ECON 2010 FINAL STAHL

Based on Okun's rule of thumb, if you forecast that the output gap will decline from -1% to -3%, the unemployment rate will:

rise by 1%

What happens to the equilibrium price and equilibrium quantity when demand and supply decrease simultaneously, but the relative size of the shifts are not known?

the equilibrium quantity falls, and the change in equilibrium price is ambiguous

If the frictional rate of unemployment is 1%, the structural rate of unemployment is 2.1%, and the total unemployment rate is 7%, then we can conclude that:

the equilibrium rate of unemployment is 3.1%

Asking "Or what?" allows the _____ principle to be analyzed as a simple question.

opportunity cost

Analysis that describes what would happen if various actions were taken is _____ analysis.

positive

(Figure: Market for Engines) According to the figure, if there is international trade in this market, and the world price of engines is $800, the value of the domestic producer surplus is:

$320,000

Question text Which of the following graphs shows what would happen to the investment line if an investment project is expected to earn higher revenues over time?

shift up to the right

What are overnight reverse repurchase agreements?

the sale of government bonds to financial institutions, with an agreement to purchase the bonds back the next day, at a higher price

(Figure: Marginal Benefit Curves) Use the graph of marginal benefit curves for slices of cheesecake to answer the question.When the market price is $1, what is the total amount of cheesecake slices purchased across Becca and Marcella?

twelve

Certain events can trigger a spell of poverty. Which of the following is NOT among the events that normally can trigger a spell of poverty?

retirement

Suppose that an economy is in a recession. You would expect to see the unemployment rate:

rise above the equilibrium unemployment rate

In Canada, all the provinces provide health care to all citizens and permanent residents. This is an example of:

social insurance

What is Belgium's real GDP if its nominal GDP is $532 billion (in current US$) and the GDP deflator is 119.9?

$443.7 billion

(Figure: Market for Pants) According to the figure, if there is international trade in this market, and the world price of a pair of pants is $40, the value of the domestic producer surplus is:

$450,000

If the interest rate is 10%, what is the approximate present value of $50,000 received in 20 years?

$7,432

Payroll taxes are 6.2%, and Medicare taxes are 2.9%. If your employer owes you $850, how much will you get after these deductions?

$772.65

In your current job, you earn $41,000. You take the standard deduction of $12,200. You have an offer of a new job working for a different employer. Your salary would go up by $6,500. How much extra will you owe in federal income taxes if you take the new job?

$780

If the average marginal propensity to consume is 0.8, then a $10 million increase in total income will lead to a _____ increase in consumption.

$8 million

Consider the following data. What is the marginal propensity to consume?

0.8

(Table: Eray and Ata's opportunity cost) Data for Eray's and Ata's decorating is given in the table. Which statement explains who has the comparative advantage in decorating cakes?

Ata, who gives up decorating 20 cupcakes when he decorates a cake.

Which of following people can be classified as cyclically unemployed?

Ben, who worked in an auto assembly plant but was laid off when the company downsized due to poor market conditions

Bond A is a five-year bond issued by a company with a very good credit rating. Bond B is a five-year bond issued by a different company in financial distress. Which of the following is likely?

Bond B will have a higher interest rate than Bond A

Consider the production functions shown here, which show the output of a bakery over time. Suppose that the bakery experiences significant wear and tear of its ovens and that this leads some of the ovens to break down. Which of the movements reflects this scenario?

D to C

According to the rule of 70, if GDP per person is growing at a rate of roughly 4%, approximately how many years will it take for average income to double?

18 years

In 1986, the United States recorded real GDP growth of 3.5% and nominal GDP growth of 5.5%. What was the inflation rate in 1945?

2%

The table shows the salary of a construction worker in Japan. The level of saving in 2016 is _____ yen.

2.4 million

Refer to the following table. What was the approximate output gap in 1973?

4.8%

You are the Chair of the Federal Reserve Bank of the United States. The neutral rate of interest is 2%, the inflation rate is 3.5%, and the output gap is 1.5%. Using the Fed's rule of thumb, what is the appropriate new nominal federal funds rate that you should set for the economy?

7.75%

Refer to the data dashboard shown. Which indicator directly tells you how the labor market is doing?

