Econ Final Exam
The household survey asks adults about their employment status and is used to compile the monthly unemployment rate.
True
The GDP deflator is the ratio of
current to fixed prices
One cost of inflation is the
menu cost
Market equilibrium occurs where the quantity supplied is equal to the quantity demanded.
True
Because knowledge capital is nonexcludable and nonrival, firms have an incentive to ________ the research and development of other firms.
free ride on
The ________ illustrates the relationship between the price level and the quantity of planned aggregate expenditure, holding constant all other factors that affect aggregate expenditure.
aggregate demand curve
A decrease in consumer confidence can put your job at risk if
aggregate expenditures fall.
A student who just graduated from college but has not found a job would most likely be
frictionally unemployed
The response of investment spending to an increase in the govt budget deficit is called
crowding out
The ratio of the increase in ________ to the increase in ________ is called the multiplier.
equilibrium real GDP; autonomous expenditure
Every society faces a trade-off between
equity and efficiency
One of the basic principles of economics is that trade makes:
everyone better off
During a(n) ________ many firms experience increased profits, which increases ________ and investment spending.
expansion; cash flow
A worker is hired in a
factor market
Producer surplus is the difference bw highest price someone is willing to pay versus what they actually pay
false
The demand for loanable funds is determined by the willingness of ________ to borrow money to engage in new investment projects.
firms
Actual real GDP will be above potential GDP if
firms are producing above capacity.
Creative destruction means that
firms develop new products that replace old products in the economy, thereby encouraging economic growth.
The ______ effect of a price change refers to the impact of a change in the price of a good on a consumer's purchasing power.
income
If a bank receives a $20 million discount loan from the Fed Reserve, then the banks reserves will
increase by $20 million
The increased generosity of unemployment insurance programs in Canada as compared to the United States should
increase in duration of unemployment
An advantage of the establishment survey over the household survey of the labor market is that the establishment survey
is based on actual payrolls, rather than on unverified answers
A final good is one that
is purchased by its final user
A firm can fund an expansion of its operations by
issuing bonds
supply curve has a
positive slope
The PPF shows the ______ combo of goods and services a firm can produce
possible and efficiently
The minimum wage is an example of
price floor
The quantity theory of money seeks to explain the connection between money and
prices
Suppose the labor force stays constant, and the working-age population stays constant, but a greater number of persons who were unemployed become employed. The labor force participation rate will
remain constant
Suppose the reserve ratio is RR. Then,
required reserves = RR × deposits.
The GDP is the market value of goods and services produced by _______ of a country
residents
The seven members of the Board of Governors of the Federal Reserve are appointed by
the President.
Comparative advantage means
the ability to produce a good or service at a lower opportunity cost than any other producer.
The slope of the consumption function is equal to
the change in consumption divided by the change in disposable income
The substitution effect of a price change refers to
the change in quantity demanded that results from a change in price making a good more or less expensive relative to other goods that are substitutes
If the price of smartphones was to increase, then
the demand for smartphone apps would decrease.
Liquidity refers to
the ease with which a financial security can be traded for cash.
If cyclical unemployment is eliminated in the economy, then
the economy is considered to be at full employment
Refer to table above. Suppose that the level of GDP associated with point N is potential GDP. If the US economy is currently at point K,
the economy is in recession
U.S. net export spending rises when
the growth rate of U.S. GDP is slower than the growth rate of GDP in other countries.
According to the quantity theory of money, the inflation rate equals
the growth rate of the money supply minus the growth rate of the real output.
What is value of producer surplus after the imposition of the price floor?
$3,000
Kendra's marginal benefit from consuming the second ice cream cone is
$3.00
Inflation rate is measured as percentage change in prices from one period to the
next
The nom interest rate equals the real interest rate _____ the inflation rate
plus
Long-run economic growth requires all of the following except
political instability
What is OC of one dozen roses
0.4 dozen orchids
If the number of unemployed workers is 19 million, the number in the working-age population is 500 million, and the unemployment rate is 4%, how many workers are in the labor force?
