Econ Final
Which of the following best describes the invisible-hand concept?
The desires of resource suppliers and producers to further their own self-interest will automatically further the public interest.
Assume that Kyle is temporarily unemployed because he has voluntarily quit his job with company A and will begin a better job in two weeks with company B. Kyle will be considered as
frictionally unemployed.
The crowding-out effect suggests that
government borrowing to finance the public debt increases the real interest rate and reduces private investment.
Which of the following is not a typical characteristic of a market system?
government ownership of most property resources
Answer the question using the accompanying cost ratios for two products, fish (f) and chicken (c), in countries Singsong and Harmony. Assume that production occurs under conditions of constant costs and that there are the only two nations in the world. Singsong: F1=2C Harmony: 1F=4C If these two nations specialize based on comparative advantage:
harmony will produce chicken and singsong will catch fish
NAFTA
has reduced most trade barriers between, Canada, Mexico and the U.S.
A recurring theme in economics is that people
have unlimited economic wants but limited resources.
The simple circular flow model shows that
households are on the selling side of the resource market and on the buying side of the product market.
The simple circular flow model shows that:
households are on the selling side of the resource market and on the buying side of the product market.
QUANTITY DEMANDED 52 62 72 82 92 PRICE $50 45 40 35 30 QUANTITY SUPPLIED 73 62 51 42 33 In this market, economists would call a government-set minimum price of $50 a
price floor.
Inflation means that
prices on average are rising, although some particular prices may be falling.
Copyrights and trademarks are examples of
property rights
Which of the following is a fundamental characteristic of the market system?
property rights
For a nation's real GDP per capita to rise during a year,
real GDP must increase more rapidly than the population.
The market system's answer to the fundamental question "Who will get the goods and services?" is essentially
"Those most willing and able to pay for them."
Which of the diagrams for the U.S. economy best portrays the effects of declines in the prices of imported resources?
A
Refer to the diagrams, in which AD1 and AS1 are the "before" curves and AD2 and AS2 are the "after" curves. A recession is depicted by
A and B
Which of the following best describes the cause effect chain of a restrictive monetary policy?
A decrease in the money supply will raise the interest rate, decrease investment spending, and decrease aggregate demand and GDP.
Which of the following statements is correct?
If supply increases and demand decreases, equilibrium price will fall
Assume the CPI for 2015 and 2016 are 238 and 243 respectively. What was the inflation rate between those two years?
The inflation rate is 2.1
as a consequence of the problem of scarcity
Individuals have to make choices from among alternatives
opportunity cost exist because
The decision to engage in one activity means forgoing some other activity
If the MPC is 0.6, the multiplier will be
2.5.
Define consumer sovereignty.
Consumers vote with their dollars.
In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by
a change in buyer tastes.
Which of the following will not cause the demand for product k to change?
a change in the price of product k
Which of the following is a labor resource?
a computer programmer
The horizontal axis is labeled real domestic output, G D P. The vertical axis is labeled price level. The axes have no numbers. Three parallel rising curves labeled A S 3, A S 1, and A S 2 begin at three different points on the bottom left and end at three different points on the top-right. A S 2 is below A S 1 and A S 3 is above A S 1. In the diagram, a shift from AS1to AS2might be caused by
a decrease in the prices of domestic resources.
Which of the following is a final good or service?
a haircut purchased by a father for his 12-year-old son
For economists, the word "utility" means
pleasure or satisfaction
The horizontal axis labeled quantity ranges from 0 to 290. The line break is on the horizontal axis between 0 and 130. The vertical axis labeled price ranges from $ 0 to $ 1.60. The supply curve is a rising straight curve that passes through the points (130, $ 0.50), (200, $ 1.00), and ends at (290, $ 1.60). The demand curve is a falling slight curve that passes through the points (130, $ 1.6), (200, $ 1.00), and ends (290, $ 0.50). Refer to the diagram. A shortage of 160 units would be encountered if price was
$0.50.
Gross Investment $18 National Income 100 Net Exports 2 Personal Income 85 Personal Consumption Expenditures 70 Saving 5 Government Purchases 20 Net Domestic Product 105 Statistical Discrepancy 0 Refer to the accompanying data (all figures in billions of dollars). The gross domestic product for this economy is
$110
Suppose that technological advancements stimulate $20 billion in additional investment spending. If the MPC = 0.6, how much will the change in investment increase aggregate demand?
$50 billion
Suppose a commercial banking system has $100,000 of outstanding checkable deposits and actual reserves of $35,000. If the reserve ratio is 20 percent, the banking system can expand the supply of money by the maximum amount of:
$75,000
If the marginal propensity to consume is 0.9, then the marginal propensity to save must be
0.1.