Nonfarm payrolls

If Derek is a consumption smoother and has just signed a contract for a new job that will increase his salary by 14%, we can expect Derek to exhibit:

a small change in consumption

Some safety net programs provide specific goods rather than income or tax breaks. This type of program benefit is known as:

an in-kind transfer

If a country experiences a lot of political strife and uncertainty, which leads managers to have a pessimistic outlook, then the _____ loanable funds shifts to the _____.

demand for; left

The Federal Reserve uses the _____ to fulfill its function as lender of last resort.

discount window

Refer to the diagram of the circular flow of income. Based on the diagram, the arrow going FROM box 2 to box 3 must be:

earnings by businesses

(Figure: Market for Shrimp) Use the figure to answer the question.

graph c

The aggregate production function Y = f(L, H, K) shows that economic growth can occur if:(i) human capital increases.(ii) labor productivity falls.(iii) the capital stock in the country depreciates.(iv) the depreciation rate increases.

i only

Consider the following graph. Why did government spending rise during the 2007 to 2009 period?

it increased due to the use of expansionary fiscal policy and increased social insurance payments during the Great Recession

A bank run occurs when:

many bank customers try to withdraw their savings at the same time

Which of the following scenarios shows evidence of inflation?

the average house price in an economy rises

(Figure: Market for TVs 2) Suppose that the world price of TVs is $400, and the government imposes a $100 tariff. According to the figure, the tariff causes total surplus to decrease by:

$1,500,000

An automobile manufacturer installs a conveyor belt system for $670,000. The depreciation rate is 10% at the end of next year. The real interest rate is 6%. What is the user cost of the conveyor belt system for one year?

$107,200

The table contains information about Walmart's stock. If you were to go to the stock market right now, how much would you have to pay for a share of Walmart stock?

$118.45

Consider the following financial information for Nestlé SA stock. What is Nestlé's book value per share?NestléStock price per share: $108.55Earnings per share: $3.14Price-to-book ratio: 6.3882

$16.99

Below is U.S. economic data for 2017. What was total spending?

$19.52 trillion

The standard deduction for a single person is $12,200. Based on this table, if your total income is $131,000, what is the amount of tax you will pay on your taxable income?

$22,687

In 1971, when the consumer price index was 40.48, men earned a median income of $6,903 per year. If the consumer price index in 2012 was 229.6, how much was $6,903 in 2012 dollars?

$39,153.4

Refer to the following statistics. Based on these statistics, the level of business investment is:Equipment: $2.5 billionBusiness structures: $2 billionIntellectual property: $4 billionInventories: $0.2 billionHousing: $3 billion

$8.5 billion

You open a savings account that earns a nominal interest rate of 1.3% interest a year. The current consumer price index is 117. In one year, the consumer price index is expected to go to 120. What is your expected real rate of return?

-1.26%

The table shows consumer price index data for the United States. Based on this information, what is the rate of inflation in 1991?

4.22%

You've graduated from college and are now working in an investment firm where you advise clients on investment decisions. Here is the information on a proposed project. Up-front cost: $100,000 Next year's revenue: $15,000 Real interest rate: 7% Depreciation rate: 3% How much profit does the project yield, and should your client invest in the project?

Yes, the client should invest because the project yields a $50,000 profit

A group of people moves onto a forested piece of land (which has no established owner), cuts down all the trees, and acquires all the lumber on the land. Thereafter, the land is farmed until all the mineral properties of the soil are depleted. Ultimately, the land becomes a barren desert property. This is an example of:

a lack of established property rights leading to the depletion of a resource

In 2016, Hillary Clinton stated the following: "My message to every worker in Michigan and across America is this. I will stop any trade deal that kills jobs or holds down wages, including the Trans-Pacific Partnership [Trade Agreement]." Which of the following is a reason that Clinton's statement is not grounded in economic theory?

any trade deal that changes the terms of trade between countries will change the composition of jobs within a country

Data from the World Bank for the top and bottom quintiles of the distribution of income in Costa Rica for two years are presented in Table: Costa Rica Income Distribution, Top and Bottom Quintiles.Which of the following claims CANNOT be made conclusively for the time period based on the data in the table?

average income in bottom quintile was lower in 2016 than it was in 1986.

The opportunity cost principle states that the true cost of something is the

next best alternative you have to give up to get it

The world supply curve slopes upward because, as the world price of a product increases:

producers want to sell a larger quantity

In markets, prices act as all of the following except

productivity

Suppose you want to realize a future value of $18,000 on your investment in 20 years. The average annual rate of return is 8%. What will be the present value of your investment?

