Econ 2030 Final Review

53. The month-to-month percent change in the core CPI is

c. The inflation rate

15. If the exchange rate between the Hungarian forint and the US dollar changes from 218 to 212 forint/$, then the forint has ________ relative to the dollar

Appreciated

17. If the exchange rate between the US dollar and the euro changes from $1.30 to $1.35 per euro, then goods produced in the US will become ________ in the euro countries and aggregated demand in the US will _________ in the short run.

Cheaper, increase (GDP= C+I+G+X-M; X increase and M decrease so GDP and Agg D increase)

9. A person cashes his payroll check from Taco Bell and holds all the funds in the form of currency. M1 money supply ________.

Decrease (MS=MBxMM

10. Kristen goes to an ATM and withdraws $40 from her demand deposit account. This causes bank reserves to _______ and the money multiplier to ________.

Decrease, decrease

14. Contractionary monetary policy action by the Fed will cause ________ in government bond prices and _________ in market interest rates.

Decrease, increase (inverse relationship between bond price and interest rates)

8. A person cashes his payroll check from Taco Bell and holds all the funds in the form of currency. Money multiplier _________.

Decreases (banks extend loans-increase; people take money from bank-decrease)

16. If the exchange rate between the US dollar and the euro changes from $1.30 to $1.35 per euro, then the dollar has ________ relative to the euro.

Depriciated

6. A person cashes his payroll check from Taco Bell and holds all the funds in the form of currency. Currency in circulation ________.

Increases

13. A decision by the FOMC to conduct an open market (sale/purchase) of government bonds to stimulate economic growth is an example of ________ policy.

Purchase, monetary (expansionary is releasing money into the economy by purchasing bonds)

7.A person cashes his payroll check from Taco Bell and holds all the funds in the form of currency. Monetary base ________.

Remains unchanged (MB only changes when the Fed is printing money)

4. When you transfer money from a savings account to a small denomination time deposit, M1 ______ and M2 _______.

Unchanged, unchanged (both are M2)

Suppose Sally is considering opening her own vegan bakery/juice bar. To do so she would have to quit her current job which pays $60,000 per year, and take over a store building she owns and currently rents to her brother, Cody for $40,000 per year. Her expenses at the bar would be $20,000 per year for utilities and $180,000 per year for supplies and labor. Sally's expected total revenue from the bar is $260,000 per year. 47. In the situation above, Sally's expected economic profit from running the vegan bakery/juice bar is ______ per year.

a. -$40,000

Use the following to answer question 18-21: Suppose Carole and Harry can spend their days knitting hats or felting sops. Their productivity at each activity is the following: Output per person per hr Hats Soaps Carole 1/3 4 Harry 1/5 3 18. In the above situation Harrys opportunity cost of felting one soad is

a. 1/15 hats

77. A decrease in foreign income will cause _______ in US exports and _______ in the aggregate demand for goods and services produced in the US, everything else held constant.

a. A decrease; a decrease

55. Between 2010 and 2012 foreigners produced four feature films in Australia; in the preceding decade foreigners produced on average, 137 films per year in Australia. Last week the BBC reported that "according to industry players, one of the biggest factors behind the decline" is the recent change in the value of the Australian dollar. Assuming the industry players are correct it can be concluded with certainty that the recent change has been _______ of the Australian dollar.

a. An appreciation

46. A screening of a movie at the local Cineplex is an example of

a. An artificially scarce good

5. Suppose brokerage firms decrease the fees they charge their customers for buying and selling stock. As a result of this fee decrease the equilibrium price of stock will ______ and the equilibrium quantity of stock transacted will _______, everything else held constant.

a. Be ambiguous; increase

84. In the US the federal governments budget deficit tends to move ______. This means that when the economy is experiencing a recession, the budget deficit ________, everything else held constant.

a. Counter-cyclically; increases

Suppose broccoli is an inferior good. Suppose further that national income is increasing. 42. In the situation above, producer surplus in the market for broccoli will _______, everything else held constant.