In year 1, Adam earns $1,000 and saves $100. In year 2, Adam gets a $500 raise so that he earns a total of $1,500. Out of that $1,500, he saves $200. What is Adam's MPC out of his $500 raise?
0.8
The accompanying tables give production possibilities data for Gamma and Sigma. All data are in tons. Gamma product possibilities TEA 120 90 60 30 0 POTS 0 30 60 90 0 Sigma production possibilities TEA 40 30 20 10 0 POTS 0 30 60 90 120 What are the limits of the terms of trade between Gamma and Sigma?
1 tea = 1 pot to 1 tea = 3 pots
1. Improvements in technology. 2. Increases in the supply (stock) of capital goods. 3. Purchases of expanding output. 4. Obtaining the optimal combination of goods, each at least-cost production. 5. Increases in the quantity and quality of natural resources. 6. Increases in the quantity and quality of human resources. Which set of items in the accompanying list would shift an economy's production possibilities curve outward?
1, 2, 5, and 6 only
The multiplier is
1/MPS.
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 the nominal annual interest rate on a two-year loan is 8 percent and lenders expect inflation to be 5 percent in each of the two years. The annual real rate of interest is
3 percent.
Four supply and demand graphs show shifts in the supply and demand curves. All four graphs have P (price) on the vertical axis and Q (quantity) on the horizontal axis. In Graph A, D 1 shifts right to D 2 along a stable supply curve S. In Graph B, D 1 shifts left to D 2 along a stable supply curve S. In Graph C, S 1 shifts right to S 2 along a stable demand curve D. In Graph D, S 1 shifts left to S 2 along a stable demand curve D. Which of the diagrams illustrate(s) the effect of a decline in the price of personal computers on the market for software?
A only
Which of the diagrams for the U.S. economy best portrays the effects of a dramatic increase in energy prices?
B
Four supply and demand graphs show shifts in the supply and demand curves. All four graphs have P (price) on the vertical axis and Q (quantity) on the horizontal axis. In Graph A, D 1 shifts right to D 2 along a stable supply curve S. In Graph B, D 1 shifts left to D 2 along a stable supply curve S. In Graph C, S 1 shifts right to S 2 along a stable demand curve D. In Graph D, S 1 shifts left to S 2 along a stable demand curve D. Which of the diagrams illustrates the effect of a governmental subsidy on the market for AIDS research?
C only
Which of the following statements is most accurate about the prospects for poorer (follower) countries catching up the rider (leader) countries
Catching up is possible, as "follower countries" tend to grow faster than "leader countries"
The study of economics is primarily concerned with
Choices that are made in seeking the best use of resources
An increase in the price of a product will reduce the amount of it purchased because:
Consumer will substitute other products for the one whose price has risen.
If actual Real GDP is higher than potential Real GDP, what type of fiscal policy is called for?
Contractionary fiscal policy
Suppose that you are given a $60 budget at work that can be spent on only 2 items: staplers and pens. If staplers cost $8 and pens cost $2 each, what is the opportunity cost of purchasing one stapler?
Four pens; that is what you are giving up.
The World Trade Organization was established as a successor to
GATT.
Real GDP refers to
GDP data that have been adjusted for changes in the price level.
Which of the following statements is most accurate about modern economic growth?
Modern economic growth is characterized by sustained and ongoing increases in living standards.
Nominal GDP differs from real GDP because:
Real GDP results from adjusting for changes in the price level
The political business cycle refers to the possibility that
politicians will manipulate the economy to enhance their chances of being reelected.
An improvement in production technology will
Shift the curve to the right
What event/period of time marked the beginning of modern economic growth?
The Industrial Revolution in England marked the beginning of modern economic growth for the world.
What countries were parties to NAFTA, and are now parties to the USMCA?
The USMCA includes, Mexico, Canada, and the United States.
What is the primary determinant of Investment spending?
The interest rate is the primary The non-interest rate are acquisition, maintenance, and operating costs, business taxes, technological change, stock of capital goods on hand, planned inventory changes, and expectations.
State the Law of Supply.
The law supply states that, other things equal, the quantity of a good purchased varies directly with its price.
Total population 500 Population under 16 years of age or institutionalized 120 Not in the labor force 150 Unemployed 23 Part-time workers looking for full time jobs 10 What is the size of the labor force?
The size of the labor force is 230. Subtracting the population under 16 years of age/institutionalized (120) and population not in the labor force (150), from total population (500), equals 230 500-120-150=230
Define Economics.
The social science that examines how individuals, institutions, and society make optimal choices under conditions of scarcity.
List and discuss the three major factors that can cause a shift in aggregate supply.
