Econ 2 Ch 1 - 8

A country is categorized as a low-income economy by the World Bank if its per capita income is below:

$1,000.

Suppose an economics professor receives a $10,000 royalty check from a foreign publishing company and deposits the amount in a local bank. This transaction would be recorded as:

$10,000 credit entry in the domestic services account.

Bob and Bill can make 16 toys each if they devote 8 working hours in a day. Further, Bob can repair 4 cars and Bill can repair 2 cars, if they devote 8 working hours in a day. What is the opportunity cost of repairing one car to Bill?

8 toys

Which of the following will have no impact on the demand for ice cream in the short run? A change in consumer incomes A change in the price of ice cream A change in consumer preferences A change in population size A change in seasons

A change in the price of ice cream

Which of the following is considered a financial intermediary? The Federal Reserve ​A foreign exchange A bankruptcy court The U.S. Department of Commerce A credit union

A credit union

Archie can paint 5 backyard fences or repair 2 cars in 8 hours, while Austin can paint 4 backyard fences or repair 2 cars in 8 hours. Identify the correct statement.

Archie is relatively better in painting fences.

According to the World Bank, low-income economies are heavily concentrated in:

Asia and Africa

Refer to Figure 2.2. If there is an increase in the education level of the population, graph(s) _____ best illustrate(s) what will happen to the production possibilities curve [PPC].

C

Which of the following is not included in national income? Capital consumption allowance Stockbroker commissions Rental income Interest earnings Corporate profits

Capital consumption allowance

Which of the following is subtracted from GNP when calculating net national product? Interest Rent Capital consumption allowance Income tax Indirect business taxes

Capital consumption allowance

A price floor does not benefit producers.

False

According to economists, human activity is unresponsive to changes in costs.

False

An enterprise that has only one shareholder does not constitute a corporation.

False

GDP is based on the market value of goods and services produced in an economy and not on the value of only final goods and services.

False

If the dollar price of the yen is 1.39, the reciprocal exchange rate is ​1 yen = $0.39.

False

Suppose statistical surveys indicate that new orders for manufactured goods and new building permits for single-family homes are declining and that business inventories are rising. This implies economic activity is slowing down and the economy is potentially entering a recessionary period.

False

The government sector sells resource services to households and buys goods and services from firms.

False

The opportunity cost of going to the movies is always the same for everyone.

False

The sale of live cattle to a slaughterhouse constitutes a final transaction that is counted as part of the gross domestic product.

False

There is no cost of using your own savings in your business.

False

Which of the following statements is true? Goods are scarce for both the poor and the rich. Goods are scarcer than services in an economy. Goods are scarce for the rich but not for the poor. Goods are scarce for the poor but not for the rich. Goods are scarce for neither the poor nor the rich.

Goods are scarce for both the poor and the rich.

Which of the following is true regarding scarcity? Scarcity could be eliminated if all economies of the world would work together to solve world hunger. Scarcity could be eliminated if all economies of the world would adopt a free market system. It is impossible to eliminate scarcity, given limited resources and unlimited wants. Scarcity could be eliminated if we had full employment. Scarcity could be eliminated if all economies of the world would adopt communism.

It is impossible to eliminate scarcity, given limited resources and unlimited wants.

Which of the following would be considered a leading indicator? Prime interest rate Inventories to sales ratio Unemployment duration Money supply Personal income

Money supply

What is another name for the natural unemployment rate?

Non-accelerating-inflation rate of unemployment (NAIRU)

Which of the following statements is false? Economists look at the factors that lead an individual to decide that a particular idea is in his or her best interest. Economists do not ask whether a particular decision is in the individual's best interest. None of these statements is false, they are all true. A particular choice is made by an individual because that choice provides the greatest satisfaction. Choices must be made because of scarcity.

None of these statements is false, they are all true.

Which economic concept is illustrated by the saying "You can't have your cake and eat it too"?

