Econ Exam
Suppose a bank has $100 million in checking account deposits with no excess reserves and the required reserve ratio is 10 percent. If the Federal Reserve reduces the required reserve ration to 8 percent, then the bank can make a maximum loan of
$2 million
When Sophie, a French citizen, purchases a Dell computer in Paris that was produced in Texas, the purchase is...
A U.S. Export and an French Import
Which is the most likely effect upon the market for cotton of an increase in production costs due to higher oil prices?
A decrease in the supply and hence increase in the price of cotton and a decrease in the quantity exchanged
Suppose a successful advertising campaign increases the demand for Nike shoes. Which would tend to occur?
All of the above (The demand curve for nikes would shift to the right the price of nikes would rise, the quantity supplied of Nikes would increase)
Assume foreign beer is a normal good. If the incomes of demanders increase,
All of the above will occur (the quantity supplied of foreign beer will increase, demand for foreign beer will increase, the price of foreign beer will increase)
Farmers can raise either goats or ostriches on their land. Which of the following would cause the supply of goats to decrease?
An increase in the price of ostriches
Workers laid off as a result of a recession suffer
Cyclical Unemployment
A decrease in the reserve requirement _____ bank excess reserves and _______ the money supply.
Increases; Increases
During a business cycle expansion, total production ______ and total employment _______
Increases; Increases
Which is one of the criteria necessary for commodity to make a suitable medium of exchange?
It should have intrinsic value
A tariff
Makes domestic producers better off
Between 2013 and 2014, if an economy's exports rise by $8 billion and its imports fall by $8 billion, by how much would GDP change between the two years, all else equal?
Net Exports will increase GDP by $16 billion
Someone who is available for work but has not actively looked for work in the previous four weeks would be classified as?
Not in the labor force
The Bureau of Labor Statistics would categorize a retiree who is not working as?
Out of the labor force
The Federal Reserve System's four monetary policy goals are
Price stability, high employment, economic growth, and stability of financial markets and institutions
Economists find the notion of people "needing" things to be
Seriously misleading because they ignore substitutes
If whole tomatoes were money, which of the following functions of money would be the hardest for tomatoes to satisfy?
Store of value
Suppose the average person needs 8 glasses of water each day to maintain optimal health. What would an economist conclude?
The amount the average person drinks will depend upon the opportunity cost of acquiring water
Why are suburban stores more likely than downtown stores to provide free parking for their customers?
The cost of using land is higher in the downtown area
Suppose we observe people buying more of a good even though its price has risen. WHat would an economist conclude?
The demand curve shifted to the right
During the 1990s positive technological change in the production of chicken caused the price of chicken to fall. Holding everything else constant, how would this affect the market for pork (a substitute for chicken)?
The demand for pork would decrease and the equilibrium price of pork would decrease.
A decrease in the supply of a good will cause a larger increase in its price
The more inelastic the demand for the good
Suppose your college sharply raises tuition rates next year. Other things constant, what is the least likely to occur?
The overall demand for courses at your college will fall
The average price of goods and services in the economy is also known as
The price level
Assume that there is a surplus in the market for hybrid automobiles. Which of the following statements correctly describes this situation?
The price of hybrid automobiles will fall in response to the surplus; as the price falls the quantity demanded will increase and the quantity supplied will decrease.
Why does short-run aggregate supply curve shift to the right in the long run, following a decrease in aggregate demand?
Workers and firms adjust their expectations of wages and prices downward and they accept lower wages and prices.
An increase in the price of MP3 players will result in
a larger quantity of MP3 players supplied
If an increase in income leads to an increase in the demand for sushi, then sushi is
a normal good
Structural unemployment is the result of
a persistent mismatch between the skills and the characteristics of workers and the requirements of the jobs
"Price gouging" or significant price spikes, are typically caused by
a significant increase in supplier greed
A decrease in the price of pork will result in
a smaller quantity of pork supplied
The statement "My iPhone is worth $300" represents money's function as
a unit of account
Long-run macroeconomic equilibrium occurs when
aggregate demand equal short-term aggregate supply and they intersect at a point on the long-run supply curve
If, in response to a decrease in the price of coffee, the quantity demanded of coffee increases, economists would describe this as
an increase in quantity demanded
Which of the following would cause an increase in the supply of cheese?
an increase in the number of firms that produce cheese
Holding everything else constant, a decrease in the price of GPS systems will result in
an increase in the quantity of GPS systems demanded
Which of the following would cause a decrease in the supply of peanut butter
an increase the price of peanuts
If a decrease in income leads to an increase in the demand for macaroni, then macaroni is
an inferior good
The M1 measure of the money supply equals
currency plus checking account balances plus traveler's checks
In 1986, an Apple IIe computer with 65 kilobytes of memory cost around $1,500. Today, a $1,500 iMac computer (also made by Apple) comes with 8 gigabytes of memory. This illustrates the potential for what kind of bias in CPI calculations?