The three major factors that can cause a shift in the aggregate are input prices, productivity, and the legal-institutional environment.
List and discuss the type of unemployment discussed in our text
There are multiple types of unemployment; three to be exact, these include structural, frictional, and cyclical. Structural unemployment is unemployment that occurs because of a mismatch of skills in the labor market; someone is unemployed because they lack the skills needed for modern jobs, such as lack in technology skills. Frictional unemployment results when people take time to move from one job to another; someone is actively looking for a new job. Cyclical unemployment occurs when the economy is below its full capacity; someone loses their jobs due to a fall in job demand such as during a economic recession.
A statement that is often used to describe demand-pull inflation is
Too much money chasing too few goods
The public debt is held as
Treasury bills, Treasury notes, Treasury bonds, and U.S. savings bonds.
Which of the following is one of the Five Fundamental Questions?
What goods and services will be produced?
Economic systems differ according to which two main characteristics?
Who owns the factors of production and the methods used to coordinate economic activity
Which of the following is an example of a microeconomic question?
Will the merger of two airlines likely lead to a higher cost of air travel in the economy?
Net exports is a positive number when
a nation's exports of goods and services exceed its imports.
The phase of the business cycle in which real GDP declines is called
a recession.
Prices and wages tend to be
flexible upward but inflexible downward.
The Latin term "ceteris paribus" means
other things equal.
Which of the following is the best synonym for "marginal" in economics?
additional
Investment spending in the United States tends to be unstable because
all of the factors mentioned in other answers contribute to the instability.
The assertion that "there is no free lunch" means that
all production involves the use of scarce resources and thus the sacrifice of alternative goods.
Freedom of enterprise
allows businesses, within broad limits, to choose what goods to produce.
Which of the following would most likely shift the aggregate demand curve to the right?
an increase in stock prices that increases consumer wealth
Which one of the following would increase per-unit production cost and therefore shift the aggregate supply curve to the left?
an increase in the price of imported resources
Which of the following would not be expected to increase labor productivity?
an increase in the size of labor force
The members of the federal Reserve Board
are appointed for 14-year terms.
A person should consume more of something when its marginal
benefit exceeds its marginal cost.
The immediate-short-run aggregate supply curve represents circumstances where
both input and output prices are fixed.
The amount by which federal tax revenues exceed federal government expenditures during a particular year is the
budget surplus.
Recurring upswings and downswings in an economy's real GDP over time are called
business cycles.
A rightward shift of the investment demand curve might be caused by
businesses planning to increase their stock of inventories.
The industries or sectors of the economy in which business cycle fluctuations tend to affect output most are
capital goods and durable consumer goods.
Which of the following is a distinguishing feature of a command system?
central planning
Digital cameras and memory cards are
complementary goods
In national income accounting, the personal consumption expenditures category includes purchases of
consumer durable goods, consumer nondurable goods, and services. automobiles for personal use, but not houses
What are the four basic determinants of Aggregate Demand?
consumption spending, investment, government spending, and net exports, and if these change.
The APC is calculated as
consumption/income.
The type of unemployment associated with recessions is called
cyclical unemployment.
GDP can be calculated by summing
personal consumption, investment, government purchases, and net exports
Which is more contractionary, a $10 billion decrease in government spending or a $10 billion increase in taxes?
decrease in government spending
Discretionary fiscal policy will likely cause budget
deficits during recessions and surpluses during periods of demand-pull inflation.
The amount of after-tax income received by households is measured by
disposable income.
In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates?
expansion
Suppose that domestic price (no-international-trade price) of what is $3.50 a bushel in the U.S., while the world price is $4.00 a bushel. Assuming no transportation costs, the U.S. will
export wheat
Net exports are
exports less imports.
If taxes on the production of tires are increased, what will happen to equilibrium price and equilibrium quantity? Short
if taxes increase, supply will decrease. When the supply curve shifts to the left, the equilibrium price will increase and then equilibrium quantity will decrease.
Refer to the diagram, in which Qf is the full-employment output. If the economy's current aggregate demand curve is AD0, it would be appropriate for the government to
increase government expenditures or reduce taxes.
In the diagram, a shift from AS2 to AS3 might be caused by a(n)
increase in business taxes and costly government regulation.
At the current price, there is a shortage of a product. We would expect price to
increase, quantity demanded to decrease, and quantity supplied to increase.
The crowding-out effect of expansionary fiscal policy suggests that
increases in government spending financed through borrowing will increase the interest rate and thereby reduce investment.
Network effects are
increases in the value of a product to each user, including existing users, as the total number of users rises.