475 million
Using marginal analysis, Eva should extend her bakery's hours
5 hours
If real GDP per capita in the United States is $8,000 in 2016, and if real GDP per capita is $12,000 in 2026, what is the average annual percent change in the growth rate of GDP per capita between 2016 and 2026?
5%
If the number employed is 190 million, the working-age population is 230 million, and the number unemployed is 10 million, then the unemployment rate is
5.2%
At a price of $25, how many units will be sold?
500
If the number of unemployed workers is 200 million, the number of employed workers is 300 million, and the working-age population is 800 million, what is the labor force participation rate?
62.5%
If real GDP per capita measured in 2009 dollars was $6,000 in 1950 and $48,000 in 2016, we would say that in the year 2016, the average American could buy ________ times as many goods and services as the average American in 1950.
8
Which of the following causes the unemployment rate to understate the true extent of joblessness?
Discouraged workers are not counted as unemployed
The Industrial Revolution began in
England around 1750
A positive technological change will cause the quantity of a good supplied to increase.
False
Economic decline happens when the PPF shifts
Inward
In shortage we know that
Qs < Qd
Refer to Figure above. A movement from ________ could occur because of an influx of immigrant labor.
X to Y
The deviation of unemployment from its natural rate is called
cyclical
Net exports is calculated as
exports - imports
Commodity money
has value independent of its use as money.
On the 45 degree line, points below it are
planned AE is less than GDP
The CPI is not best measure of inflation bc
substitution
Net worth is
the difference between a firm's assets and liabilities.
Published in 1776, ________ was written by Adam Smith.
"An Inquiry into the Nature and Causes of the Wealth of Nations"
What is the value of the portion of consumer surplus that has been transferred to producer surplus as a result of the price floor?
$1,200
Suppose that investment spending increases by $10 million, shifting up the aggregate expenditure line and GDP increases from GDP1 to GDP2. If the MPC is 0.9, then what is the change in GDP?
$100 million
Consumption spending is $5 million, planned investment spending is $8 million, unplanned investment spending is $2 million, government purchases are $10 million, and net export spending is $2 million. What is GDP?
$27 million
How much of tax is paid by buyers? (cigarettes)
$3
Consider the following data for a closed economy: Y = $12 trillion C = $8 trillion I= $2 trillion G = $2 trillion TR = $2 trillion T = $3 trillion Refer to Scenario above. Based on the information above, what is the level of private saving in the economy?
$3 trillion
Refer to table above, Suppose a transaction changes a bank's balance sheet as indicated in the T-account, and the required reserve ratio is 10%. As a result of the transaction, the bank has excess reserves of
$3600
How much of the tax is paid by buyers?
$5
Real GDP for Vicuna for 2013 using 2015 as the base year equals
$5650
Product Quantity Price Shoes 40 $60.00 DVDs 100 18.00 Tomatoes 2,000 1.00 Ketchup 300 4.00 Refer to Table above. Suppose that a simple economy produces only four goods and services: shoes, DVDs, tomatoes, and ketchup. Assume one half of the tomatoes are used in making the ketchup and the other half of the tomatoes are purchased by households. Using the information in the above table, nominal GDP for this simple economy equals
$6,400
What is the value of the deadweight loss after the imposition of the price floor?
$600
Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. As a result of Kristy's deposit, Bank A can make a maximum loan of
$8,000
Suppose your grandfather earned a salary of $12,000 in 1964. If the CPI is 31 in 1964 and 219 in 2016, then the value of your grandfather's salary in 2016 dollars is approximately
$84775
Suppose a simple economy produces only 4 goods and services: sweatshirts, dental exams, coffee drinks and coffee beans ........
$8750
If the bank of Waterloo receives a $10,000 deposit, and the reserve requirement is 10 percent, how much can the bank loan out? (Assume that before the deposit this bank is just meeting its legal reserve requirement.)
$9000
Suppose that real GDP for 2015 was $10,000 billion and real for 2016 was $9,500 billion. What is growth rate?