increase in quality bias
Lowering the discount rate will
increase reserves, encourage banks to make more loans, and increase the money supply
The law of demand implies, holding everything else constant, that as the price of yogurt
increases, the quantity of yogurt demanded will decrease
The opportunity cost to a cab driver of taking the day off increases when
it rains
Fiat money has
little to no intrinsic value and is authorized by the central bank or government body
To increase the money supply, the Federal Reserve could
lower the discount rate
The quantity equation states that the
money supply times the velocity of money equals the price level times real output
The three main monetary policy tools used by the Federal Reserve to manage the money supply are
open market operations, discount policy, and reserve requirements
Suppose a student is attending your college on an athletic scholarship, and doesn't pay a penny for tuition. According to the economic way of thinking, the student's cost of attending college is
positive, because the student sacrificed some other opportunity to attend your college
A maximum price set by law above the market-clearing price is called a
price ceiling
At market equilibrium,
quantity demanded equals quantity supplied
If the quantity demanded for a product exceeds the quantity supplied, the market price will rise until
quantity demanded equals quantity supplied. The market price will then equal the equilibrium price
Fill in the blank: if a rent control were set at $200 below the market clearing rent on apartments, a _____ would tend to occur
shortage
The supply curve for umbrellas
shows the relationship between the price of umbrellas and the quantity of umbrellas supplied
An example of an intermediate good would be
the bread that goes into a cub sandwich that is sold by Quiznos
Suppose the price of home heating oil is unchanged, yet we observe people purchasing 20% more than a year ago. Then
the demand for home heating oil has increased
Assume that the hourly price for the services of personal trainers has risen and sales of the services have also risen. One can conclude that
the demand for personal trainers has increased
If you are considering buying either an Apple iPhone or a Samsung Galaxy, and you choose the Samsung only because the price is lower, then you consider
the iPhone and the Galaxy to be substitutes
A demand curve shows the relationship between
the price of a product and the quantity of the product demanded
The major shortcoming of a barter economy is
the requirement of a double coincidence of wants
Hurricane Katrina damaged a large portion of oil refining and pipeline capacity in the Gulf coast states. In the market for gasoline,
the supply curve shifted to the left resulting in an increase in the equilibrium price.
Mike has been unemployed for over a year. He hasn't looked for a job in the last three months, but he's just started looking for work again. Because Mike started looking for a new job,
the unemployment rate increased
The opportunity cost of an action is
the value of the next-best alternative that must be sacrificed to take the action
Which of the following price indices comes closest to measuring the cost of living of the typical household?
Consumer price index
Which of the following equations correctly measures GDP in an economy?
GDP= C+I+G+NX C=consumption I=Investments G=Government Purchases NX=Net Exports
As a result of losing his job, Uncle Roy dropped his cable TV service and instead bought a new iPod. For Uncle Roy,
Cable is a normal good and the iPod is an inferior good
Suppose the market clearing price for apples rises from $2.00 to $3.00 per pound, and the overall market clearing output increases from 1 million to 2 million pounds. How can we explain the increase in price and the increase in market output?
Demand increased and supply remained unchanged
A fractional reserve banking system is one in which banks hold less than 100 percent of ____ in reserves
Deposits
Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to understate the true extent of joblessness?
Discouraged workers
An increase in aggregate demand results in a(n) _____ in the ______.
Expansion; Short run
A change in which variable will change the market demand for a product?
Expected future prices
Monetary policy refers to the actions the
Federal Reserve takes to manage the money supply and interest rates to pursue its macroeconomic policy objectives
Jack just told his boss that he thinks his boss is an idiot. It is likely that Jack will be experiencing ____ unemployment in the near future.
Frictional
The advice to "keep searching, there are plenty of jobs around here for which you are qualified," would be most appropriate for which of the following types of unemployment?
Frictional Unemployment
Suppose Bob works for Mary as a typist. Mary and Bob fall deeply in love, marry and have eight children. Bob stops working for Mary in order to care for the children. What will be the effect on GDP?
GDP will decrease
Which of the following accurately describes an effect on hurricane Katrina on GDP?
GDP would increase reflecting the costs of cleanup
If people speculate that a run on one bank will cause a run on all banks in the financial system, and this speculation proves accurate, then the financial system would experience what is known as a
bank panic
The sale of bonds by the Federal Reserve will, in general,
decrease the quantity of reserves held by banks
An increase in interest rates
decreases investment spendin gon machinery, equipment and factories, consumption spending on durable goods and net exports
Consider the market for consumer loans. A legal ceiling set below the market-clearing interest rate would tend to..
do all of the above (increase the quantity demanded for loans, create a shortage of loans, and decrease the quantity supplied of loans)