a. Decrease

Suppose that ice cream and root beer are complements in consumption. Suppose further that the number of producers of ice cream increases. 4. In the situation above, the equilibrium price of ice cream will _______, everything else held constant.

a. Decrease

16. Suppose a binding quantity restriction is imposed on a market that was in equilibrium when the restriction was imposed. Everything else held constant, the quantity restriction will ______ the quantity demanded of the good and _______ the market price of the good.

a. Decrease; increase

51. If the exchange rate between the US dollar and the British pound changes from $1.53 to $1.58 per pound then the dollar has _______ relative to the pound and the unemployment rate in the US will _______ in the short run, everything else held constant.

a. Depreciated; decrease

36. Suppose a parking garage has the following pricing schedule: 0-2 hours $5; 2-4 hours $10; 4-8 hours $15. With this pricing scheme the garage is

a. Engaging in second-degree price discrimination

8. Suppose Kathleen sells hand painted silk scarfs and that her price elasticity of supply is .7. Suppose further that in response to a recent price change she increased the quantity of scarfs she supplied by 9 percent. It can be concluded with certainty that the price of silk scarfs _______ by _______ percent, everything else held constant.

a. Increased; greater than

52. The smallest expenditure component of US GDP is

a. Investment

56. The Kapauku people of the mountains of New Guinea used shells in a number of different economic activities, one being that payment in shells was made as an expression of sympathy at the death of distant relative. Used in this way, shells were functioning as

a. Means of unilateral payment

67. In which of the following situation is it most advantageous to be selling a bond?

a. The real interest rate is ~4 percent

Output per person per hr Hats Soaps Carole 1/3 4 Harry 1/5 3 19. IN the above situation can mutually beneficial trade occur?

b. Yes if Harry specialized in felting soaps and trades them to Carole for her hats

59. Suppose there are two countries, the US and Japan with two different currencies, the US $ and the Japanese yen. Which of the following is the price of the yen?

b. $ per yen

49. Suppose Remus decides to go fishing at Lake Pescaccio on his day off from work, but he faces a choice: he can fish the east, south or west side of the lake. His expected catch for the day is as follows: 5 fish on the east side, 3 fish on the south side, or 4 fish on the west side. Everything else held constant, Remus' consumer surplus from fishing the west side of the lake is _____ fish.

b. -1

Suppose an excise tax is placed on a good for which the price elasticity of demand is 3.5 and the price elasticity of supply is 1.5 39. In the situation above the buyers will bear _______ percent of the burden of the tax, everything else held constant.

b. 30

74. March 2013 the unemployment rate in the US was _______ percent.

b. 7.6

Suppose Mary's Melodica Shoppe is non-price discriminating monopolist and is producing its profit maximizing level of output. Suppose further that at her current level of output Mary's average total cost is $300, her average variable cost is $150, and her marginal cost is $250. 37. In the situation above, Mary's economic profit is ______ in the short run.

b. Ambiguous

68. Which of the following would decrease the net export (ie exports minus imports) component of the Canadian GDP

b. An automobile produced in France is purchased in Canada

44. Suppose that when Peg produces ten jewelry boxes her average total cost equals $150. Suppose further that when Peg produced an eleventh box her average total cost increased. It can be concluded with certainty that the marginal _______ of the eleventh box was _______ $150.

b. Cost; greater than

75. Suppose Mark lost his job as a sales executive due to a recession. He is available to begin a job immediately and send his résumé to thirty companies per week on average. In this situation Mark would be considered

b. Cyclically unemployed

86. Unanticipated inflation will cause the real value of the national debt to

b. Decrease

78. The self-correcting mechanism operates in such a way that recessionary gaps are eliminated over time by ________in labor costs

b. Decreases

Suppose that ice cream and root beer are complements in consumption. Suppose further that the number of producers of ice cream increases. 3. In the situation above, how will behavior change in the root beer market?