Opportunity cost

Given that resources can be allocated by the government, the market, a random process, or on a first-come first-serve basis, which of the following statements is true?

The market system is not entirely fair but it creates incentives to increase supplies and improve standards of living.

Which of the following conditions is true for a nation operating at a point lying inside its production possibilities curve? The nation is producing the maximum output that can be produced with a limited quantity of resources. The nation is clearly utilizing its resources efficiently. The nation is not utilizing its resources efficiently. The nation is producing the maximum output that can be produced with its unlimited quantity of resources. The nation is experiencing a technological breakthrough in one of its key industries.

The nation is not utilizing its resources efficiently.

Which of the following statements about transfer payments is true? Transfer payments refer to the transfer of money by the commercial banks to the people. Transfer payments are made by the government to taxpayers. Transfer payments are not included in total government expenditures. Transfer payments are made when governments purchase goods and services. Transfer payments involve the international remittance of funds.

Transfer payments are made by the government to taxpayers.

A limitation one faces when shopping for clothes is the amount of time available to shop.

True

Exchange rates allow for a comparison of the trade values of goods and services across countries.

True

Gains from trade can be realized if each country specializes in the production of a good in which it has a comparative advantage.

True

If more firms enter the telecommunications industry, we can expect the equilibrium price of telecom services to decrease and the equilibrium number of services to increase.

True

If total U.S. trade consists of $10 billion in electronics imports from Japan and $9 billion in automobile exports to Germany, then the U.S. net export account will be negative.

True

In a business cycle, a peak marks the end of an expansion and the beginning of a recession.

True

Institutionalized adults are not considered to be a part of the labor force by the Bureau of Labor Statistics.

True

When the equation X = GDP - C- I - G yields a negative X, it represents a situation in which the country:

borrows to cover the difference between production and spending.

Aggregate supply curve shifts due to

changes in price

Factors that affect aggregate demand

consumption, investment, government spending, net exports

The effect of _____ is to produce an unemployment rate that understates actual unemployment.

discouraged workers and underemployment

Non price determinants of aggregate demand curve

expectations, foreign income and price levels, government policy

According to the law of demand, if the price of a netbook decreases, ceteris paribus, the demand for netbooks would increase.

false

If net investment spending in a nation is zero, we can conclude that:

gross investment equals the capital consumption allowance.

The market supply curve for any product:

is a summation of individual firms' supply curves.

The net balance on the balance of payments accounts:

is always zero.

Non price determinants of supply

resource prices, technology, and expectations

People (and all resources):

tend to specialize in those activities in which their opportunity costs are minimized.

The term net exports refers to:

the difference between the value of exports and the value of imports.

On a given day, the exchange rate for one U.S. dollar is 1.2 Canadian dollars and 0.5 British pounds. Exactly six months later, the exchange rate for one U.S. dollar is 1.1 Canadian dollars and 0.7 British pound. From the information given, we can say that:

the dollar has appreciated relative to British pounds and depreciated relative to Canadian dollars.

Overfishing and extinction of species arise because of:

the lack of incentive to take care of these species.

The demand curve of a commodity slopes downward because of:

the law of demand.

When the government's spending is less than tax revenue, it implies that:

there is a budget surplus.

To say that there is a scarcity of gold means that:

there is not enough gold to satisfy people's demand for it at a zero price.

In a given year, country A exported $12 million worth of goods to country B and $6 million worth of goods to country C; country B exported $4 million worth of goods to country A and $7 million worth of goods to country C; and country C exported $5 million worth of goods to country A and $2 million worth of goods to country B.According to Scenario 4-1, country B is running a:

trade deficit with country A and a trade surplus with country C

Aggregate demand curve shifts because

wealth effect, interest rate effect, international trade effect

The term barter refers to exchanges made:

without the use of money.

​The domestic currency value of the foreign currency price of a product is equal to:

​​the foreign currency price of the product x the exchange rate between the domestic and foreign currency.