-5%
If the economy is currently producing at point E, what is the opportunity cost of moving to point B
0 spoons
Consumption (dollars) Disposable Income (dollars) $1,200 $3,000 2,100 4,000 3,000 5,000 Refer to Table above. Given the consumption schedule in the table above, the marginal propensity to save is
0.1
If national income increases by $75 million and consumption increases by $15 million, the marginal propensity to consume is
0.20
Most economists believe that the biases in the CPI cause the CPI to overstate the true inflation rate by about
0.5 to 1%
If disposable income increases by $100 million, and consumption increases by $90 million, then the marginal propensity to consume is
0.9
Refer to Table above. Given the consumption schedule in the table above, the marginal propensity to consume is
0.9
The sum of the marginal propensity to consume and the marginal propensity to save is always equals to
1
A general formula for the multiplier is
1/MPS
If the required reserve ratio is RR, the simple deposit multiplier is defined as
1/RR
2011 2016 Product Quantity Price Quantity Price Camera 100 $10 120 $12 Legal services 50 15 45 20 Books 200 40 210 45 Refer to Table above. What is the GDP deflator in 2016 if 2016 is the base year?
100
Using the quantity equation, if the velocity of money grows at 5 percent, the money supply grows at 10 percent, and real GDP grows at 4 percent, then the inflation rate will be
11%
Given info above, calculate GDP deflator in 2016
114
assume the market basket for the CPI has three products: cokes, hamburgers, and CDs with the following values in 2011 and 2016 for price and quantity: The consumer price index for 2016 equals
121
If nominal GDP is $5 trillion and real GDP is $4 trillion, the GDP deflator is
125
Refer to Figure above. Suppose Vidalia is currently producing 20 dozen orchids per period. How many roses is it also producing, assuming that resources are fully utilized?
150 dozen roses
Significant economic growth did not begin in the world until
1750 AD
Consider the following values of the CPI for 1996 1997 and 1998. the inflation rate for 1997 was equal to
2.5%
If the GDP deflator rises from 185 to 190, what is the rate of inflation between the two years?
2.7%
If real GDP grows by 3% in 2014, 3.2% in 2015, and 2.5% in 2016, what is the average annual growth rate of real GDP?
2.9%
A patent grants an inventor exclusive rights to a product for how long?
20 years
Year Nominal GDP Real GDP 2013 $7,400 $7,537 2014 7,813 7,813 2015 8,301 8,165 2016 8,760 8,516 Refer to Table above. Consider the following data on nominal GDP and real GDP (values are in billions of dollars): The base year used in calculating real GDP is
2014
If the growth rate of real GDP rises from 3% to 4% per year, then the number of years required to double real GDP will decrease from
23.3 years to 17.5 years
What is investment in a closed economy if you have following data
3 trillion
Imagine you borrow $1000 for one year and at the end of the year you repay the $1000 plus $100 of interest. If the inflation rate was 7% waht was real interest rate you paid?
3%
If real GDP per capita doubles between 2005 and 2020, what is the average annual growth rate of real GDP per capita?
4.7%
Imagine that you borrow $5,000 for one year and at the end of the year you repay the $5,000 plus $600 of interest. If the inflation rate was 4%, what was the real interest rate you paid?
8 percent
If the number employed is 190 million, the number unemployed is 10 million, and the working-age population is 250 million, then the labor force participation rate is
80%
What area represents the decrease in producer surplus when the market price falls from P2 to P1?
A+B
Opportunity cost is defined as
The highest-valued alternative that must be given up to engage in an activity.
The formula for aggregate expenditure is
AE=C+I+G+NX
In the US, in 2013 the Bureau began counting spending by firms and individuals on developing entertainment products as investment
Add to GDP
_______ a nation's PPF represents economic growth
An outward shift
Technological change is illustrated in the per-worker production function in the figure above by a movement from
B to C
The BLS produces data on unemployment from a regular survey of households called the
Current population survey
Eliminating frictional unemployment would be good for the economy.
False
An increase in the price of a complement would be represented by a movement from
D2 to D1
According to new growth theory, firms accumulate the efficient level of both physical and knowledge capital
False
Aggregate expenditure includes consumption spending, unplanned investment spending, government purchases, and net exports
False
An increase in the price level in the United States will reduce imports and increase exports.