b. Demand will increase

45. A monopolist faces a _______ demand curve can sell _______ at any given price.

b. Downward-sloping; only a limited amount

73. Suppose Monica is a 16-year old high school student who babysits a neighbor's child 10 hours per week and is paid in cash. Due to her busy schedule she is not available to work any more hours and she is not actively seeking another job. According to the BLS household survey Monica would be classified as

b. Employed

25. Suppose at a recent Belgian film festival rational cinephile Jennifer faced a choice: see The kid with a Bike tickets to which cost $4, or see I You He She tickets to which cost $5. Jennifer chose to see I You He She. Answer true or false to the following statement. Jennifers expected pleasure from seeing I You He She could have been equal to her expected pleasure from seeing The Kid with a Bike.

b. False

6. Suppose you observe a market in which, at a given point I time, the quantity consumers are willing and able to purchase is _______ the quantity producers are willing and able to sell. Thus we say that there is a shortage of the good and over time, everything else held constant, the price in the market will ________.

b. Greater than; increase

Suppose Bess's Hat Hut operates in a perfectly competitive market and is producing its profit maximizing level of output. Suppose further that at this level of production, Bess's average total cost is $50 and her price is $40. 32. Over time in the situation above the profits of firms operating in the hat market will _______, everything else held constant.

b. Increase

Suppose that ice cream and root beer are complements in consumption. Suppose further that the number of producers of ice cream increases. 2. In the situation above the equilibrium quantity of root beer transacted will _____, everything else held constant.

b. Increase

Suppose an excise tax is placed on a good for which the price elasticity of demand is 3.5 and the price elasticity of supply is 1.5 40. In the situation above, the imposition of the excise tax will cause the price buyers pay for the good to ______ by _____ than the price sellers receive _______, everything else held constant.

b. Increase; less; decreases

26. In the short run, a firm's variable cost will be ________ its total cost.

b. Less than

9. The _______ the time period in which a purchasing decision can be made, everything else held constant, the more price elastic demand will be for a good. The ________ substitutes that are available for a good, everything else held constant, the more price inelastic demand will be for the good.

b. Longer; fewer

15. "Economic understanding of the causes and cures of depressions has not progressed to the pint at which ideology no longer influences analysis" is an example about a ______ issue.

b. Macro economic

5. When commercial banks make a loan

b. Money multiplier increases

35. In the long run a market controlled by a non-price discriminating monopolist will generate ________ producer surplus and ________ economic surplus than the same market were perfectly competitive everything else held constant.

b. More; less

30. A pigovian tax is designed to correct the market failure resulting from

b. Negative externalities

12. "Generous compensation was not limited to the senior management level, but extended to lower level executives who made most of the actual investment decisions" is an example of a ________ statement.

b. Normitive

27. Suppose a firm operating in a perfectly competitive market is producing its profit-maximizing level of output when it experiences an increase in its fixed costs. Everything else held constant the firm will respond to the change in fixed costs by ______ the amount it produces in the short run.

b. Not changing

7. Suppose green grocer Artie ran a 20 percent off sale on artichokes last week, but his revenues from selling artichokes decreased from the previous week. It can be concluded with certainty that the demand for Arties artichokes is _________, Everything else held constant

b. Price inelastic

71. Suppose Nikki goes to an ATM and withdraws $90 from her demand deposit account. This action everything else held constant, will cause the monetary base to ______ and the money supply to ________.

b. Remain unchanged; decrease

12. Which is not a tool of monetary policy in the US?

b. Setting the prime rate

2. Suppose grandmother keeps $1000 worth of twenty dollar bills in an old coffee can in the pantry. The bills are a ________?

