no positive or negative externalities D. is available to all and cannot be defined to anyone.

D. is available to all and cannot be defined to anyone

A public good: A. can be profitably produced by private firms. B. is characterized by rivalry and excludability. C. produces no positive or negative externalities. D. is available to all and cannot be denied to anyone.

D. is available to all and cannot be denied to anyone.

If an unintended increase in business inventories occurs at some level of GDP, then GDP: A. entails a rate of aggregate expenditures in excess of the rate of aggregate production. B. may be either above or below the equilibrium output. C. is too low for equilibrium D. is too high for equilibrium

D. is too high for equilibrium

If an unintended increase in business inventories occurs at some level of GDP, then GDP: A. entails a rate of aggregate expenditures in excess of the rate of aggregate production. B. may be either above or below the equilibrium output. C. is too low for equilibrium. D. is too high for equilibrium.

D. is too high for equilibrium.

One reason that the quantity demanded of a good increases when its price falls is that the: A. price decline shifts the supply curve to the left. B. lower price shifts the demand curve to the left. C. lower price shifts the demand curve to the right. D. lower price increases the real incomes of buyers, enabling them to buy more.

D. lower price increases the real incomes of buyers, enabling them to buy more.

Other things equal, a decrease in the real interest rate will: A. shift the investment demand curve to the right. B. shift the investment demand curve to the left. C. Move the economy upward along its existing investment demand curve. D. move the economy downward along its existing investment demand curve.

D. move the economy downward along its existing investment demand curve.

Other things equal, a decrease in the real interest rate will: A. shift the investment demand curve to the right. B. shift the investment demand curve to the left. C. move the economy upward along its existing investment demand curve. D. move the economy downward along its existing investment demand curve.

D. move the economy downward along its existing investment demand curve.

An inferior good is: A. one whose demand curve will shift rightward as incomes rise. B. one whose price and quantity demanded vary directly. C. one that has not been approved by the FDA. D. not accurately defined by any of these statements.

D. not accurately defined by any of these statements.

A recession is defined as a period in which: A. cost-push inflation is present B. nominal domestic output falls C. demand-pull inflation is present D. real domestic output falls.

D. real domestic output falls.

A recession is defined as a period in which: A. cost-push inflation is present. B. nominal domestic output falls. C. demand-pull inflation is present. D. real domestic output falls.

D. real domestic output falls.

An increase in net exports will shift the AD curve to the: A. left by a multiple of the change in investment B. left by the same amount as the change in investment. C. right by the same amount as the change in investment. D. right by a multiple of the change in investment.

D. right by a multiple of the change in investment.

An increase in net exports will shift the AD curve to the: A. left by a multiple of the change in investment. B. left by the same amount as the change in investment. C. right by the same amount as the change in investment. D. right by a multiple of the change in investment.

D. right by a multiple of the change in investment.

The market system's answer to the fundamental question "Who will get the goods and services?" is essentially: A. "Those willing and able to pay for them." B. "Those who physically produced them." C. "Those who most need them." D. "Those who get utility from them."

A. "Those willing and able to pay for them."

Which of the following would an economist consider to be investment? A. Boeing building a new factory. B. Oprah buying a $10 million home from a fellow celebrity. C. A stockbroker buying 10,000 shares of Starbucks stock. D. All of these.

A. Boeing building a new factory.

Which of the following will increase commercial bank reserves? A. The purchase of government bonds in the open market by the Federal Reserve Banks. B. A decrease in the reserve ratio. C. An increase in the discount rate. D. The sale of government bonds in the open market by the Federal Reserve Banks.

A. The purchase of government bonds in the open market by the Federal Reserve Banks.

Which of the following will increase commercial bank reserves? A. The purchase of government bonds in the open market by the Federal Reserve Banks. B. A decrease in the reserve ratio. C. An increase in the discount rate. D. The sale of government bonds in the open market by the Federal Reserve Banks.

A. The purchase of government bonds in the open market by the Federal Reserve Banks.

The total demand for money curve will shift to the right as a result of: A. an increase in nominal GDP. B. an increase in the interest rate. C. a decline in the interest rate. D. a decline in the nominal GDP.

A. an increase in nominal GDP.

The total demand for money curve will shift to the right as a result of: A. an increase in nominal GDP. B. an increase in the interest rate. C. a decline in the interest rate. D. a decline in nominal GDP.

A. an increase in nominal GDP.

The immediate short-run aggregate supply curve represents circumstances where: A. both input and output prices are fixed B. both input and output prices are flexible C. input prices are fixed but output prices are flexible D. input prices are flexible, but output prices are fixed.

A. both input and output prices are fixed

The immediate-short-run aggregate supply curve represents circumstances where: A. both input and output prices are fixed. B. both input and output prices are flexible. C. input prices are fixed, but output prices are flexible. D. input prices are flexible, but output prices are fixed.

A. both input and output prices are fixed.

A nation's gross domestic product (GDP): A. can be found by summing C + Ig + G + Xn. B. is the dollar value of the total output produced by its citizens, regardless of where they are living. C. can be found by summing C + S + G + Xn. D. is always some amount less than its NDP.

A. can be found by summing C + Ig + G + Xn.

It is costly to hold money because: A. deflation may reduce its purchasing power. B. in doing so, one sacrifices interest income. C. bond prices are highly variable. D. the rate at which money is spent may decline.