False
Counting part-time workers who are looking for full-time work as employed overstates the degree of joblessness in the economy.
False
Deadweight loss refers to a loss in revenue resulting from producers having to reduce their selling price to remain competitive
False
Deadweight loss refers to a loss in revenue resulting from producers having to reduce their selling to remain competitive
False
Economies cannot function without money.
False
Efficiency wage is another name for the minimum wage
False
If a country is producing efficiently and is on the production possibilities frontier, the only way to produce more of one good is with an advance in technology.
False
If consumers believe the price of tablet computers will increase in the future, this will cause the demand for tablet computers to decrease now.
False
If it costs Hobie $900 to produce 5 lamps and $1,200 to produce 6 lamps, then the difference of $300 is the marginal cost of producing the 5th lamp.
False
If nominal GDP is less than real GDP, then the GDP deflator will be greater than 100.
False
If planned investment is greater than actual investment, then aggregate expenditure is less than GDP
False
If the demand for a product decreases and the supply of the product does not change, eq price and eq quantity will both increase
False
If the demand for a product decreases and the supply of the product does not change, equilibrium price and equilibrium quantity will both increase.
False
Inflation usually increases during a recession and decreases during an expansion.
False
It is possible for a market for a good to experience shortage and surplus at the same time
False
Liquidity increases as we move from the M1 to the M2 definition of the money supply.
False
Most of the countries of Africa are considered newly industrializing countries.
False
Optimal decisions are made at the point where MB is maximized
False
Paying efficiency wages are a way for a company to cut costs and become more efficient, and are therefore lower than market wages.
False
Potential GDP is the maximum output a firm is capable of producing.
False
Producer surplus is the difference between the highest price someone is willing to pay and the price he actually pays.
False
Rent control is an example of a price floor
False
Residential investment includes spending by firms on office buildings.
False
The SPI compiled by Econ CLub at KSU indicates that groceries were main factor
False
There is a shortage of every good that is scarce.
False
Transfer payments are subtracted from national income to get to personal income.
False
When net exports equal zero, the economy is in macroeconomic equilibrium.
False
When voluntary exchange takes place, only one party gains from the exchange.
False
inflation rate measures the avg prices of goods and services
False
In a small economy in 2016, aggregate expenditure was $800 million while GDP that year was $850 million. Which of the following can explain the difference between aggregate expenditure and GDP that year?
Firm investment in inventories was greater than anticipated in 2016
GDP is not a perfect measure of well-being because
GDP is not adjusted for pollution
If planned aggregate expenditure is less than total production,
GDP will decrease
Which of the following accurately describes growth rates in the United States from 1900 to the present?
Growth rates rose until the 1970s, slowed until the 1990s, rose again until 2005, and then slowed again to the present
________ is defined as the value of a household's assets minus the value of its liabilities
Household wealth
If the U.S. economy is currently at point N, which of the following could cause it to move to point K?
Households expect future income to decline
If the economy is at point L, what will happen?
Inventories have risen above their desired level, and firms decrease production.
If aggregate expenditure is less than GDP, how will the economy reach macroeconomic equilibrium?
Inventories will rise, and GDP and employment will decline
Which two arrows in the diagram depict the following transaction: Stanley purchases the novel, "Night of Sorrows" for his summer reading pleasure.
K and G
The Fed narrowest definition of money is
M1
The M2 measure of the money supply equals
M1 plus savings account balances plus small-denomination time deposits plus non-institutional money market fund shares.
Marginal analysis consists of comparing
MB and MC
Which of the following is true
National income= Consumption+Savings+Taxes
Between 2017 and 2018, if an economy's exports rise by $8 billion and its imports fall by $8 billion, by how much will GDP change between the two years, all else equal?
Net exports will increase GDP by $16 billion.
Which of the following is an example of a worker experiencing frictional unemployment?
Quits post office to find more interesting work
Which of the following is consistent with the graph depicted above? (shift in demand one)
Technological change increases the profitability of new investment
A decrease in the number of firms in the market would be represented by a movement from
S2 to S1
which of the following is a result of govt price controls?