b. Store of value

70. In which of the following situations is most advantageous to be saving?

b. The nominal interest rate is 3% the expected inflation rate is 2%

Suppose Sally is considering opening her own vegan bakery/juice bar. To do so she would have to quit her current job which pays $60,000 per year, and take over a store building she owns and currently rents to her brother, Cody for $40,000 per year. Her expenses at the bar would be $20,000 per year for utilities and $180,000 per year for supplies and labor. Sally's expected total revenue from the bar is $260,000 per year. 48. IN the situation above Sally's explicit cost from the vegan baker/juice bar is ? per year.

c. $200,000

79. Suppose the US economy is operating at full employment. A decrease in government spending will cause _______in real GDP in the short run and ______ in the unemployment rate in the long run, everything else held constant.

c. A decrease; no change

81. Suppose the US economy is operating at full employment. A decrease in the money supply by the Federal Reserve will cause _______in the aggregate price level in the short run and _______ in real GDP in the long run, everything else constant.

c. A decrease; no change

82. Suppose the US economy is operating at full employment. A decrease in government spending will cause ______ in the aggregate price level in the short run and ______ in the unemployment rate in the long run, everything else held constant.

c. A decrease; no change

Suppose broccoli is an inferior good. Suppose further that national income is increasing. 43. In the situation above economic surplus in the market for broccoli will _______, everything else held constant.

c. Decrease

72. Suppose the Fed sells $1 million of US government bonds to a commercial bank, if commercial banks are making some loans, the sale will cause the monetary base to ________ $1million everything else held constant.

c. Decrease by

64. Suppose at a point in time an economy is experiencing frictional structural and cyclical unemployment. The labor market of the country is

c. Experiencing a surplus

34. It can be concluded with certainty that, in the long run, a firm operating in a perfectly competitive market will be earning accounting profits

c. Greater than zero

Suppose at a given point in time Chez Rachael sells ratatouille in a perfectly competitive market and is producing its profit-maximizing level of output. Suppose further that at this level of production Rachael's average total cost of producing ratatouille is $10, her average variable cost is $8 and her marginal revenue is $11. 29. Overtime the quantity of ratatouille transacted in the market will _______, everything else held constant.

c. Increase

85. The passive deficit

c. Increases as output decreases and decrease as output increases

50. The greater the amount of an excise tax, everything else held constant, the______the dead weight loss will be from the tax. The more price elastic demand is, everything else held constant, the ________ the dead weight loss will be from a given excise tax.

c. Larger; larger

3. When the government declares money to be "legal tender for all debts, public," it is guaranteeing that money will function as a _______?

c. Means of unilateral payment (paying taxes; giving money but not receive good or service in return)

14. Suppose Romania has the comparative advantage in producing mineral water, Bulgaria has the comparative advantage in producing rose oil, and the countries engage in mutually beneficial trade. ________ Workers in Romania wil be employed in mineral water bottling plants when the countries trade than when they were operating in autarky.

c. More

31. In the case of positive consumption externalities, the social benefit is ______than the private benefit and the equilibrium market quantity is ________ than the socially optimal quantity

d. Greater; less

60. Suppose Morty a 74 year old former lawyer has retired and living in Boca Raton, FL when his pension fund collapsed. Five weeks ago in order to augment his meager income, Morty applied for a job as a receipt checker at the local Sams Club, a position he is eager to fill immediately if offered. At present, however, he is still waiting on a response and has not applied for any other jobs. According to the BLS household survey, Morty would be classified as

c. Not in the labor force

Output per person per hr Hats Soaps Carole 1/3 4 Harry 1/5 3 20. Suppose in a nine hour day Carole knits two hats and felts twelve soaps. On that day everything else held constant, Carole was operating _______ her production possibilities frontier.

c. On

69. Suppose Charles attended a preview of a art auction. Suppose further that he saw a painting he liked and thought about his reservation price for that piece. Used in this way money is performing which of the following functions.

c. Standard of value

57. The Federal Open Market Committee consists of _____ voting memebers, _______of whom are Federal Reserve Bank presidents.

c. Twelve; five

17. Suppose a parking garage has the following pricing schedule: 0-2 hours $5; 2-4 hours $10; 4-8 hours $15. The total cost of parking five hours is _______. The marginal cost of the third hour of parking is _______.