$3,862

A city experiences a rise in economic growth due to improvements in technology, but at the same time, there is increasing consumption of illegal drugs. What shortcoming of GDP measurement does this finding reflect?

the shadow economy is missing

Juan McDonald is willing to pay $600 for a new iPad. Apple (the producer of iPads) is selling a new iPad for $700. It costs Apple $400 to produce this iPad. A voluntary economic transaction between Juan and Apple _____ occur because ____ would be better off due to the transaction.

will not; only apple

If inflation is 2% and a firm does not give its workers a nominal raise, then:

real wages have fallen by 2%

On which of the following is there a tax incentive in the United States?(i) health insurance purchased through employers(ii) your mortgage(iii) rental value on owner-occupied housing(iv) contributions toward your retirement account

(i), (ii), (iii), and (iv)

Consider the following financial information for Kimberly-Clark Corporation stock. What is Kimberly-Clark's price-to-earnings ratio?Kimberly-ClarkStock price per share: $142.06Earnings per share: $6.65Price-to-book ratio: 3.0802

21.36

In April 2019, the state of New York reported a civilian labor force of 9,603,801. The number of unemployed people was 378,371. What was the unemployment rate?

3.9%

If the median value of initial unemployment claims is 400,000, which of the values of initial unemployment claims indicates a particularly weak economy?

465,000

Which of the following pieces of advice is consistent with the principle of comparative advantage?

Focus on what you are relatively good at doing, even if you are not the best at is

In the United States, most social insurance programs are funded by taxes that are:

NOT progressive

You go to Starbucks and see that the price of your favorite tall vanilla latte has gone up by 25 cents. All sizes of the vanilla lattes are now more expensive. As a result of this price increase, you would expect to see a

fall in the quantity demanded of vanilla lattes.

Suppose falling interest rates in Australia discourage saving. What effect does this have on the consumption function in Australia?

figure A

Which of the following is a reason that male labor force participation has declined over the last several decades in the United States?

more men opting to complete college

An index fund is a mutual fund that consists of:

stocks on a broad market index

Consider the following basket of goods: 50 hamburgers, 10 textbooks, eight T-shirts, and 100 bottles of water. Suppose that in 2015, each hamburger was $3.50, each textbook was $89.99, each T-shirt was $14, and each bottle of water was $1.50. In 2016, each hamburger was $3.60, each textbook was $95, each T-shirt was $13, and each bottle of water was $1.65. What was the approximate inflation rate in 2016?

4.7%

In a 2011 to 2012 labor force survey, the working age population in Uganda was 15,764,000. The labor force was 12,623,000. What was the labor force participation rate in Uganda?

80.01%

If an economy has a positive output gap of 3%, this means:

GDP is 3% above potential GDP

(Figure: Market for Apple Computers) Dell and Apple are competitors in the computer market. Which graph illustrates the effect of a rise in the price of Dell computers on the demand for Apple computers?

Graph D

Consider your decision to attend class each day or skip it. Which of the four core principles of economics applies to the notion that attending class will most likely help you understand the material better and perform well on future exams?

Interdependence principle

What is a progressive tax system?

It is a system where those with more income pay a higher share of their income in taxes than those with lower incomes.

Consider the data in the table below. In 2017, the country with the highest economic growth rate was:

Spain

You are a financial adviser. Your client, Nessie, wants a portfolio of assets that consists of a broad market index. Which of the following investments is right for Nessie?

an index fund

The cost-benefit principle evaluates _____ costs and benefits, and willingness-to-pay considerations evaluate _____ costs and benefits.

both monetary and non monetary; only nonmonetary

If the fundamental analysis reveals that the fundamental value of a particular stock is higher than the market price for that stock, you should:

buy the stock

Which of the following graphs shows the correct effect on the consumption function when consumers become optimistic about the state of the economy?

figure B

In order to prepare for each meeting, the Federal Open Market Committee (FOMC) members prepare their responses to queries regarding their:

forecasts of economic growth, their suggested policy choices, and their ideas on effective communication regarding Fed plans.

(Figure: Market for Automobiles) Which graph shows what will happen in the market for automobiles if there is an advancement in production technology?

graph A

Consider these four graphs of the labor market, showing four different minimum wage levels. Which graph(s) shows a wage level where there is an excess supply of workers?

graphs A and D

The law of diminishing returns means that production functions:

have slopes that increase at a decreasing rate

Suppose that the Federal Reserve has a 2% target on inflation. If actual inflation is 3%, then the Fed will want the new real interest rate to be:

higher than the neutral interest rate

_____ income taxes and payroll taxes _____ after-tax incomes, which _____ consumption and therefore lower aggregate expenditure.

higher; lower; decrease

If the output gap is negative, then the Federal Reserve will use its floor framework to _____ the interest on excess reserves, borrow _____ money from financial institutions to set the lower bound for the federal funds rate, and _____ the discount rate to set the upper bound for the federal funds rate.

lower; less; decrease

The government enacts regulation to institute enforceable property rights for business investment. Which input in the production function changes, and what is the effect on economic growth in the country?

the capital stock increases, and economic growth is positively affected

Which of the following is a broad indicator?

the consumer price index