Some people will win and some people will lose
For each watch that Switzerland produces, it gives up the opportunity to make 50 pounds of chocolate. Germany can produce 1 watch for every 100 pounds of chocolate it produces. Which of the following is true about the comparative advantage between the two countries?
Switzerland has the comparative advantage in watches.
If government saving is negative, then
T-TR<G (Taxes- Transfers< Government purchases)
Which of the following is consistent with the graph depicted above? (shift in supply one)
Taxes are changed so that real interest income is taxed rather than nominal interest income.
Which of the following is not a reason why the Industrial Revolution occurred when and where it did?
The British government was able to more easily seize wealth.
If a country's real GDP is rising by 3% per year while its population is rising at 5% per year, which of the following is true?
The country's standard of living is falling
The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D1 and S1 (point A). If the price of motorcycle engines increases, and the wages of motorcycle workers increase, how will the equilibrium point change?
The equilibrium point will move from A to B
Which of the following is evidence of a shortage of chocolate?
The quantity of chocolate demanded is greater than the quantity supplied
Prices of smartphones (assume that this is a normal good) have fallen in recent years. Over this same period, the price of the components used to produce smartphones has also fallen and consumer incomes have risen. Which of the following best explains the falling prices of smartphones?
The supply curve for smartphones has shifted to the right more than the demand curve has shifted to the right
If the United States lifts the embargo on Cuban products, what will happen in the U.S. market for Cuban cigars?
The supply curve will shift to the right
Which of the following describes a characteristic of a perfectly competitive market?
There are many buyers and sellers
Labor force participation rate measures percentage of _________ in labor force
adult population
A cash withdrawal reduces deposits, reserves, and excess reserves in the banking system
True
A cash withdrawal reduces deposits, reserves, and excess reserves in the banking system.
True
A rising price level decreases consumption by decreasing the real value of household wealth.
True
An increase in population results in an increase in demand
True
Developing countries with large informal sectors tend to have firms that invest less in capital equipment.
True
Financial markets and financial intermediaries make up financial system
True
Housing is the largest component of the U.S. CPI market basket.
True
If a country produces only two goods, then it is not possible to have a comparative advantage in the production of both those goods.
True
If consumers believe the price of hybrid vehicles will decrease in the future, this will cause the demand for hybrid vehicles to decrease now.
True
If inflationary expectations are increasing, we would expect that the nominal interest rate would also be increasing, holding all else constant.
True
If planned aggregate expenditure is less than real GDP, some firms will experience unplanned increases in inventories.
True
If the rate of growth in real GDP exceeds the rate of growth in the money supply, the quantity theory of money predicts a price deflation.
True
In the US, businesses are not required to accept cash
True
Money will fail to serve as a medium of exchange if it ceases to be a store of value.
True
The Fed can change the money supply more quickly by using open market operations as compared to discount policy.
True
The Fed was founded in 1913 to serve as a lender of last resort to bankers during bank runs and panics
True
The division of the burden of a tax between buyers and sellers in a market is called tax incidence.
True
The marginal propensity to consume is the slope of the consumption function
True
The natural rate if unemployment consists of fric+struct
True
The productivity slowdown experience in the United States from the mid-1970s to the mid-1990s occurred in all high-income countries
True
The quantity equation becomes the basis for a theory when we assume that velocity of money is constant
True
The equation of the GDP components is
Y=C+I+G+NX
Which of the following explains the changes in the U.S. adult male labor force participation rate since 1948?
Younger men are remaining in school longer as compared to the past
Which of the following goods is directly counted in GDP?
a 12-inch Subway sandwich purchased by a student
Which of the following statements is true?
a curved line has slope values that change at every point
A major source of inefficiency in barter economies is that they require
a double coincidence of wants in exchange.
An increase in the price of MP3 players will result in
a larger quantity of MP3 players supplied
If the current market price is $25, the market will achieve equilibrium by
a price decrease, decreasing the quantity supplied and increasing the quantity demanded.