d. $15; $5

Suppose Mary's Melodica Shoppe is non-price discriminating monopolist and is producing its profit maximizing level of output. Suppose further that at her current level of output Mary's average total cost is $300, her average variable cost is $150, and her marginal cost is $250. 38. In the situation above, the marginal revenue from the last melodica Mary sold was

d. $250

23. Suppose pork is a normal good. Which of the following would cause the quantity of pork demanded to decrease, everything else held constant.

d. A decrease in worker productivity at the slaughterhouses

22. Suppose Brussels sprouts are______good. A decrease in national income will cause a decrease in the equilibrium price of Brussels sprouts and _______ in the equilibrium quantity transacted, everything else held constant.

d. A normal; decrease

80. Suppose the US economy is operating at full employment. A decrease in government spending will cause _______ in the unemployment rate and _______ in the aggregate price level in the long run, everything else held constant.

d. An increase; a decrease

Output per person per hr Hats Soaps Carole 1/3 4 Harry 1/5 3 21. In the above situation _______ has the absolute advantage in knitting hats and _______ has the comparative advantage in felting soaps.

d. Carole; Harry

76. If the aggregate price level increases the real wealth effect will cause consumption to _____ and the quantity of aggregate demand to ________, everything else held constant.

d. Decrease; decrease

54. Nominal GDP is a _______variable; government spending is a ______variable.

d. Flow; flow

58. Large universities such as LSU have career service centers. These centers are most effective in combating _______ unemployment.

d. Frictional

11. Suppose input costs in the furniture industry decrease. Everything else held constant, the supply of furniture will _______ and the equilibrium quantity of furniture transacted will _________.

d. Increase; increase

1. When something is used to pay for a good at the time or purchase, it is being used as a _______?

d. Medium of Exchange

65. US government bonds are included in which of the following measures of the money supply of the US?

d. Neither M1 nor M2

61. Suppose Michael a self employed jeweler buys $1500 worth of lumber at Home Depot to use in the building a new display case for his jewelry shop in Covington, LA. The lumber

d. Would be included in GDP as part of investment

63. The federal Reserve bank serving Baton Rouge is located in

e. Atlanta, GA

24. If the _____ elasticity of demand for gods x and y is _______ than zero, then x and y are substitute goods.

e. Cross-price; greater

1. If a 2 percent ______ in price results in a 3 percent increase in quantity demanded, it can be concluded with certainty that demand is _______.

e. Decrease; price elastic

Suppose Bess's Hat Hut operates in a perfectly competitive market and is producing its profit maximizing level of output. Suppose further that at this level of production, Bess's average total cost is $50 and her price is $40. 33. In the situation above it can be concluded with certainty that Bess will shut down immediately if her average variable cost is _______, everything else held constant.

e. Greater than $40

13. Suppose Dawn, a rational artist, recently sold her painting, "Pilgrimage," for $950. It can be concluded with certainty that Dawn's reservation price for her painting was _______$950.

e. Less than or equal to

Suppose at a given point in time Chez Rachael sells ratatouille in a perfectly competitive market and is producing its profit-maximizing level of output. Suppose further that at this level of production Rachael's average total cost of producing ratatouille is $10, her average variable cost is $8 and her marginal revenue is $11. 28. In the short run, Rachael should

e. Maintain her current level of production since she is earning a positive economic profit

10. Suppose the market for rental housing is operating under a binding price ceiling. An increase in the supply of rental space will cause rents to ______ and the quantity of occupied rental space to ________, everything else held constant.

e. Remain unchanged; increase

83. Suppose the US economy is operating at full employment. A decrease in other input costs will cause _______ in real GDP in the shot run and _______ in the aggregate price level in the long run, everything else held constant.

f. An increase; no change

11. A Federal Reserve Bank is located in all of the following except

f. Washington, DC