If the MPS in an economy is 0.1, government could shift the aggregate demand curve rightward by $40 billion by
increasing government spending by $4 billion.
The short-run aggregate supply curve represents circumstances where
input prices are fixed, but output prices are flexible.
Discretionary fiscal policy refers to
intentional changes in taxes and government expenditures made by Congress to stabilize the economy.
An economic system
is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem.
A nation's gross domestic product (GDP)
is the dollar value of all final output produced within the borders of the nation during a specific period of time.
Any combination of goods lying outside of the budget line
is unattainable, given the consumer's income.
Assume that there is a fixed rate of interest on contracts for borrowers and lenders. If unanticipated inflation occurs in the economy, then
lenders are hurt, but borrowers benefit.
The issues of inflation, unemployment, and business cycles are
major topics of macroeconomics.
The horizontal axis is labeled quantity. The vertical axis is labeled price. Two upward sloping curves marked S 1 and S 2 are plotted. Curve S 2 lies below curve S 1. Points y and x are marked on curve S 1. Point y lies below point x. Refer to the diagram. An increase in quantity supplied is depicted by a
move from point y to point x.
An "increase in the quantity supplied" suggests a
movement up along the supply curve.
An economy's aggregate demand curve shifts leftward or rightward by more than changes in initial spending because of the
multiplier effect.
demand-pull inflation
occurs when total spending exceeds the economy's ability to provide output at the existing price level.
The horizontal axis is labeled quantity. The vertical axis is labeled price. Two downward sloping curves marked D 1 and D 2 are plotted. Curve D 1 lies below curve D 2 and these curves do not touch the axes at any point. Points x and y are marked on curve D 1. Point y lies down and to the right of point x. The lines don't touch the axes at any point. Refer to the diagram. A decrease in demand is depicted by a
shift from D2 to D1.
The horizontal axis is labeled consumer goods. The vertical axis is labeled capital goods. The graph shows three parallel concave downward curves. The first curve begins at a point on the vertical axis, goes down slightly and to the right until it reaches a point and then continues to go down with increasing steepness till it reaches a point marked P P 1 on the horizontal axis. Points A, B, and C are marked on the first curve in order from left to right, with A close to the vertical axis, C close to the horizontal axis, and B in between the two. Point D is marked below the first curve, to the left of C. The second curve is above the first curve and ends at a point marked P P 2 on the horizontal axis. Point E is marked on the second curve, above point B. The third curve is above the second curve and ends at a point marked P P 3 on the horizontal axis. Point F is marked on the third curve. Refer to the diagram. An improvement in technology will
shift the production possibilities curve from PP1 to PP2.
Economics may best be defined as the
social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity.
Which of the following is a positive economic statement?
stock prices rose to a new record last month for the fourth month in a row
The federal budget deficit is found by
subtracting government tax revenues from government spending in a particular year.
Corporate profits are found by
summing corporate income taxes, dividends, and undistributed corporate profits.
Refer to the diagram, which shows the domestic demand and supply curves for a specific standardized product in a particular nation. If the world price for this product is $1.60, this nation will experience a domestic
surplus of 160 units, which it will export.
The largest contributor to increases in the productivity of American labor is
technological advance.
Economic growth rates in follower countries
tend to exceed those in leader countries because followers can cheaply adopt the new technologies that leaders developed at relatively high costs.
The natural rate of unemployment is
that rate of unemployment occurring when the economy is at its potential output.
The largest proportion of the U.S. public debt is held by
the U.S. public (individuals, businesses, financial institutions, and government).
The equilibrium price level and level of real output occur where
the aggregate demand and supply curves intersect.
Which of the following activities is excluded from GDP, causing GDP to understate a nation's well-being?
the child-care services provided by stay-at-home parents
The financing of a government deficit increase interest rates and, as a result, reduce investments spending. This statements describes
the crowding out effect
The most important determinant of consumer spending is
the level of income.
The production possibilities curve is a graph of
the maximum combinations of products that can be produced with the available resources.
Which of the following arguments contends that certain industries need to be protected in the interest of national security?
the military self-sufficiency argument
In comparing a tariff and an import quota, we find that
the tariff generates revenue for the U.S. Treasury, but the quota does not.
In economics, the pleasure, happiness, or satisfaction received from a product is called
utility
Define Gross Domestic Product.
value of the total output of goods and services produced in a country in a given period of time
Normative statements are concerned primarily with
what ought to be.
The real-balances, interest-rate, and foreign purchases effects all help explain
why the aggregate demand curve is downsloping.
The incentive problem under communist central planning refers to the idea that
workers, managers, and entrepreneurs could not personally gain by responding to shortages or surpluses or by introducing new and improved products.
