Econ Exam 2
Which of the following statements best reflects the concept of present value?
"You owe me $500, due at the end of the year, but I will reduce your debt to $450 if you pay me now."
If a country had a trade deficit of $10 billion and then its exports rose by $20 billion and its imports rose by $10 billion, its net exports would now be
$0
Refer to the above diagram. The equilibrium dollar price of euros is:
$1.60
Refer to the above data. The net domestic product is:
$255.
Refer to the above data. The national income is:
$265.
Refer to the above data. The gross domestic product is:
$307.
How much of each dollar spent by a consumer ultimately becomes income to someone else?
100 percent
If the Consumer Price Index rises from 300 to 333 in a particular year, the rate of inflation in that year is:
11 percent.
Suppose that lenders want to receive a real rate of interest of 5 percent, and that they expect inflation to remain steady at 2 percent in the coming years. Based on this, lenders should charge a nominal interest rate of:
7 percent.
Which of the following institutional structures is most likely to promote growth?
A well-enforced system of patents and copyrights.
Which of the following is a difference between stocks and bonds?
Bond payouts are more predictable than payouts from stocks.
Which of the following concepts provides the basic rationale for international trade?
Comparative advantage
What is the difference between economic and financial investments?
Financial investments include all purchases undertaken with the expectation of financial gain; economic investments include only purchases of new capital goods.
Bill, a U.S. citizen, pays a Spanish architect to design a metal casting factory. Which country's exports increase?
Spain's
What are the two most important factors influencing investor preferences?
The desire for high rates of return and dislike of risk and uncertainty.
Paul, a Canadian citizen, purchases oranges grown in Florida. This purchase is an example of
a U.S. export and a Canadian import
When Jamie, a U.S. citizen, purchases a wool jacket made in Ireland, the purchase is
a U.S. import and an Irish export.
When shares of stock are sold for more than they are purchased, the difference received by the seller is referred to as:
a capital gain.
Which of the following is a final good or service?
a haircut
In the treatment of U.S. exports and imports, national income accountants:
add exports, but subtract imports, in calculating GDP.
A nation's true gain from international trade is:
an overall increase in output obtained through specialization and exchange
Who is least likely to be hurt by unanticipated inflation?
an owner of a small business
Inflation is undesirable because it:
arbitrarily redistributes real income and wealth.
Critics of economic growth:
argue that economic growth does not resolve socioeconomic problems such as an unequal distribution of income and wealth.
Bond payments are generally more predictable than stocks because:
bond owners know the size and timing of payments they will receive.
Recurring upswings and downswings in an economy's real GDP over time are called:
business cycles.
A nation's gross domestic product (GDP):
can be found by summing C + Ig + G + Xn.
A small increase in the annual rate of economic growth can lead to a larger increase in growth over time due to the effects of
compounding.
If the economy's real GDP doubles in 18 years, we can:
conclude that its average annual rate of growth is about 4 percent.
In national income accounting, consumption expenditures include:
consumer durable goods, consumer nondurable goods, and services.
Rising per-unit production costs are most directly associated with:
cost-push inflation.
"Too much money chasing too few goods" best describes:
demand-pull inflation.
Compound interest:
describes how quickly an interest-bearing asset increases in value.
In general, risk levels and average expected rates of return are:
directly related.
Payments to shareholders from corporate profits are known as:
dividends.
Owners of stock can receive ___________ from their shares; sellers of stock can receive ___________ from selling their shares.
dividends; capital gains
Real income is found by:
dividing nominal income by the price index (in hundredths).
The production of durable goods varies more than the production of nondurable goods because:
durables purchases are postponable.
Economic growth is best defined as an increase in:
either real GDP or real GDP per capita.
Limited liability rules:
encourage stock investing by limiting shareholder risk of loss.
A competitive market system:
encourages growth by allowing producers to make profitable investment decisions based on market signals.
Free trade:
encourages growth by promoting the rapid spread of new inventions and innovations.
For any country, if the world price of copper is higher than the domestic price of copper without trade, that country should
export copper, since that country has a comparative advantage in copper
A country purchases $3 billion of foreign-produced goods and services and sells $2 billion dollars of domestically produced goods and services to foreign countries. It has
exports of $2 billion and a trade deficit of $1 billion.
GDP is a
flow because it measures income over a period of time.
Net exports of a country are the value of
goods and services exported minus the value of goods and services imported
Since 1970, United States exports and imports have:
grown both absolutely and as a percentage of GDP.
Which of the following best measures improvements in the standard of living of a nation?
growth of real GDP per capita
If intermediate goods and services were included in GDP:
he GDP would be overstated.
The U.S. Federal government is unlikely to default on its bond payments because:
if necessary, it can print the money needed to make payments on time.
An unexpected increase in total spending will cause an increase in GDP:
if prices are sticky.
Depreciation of the dollar will:
increase the prices of U.S. imports, but decrease the prices to foreigners of U.S. exports.
Growth is advantageous to a nation because it:
lessens the burden of scarcity.
Bonds represent:
loans to governments and corporations
The GDP is the:
monetary value of all final goods and services produced within a nation in a particular year.
In calculating GDP, governmental transfer payments, such as social security or unemployment compensation, are:
not counted.
Inflation means that:
prices in the aggregate are rising, although some particular prices may be falling.
When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy,
producer surplus increases and total surplus decreases in the market for that good.
Tom Atoe grows tomatoes for home consumption. This activity is:
productive but is excluded from GDP because no market transaction occurs.
A nation's infrastructure refers to:
public capital goods such as highways and sanitation systems.
For a nation's real GDP per capita to rise during a year:
real GDP must increase more rapidly than population.
Suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105. The person's real income will:
rise by about 15 percent.
The rate of return on short-term U.S. government bonds is often referred to as the:
risk-free interest rate.
Refer to the above diagram. If U.S. consumers increase their travel to Euro Zone nations, we would expect:
the demand for euros to increase, and the euro to appreciate
The components of the expenditure approach to measuring GDP include all of the following EXCEPT
the implicit payments for unpaid household work.
Human capital refers to:
the skills and knowledge that enable a worker to be productive.
Exchange rates are particularly important because:
they link the price levels of various nations to one another
The price of sugar that prevails in international markets is called the
world price of sugar
Present value is best defined as the:
worth today of future expected returns or costs.