A. deflation may reduce its purchasing power.

Joe sold gold coins for $1000 that he bought a year ago for $1000. He says at least I didn't lose any money on my financial investment. His economist friend points out that in the fact he did lose money because he could've received a 3% return on the $1000 if he had bought a bank certificate of deposit instead of the coins. The economist analysis in this case incorporate the idea of: A. opportunity costs B. marginal benefits that exceed marginal costs C. imperfect information D. normative economics

A. opportunity costs.

Other things equal, if the price of a key resource used to produce product X falls, the: A. product supply curve of X will shift to the right B. product demand curve of X will shift to the right C. product supply curve of X will shift to the left D. product supply curve of X will not shift

A. product supply curve of X will shift to the right.

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

A. results in greater total output.

The asset demand for money is downsloping because: A. the opportunity cost of holding money increases as the interest rate rises. B. it is more attractive to hold money at high interest rates than at low interest rates. C. bond prices rise as interest rates rise. D. the opportunity cost of holding money declines as the interest rate rises.

A. the opportunity cost of holding money increases as the interest rate rises.

The asset demand for money is downsloping because: A. the opportunity cost of holding money increases as the interest rate rises. B. it is more attractive to hold money at high interest rates than at low interest rates. C. bond prices rise as interest rates rise. D. the opportunity cost of holding money declines as the interest rate rises.

A. the opportunity cost of holding money increases as the interest rate rises.

Checkable deposits are classified as money because: A. they can be readily used in purchasing goods and paying debts. B. banks hold currency equal to the value of their checkable deposits. C. they are ultimately the obligations of the Treasury. D. they earn interest income for the depositor.

A. they can be readily used in purchasing goods and paying debts.

Checkable deposits are classified as money because: A. they can be readily used in purchasing goods and paying debts. B. banks hold currency equal to the value of their checkable deposits. C. they are ultimately the obligations of the Treasury. D. they earn interest income for the depositor.

A. they can be readily used in purchasing goods and paying debts.

Real GDP measures the: A. total dollar value of all goods and services produced within the borders of a country using current prices. B. value of all final goods and services produced within the borders of a country. C. total dollar value of all goods and services consumed within the borders of a country, adjusted for price changes. D. value of all goods and services produced in the world, using current prices.

A. total dollar value of all goods and services produced within the borders of a country using current prices.

Built-in stability means that: A. an annually balanced budget will offset the procyclical tendencies created by state and local finance and thereby stabilize the economy. B. with given tax rates and expenditures policies, a rise in domestic income will reduce a budget deficit or produce a budget surplus while a decline in income will result in a deficit or a lower budget surplus. C. Congress will automatically change the tax structure and expenditure programs to correct upswings and downswings in business activity. D. government expenditures and tax receipts automatically balance over the business cycle, though they may be out of balance in any single year.

B. with given tax rates and expenditures policies, a rise in domestic income will reduce a budget deficit or produce a budget surplus while a decline in income will result in a deficit or a lower budget surplus.

Built-in stability means that: A. an annually balanced budget will offset the procyclical tendencies created by state and local finance and thereby stabilize the economy. B. with given tax rates and expenditures policies, a rise in domestic income will reduce a budget deficit or produce a budget surplus while a decline in income will result in a deficit or a lower budget surplus. C. Congress will automatically change the tax structure and expenditure programs to correct upswings and downswings in business activity. D. government expenditures and tax receipts automatically balance over the business cycle, though they may be out of balance in any single year.

B. with given tax rates and expenditures policies, a rise in domestic income will reduce a budget deficit or produce a budget surplus while a decline in income will result in a deficit or a lower budget surplus.

The interest-rate effect suggests that: A. a decrease in the supply of money will increase interest rates and reduce interest-sensitive consumption and investment spending. B. an increase in the price level will increase the demand for money, reduce interest rates, and decrease consumption and investment spending. C. an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending. D. an increase in the price level will decrease the demand for money, reduce interest rates, and increase consumption and investment spending.

C. an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending.

In situations of sticky prices and negative demand shocks, we would expect firms to: A. deplete inventories before increasing production. B. reduce production before building up inventories. C. build up inventories before reducing production. D. lower prices before reducing production or building up inventories.

C. build up inventories before reducing production.

Given the annual rate of economic growth, the "rule of 70" allows one to: A. detrmine the accompanying rate of inflation. B. calculate the size of the GDP gap. C. calculate the number of years required for real GDP to double. D. determine the growth rate of per capita GDP.

C. calculate the number of years required for real GDP to double.

Given the annual rate of economic growth, the "rule of 70" allows one to: A. determine the accompanying rate of inflation. B. calculate the size of the GDP gap. C. calculate the number of years required for real GDP to double. D. determine the growth rate of per capita GDP.

C. calculate the number of years required for real GDP to double.

If Carol's disposable income increases from $1,200 to $1,700 and er level of saving increases from minus $100 to plus $100, her marginal propensity to: A. save is 3/5 B. consume is 1/2 C. consume is 3/5 D. consume is 2/5

C. consume is 3/5

If Carol's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, her marginal propensity to: A. save is three-fifths. B. consume is one-half. C. consume is three-fifths. D. consume is two-fifths.

C. consume is three-fifths.

Net exports are: A. that portion of consumption and investment goods sent to other countries. B. exports plus imports. C. exports less imports. D. imports less exports.

C. exports less imports.

Net exports are: A. that portion of consumption and investment goods sent to other countries. B. exports plus imports. C. exports less imports. D. imports less exports.

C. exports less imports.

The size of the MPC is assumed to be: A. less than zero. B. greater than one. C. greater than zero but less than one. D. two or more.

C. greater than zero but less than one.

The size of the MPC is assumed to be: A. less than zero. B. greater than one. C. greater than zero but less than one. D. two or more.

C. greater than zero but less than one.

Which of the following best measures improvements in the standard of living of a nation? A. growth of nominal GDP B. growth of real GDP C. growth of real GDP per capita D. determine the growth rate of per capita GDP

C. growth of real GDP per capita