Econ Final Exam

A mutual fund is a fund that

buys a portfolio of stocks and bonds on your behalf

The "market value" of a good or service refers to the

current dollar value of that good or service

Depreciation refers to the

decline in capital due to wear and tear, obsolescence, accidental damage, and aging

Frictional unemployment is unemployment

due to the time it takes for employers to search for workers and for worker to search for jobs

The concept of equity focuses on

fairness

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

Intergenerational mobility is the extent to which

the economic status of children is independent of the economic status of their parents

Human capital refers to

worker skills and knowledge

An underemployed person is one who is

working but whose skills are not fully utilized

In your current job, you earn $55,000. 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 $5,000. How much extra will you owe in federal income taxes if you take the new job?

$1,100

The standard deduction for a single person is $12,200. Based on this table, if your total income is $47,000, what is the amount of tax you will pay on your taxable income?

$3,982

Which of the following is a source of comparative advantage?

Abundant inputs

The loanable funds market is the market for

Funds used to buy, rent, or build capital

Which of the following items is an inferior good?

Inferior goods

What is social insurance?

It is government-provided financial funding to households to compensate for bad outcomes such as unemployment, illness, disability, or outliving their savings

What is quantity supplied?

It is the amount of an item that a seller is willing to sell at a particular price

What is a social safety net?

It is the cash-assistance, goods, and services provided by the government to better the lives of those at the bottom of the income distribution

When quantity demanded exceeds quantity supplied, _____ exists

a shortage

The table provides data on how long it takes Marla and Jason to cook lasagna or chicken curry

Marla because she has a lower opportunity cost than Jason

Due to a decline in demand and popularity, Ford Motor Company is planning to phase out traditional sedans such as 'Fusion' and 'Taurus' to focus on SUVs and trucks. Ford's sedans and trucks/SUVs are

Substitutes in production

The law of demand refers to

The inverse relationship between price and quantity demanded

Which principle tells you that the true cost of something is the next best alternative you have to give up to get it?

The opportunity cost principle

The aggregate production function is represented as

Y = f(L, H, K)

In the graph, the movement from point E to point F represents

a decrease in the quantity supplied

the liquidity of an asset is defined as the

ability to quickly and easily convert the asset to cash, with little or no loss in value

In the market graph, consumer surplus in the area

above the price and below the demand curve

On a market graph, producer surplus is the area that is

above the supply curve and below the price

The working age population includes people who are

age 16 or older who are not in the military or institutionalized

The U.S. Department of Education sponsors the i3 program (Investing in Innovation), which provides grants to educational institutions and schools that have a proven track record of high student achievement. This is an example of a government program designed to build

human capital

The principle that your best choice depends on your other choices, the choices others make, developments in other markets, and expectations about the future is known as the _____ principle.

interdependence

Enforceable property rights encourage economic growth by encouraging

investment

Discretionary spending is spending that

is appropriated by Congress annually

Diminishing marginal benefit

is when buying an additional item yields a smaller marginal benefit than the previous item

Shifts in demand

lead to price and quantity to move in the same direction

The concept of diminishing marginal utility means that an additional dollar of income will yield _____ marginal benefit compared to the previous dollar of extra income

less

Analysis based on value judgments is called _____ analysis

normative

A labor force participation rate is the

percentage of the working age population that is either employed or unemployed

The producer price index is an index that tracks the

price that businesses pay over time for the inputs used in production process

A market is

setting that brings together potential buyers and sellers

The law of supply refers to

the positive relationship between price and quantity supplied

What is the Federal Reserve's mandate?

to ensure maximum employment while maintaining stable prices

The cost-benefit principle states that a decision should be pursued only if the

Benefits are greater than the costs

What's the difference between microeconomics and macroeconomics

Microeconomics is the study of individual decisions in specific markets, whereas macroeconomics is the study of the economy as a whole

How is monetary policy different from fiscal policy?

Monetary policy adjusts interest rates, whereas fiscal policy adjusts government spending and taxes

In the field of economics, the observation that the living standard of a household is more stable than its income, because people think in terms of their long-term earnings as they spend, is known as

Permanent income vs current income

Suppose that a CPI basket includes avocados, pineapples and oranges. Avocados become very expensive, and consumers substitute away from avocados and buy hummus instead. If the CPI basket does not change to reflect the move away from avocados, the result is

Substitution bias

What happens to the equilibrium price and quantity when demand increases and simultaneously supply decreases, and the relative size of the shifts is not known?

The equilibrium price rises, and the change in the equilibrium quantity is ambiguous

A production function is

a method through which inputs can be turned into outputs, given the available resources

An excise tax is a tax on

a specific product

Credit constraints limit the

amount of money that people can borrow

future value is the

amount that your money will grow into by a future date as a result of earning interest

A trade cost is

an extra cost incurred as a result of buying or selling a good abroad rather than domestically

the movement from point M to point Q represents

an increase in demand

The movement from point M to point N represents

an increase in quantity demanded

Market failures occur when market forces lead to

an inefficient outcome

Sunk costs are costs that

are incurred in the past and cannot be reversed

The consumer price index is an index that tracks the

average price that consumers pay over time for a representative basket of goods and services

A "final" good or service is one that is

finished and ready for the final user

To maximize production, people should

focus on the task in which they have a comparative advantage

Hand to mouth consumers

live paycheck to paycheck

Menu costs are the

marginal costs of adjusting prices

The slope of the consumption function is the

marginal propensity to consume

GDP is defined as the

market value of all final goods and services produced within a country in a given year

Forward guidance occurs when the Federal Reserve

provides information about the future course of monetary policy in order to influence expectations about future interest rates

An equilibrium price is a price where the

quantity supplied equals the quantity demanded

Comparative advantage explains why people

specialize and trade

Investment refers to

spending on physical capital

The three major pillars of the financial sector are the

stock market, the bond market, and the banks

A government can promote the development of human capital by

subsidizing secondary school education

Mandatory spending is spending that

supports programs that do not get determined annually but instead are set in law

When a manager uses comparative advantage to assign tasks in a workplace, then each

task is assigned to the worker with the lowest opportunity cost for performing the task

Government social insurance programs are funded by

taxes and fees that are assessed on workers and employers specifically for each program

A market's deadweight loss is calculated at

the economic surplus at the efficient quantity minus the economic surplus at the actual quantity

the law of diminishing returns states that

when one input is held constant, while other inputs are increased, eventually output will increase by smaller and smaller amounts