If consumers decide to be more thrifty and save more out of their income, then this will cause
a shift in the supply curve for loanable funds to the right
Hurricane Katrina damaged a large portion of refining and pipeline capacity when it swept through the Gulf coast states in August 2005. As a result of this, many gasoline distributors were not able to maintain normal deliveries. At the pre-hurricane equilibrium price (i.e., at the initial equilibrium price), we would expect to see
a shortage of gasoline
A decrease in the price of pork will result in
a smaller quantity of pork supplied
Labor unions cause unemployment because the union contract wage is set
above the market wage, causing a surplus of labor
human capital refers to
accumulated skills and training workers have
A central bank can help stop a bank panic by
acting as a lender of last resort.
All the following are components of aggregate expenditure except
actual investment spending
An unplanned decrease in inventories results in
actual investment that is less than planned investment
Banks can continue to make loans until their
actual reserves equal their required reserves.
Which of the following is not one of the three sources of technological change?
additional amounts of existing capital
The nominal GDP of the U.S. in 2015 was approximately $17.3 trillion. This means that
all of the above
Which of the following would encourage economic growth through increases in the capital stock?
all of the above
When every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it, ________ occurs.
allocative efficiency
Money is
an asset that people are willing to accept in exchange for goods and services.
A stock market boom which causes stock prices to rise should cause
an increase in consumption spending
Which of the following will increase aggregate expenditure in the United States?
an increase in government purchases
If, in response to a decrease in the price of coffee, the quantity of coffee demanded increases, economists would describe this as
an increase in quantity demanded
An increase in the demand for peanuts due to changes in consumer tastes, accompanied by an increase in the supply of peanuts as a result of favorable growing conditions, will result in
an increase in the equilibrium quantity of peanuts; the equilibrium price may increase or decrease
An increase in the demand for peanuts due to changes in consumer tastes, accompanied by an increase in the supply of peanuts as a result of favorable growing conditions, will result in
an increase in the equilibrium quantity of peanuts; the equilibrium price may or may not decrease
Electric car manufacturers want to sell more electric cars at a higher price. Which of the following events would have this effect?
an increase in the price of gasoline
Which of the following would cause the equilibrium price of ketchup to increase and the equilibrium quantity of ketchup to decrease?
an increase in the price of tomatoes
Which of the following would increase the unemployment rate?
an increase in unemployment insurance payments
If a decrease in income leads to an increase in the demand for macaroni, then macaroni is
an inferior good
In economics, money is defined as
any asset people generally accept in exchange for goods and services.
What does PPI measure?
average of the prices received by producers of goods and services at all stages of the production process
Economies where goods and services are traded directly for other goods and services are called ________ economies.
barter
Fiat money is generally issued by
central banks
The law of demand is the rule that, ____________, as the price of a good or service decreases, the quantity demanded increases.
ceteris paribus
Economics is the study of the ________ people make to attain their goals, given their ________ resources.
choices; scarce
Investment, as defined by economists, would include the purchase of a
computer by an accounting firm
To increase the money supply, the Federal Reserve could
conduct an open market purchase of Treasury securities.
If the PPF is linear, then the opportunity cost of producing a good or service is
constant
The decision about what goods and services will be produced in a market economy is made by
consumers and firms choosing which goods and services to buy or produce
________ describes relationship bw consumption spending and disposable income
consumption function
To calculate GDP by the expenditure method, one must add
consumption spending, investment spending, govt spending, and net exports
In the long run, an economy will experience an increasing standard of living only if it experiences
continuous technological change
All modern dynamic economies are subject to ____ of job.
creative destruction
New houses are included in the ______________ component of the GDP.
investment
Over the past 50 years, deaths among children have
declined in nearly all countries, including most low-income countries
Compared to prices charged by Uber, traditional taxi companies charge government-regulated prices. These government-regulated prices ________ in the market for shared rides.
decrease consumer surplus
If the BLS counted persons that are on active military service in the totals for employment, the labor force, and the working-age population, this would
decrease the measured unemployment rate.
If the government implements a price ceiling on insulin, this will
decrease the quantity of insulin the manufacturers will be willing to supply.
If the CPI changes from 125 to 120 between 2015 and 2016, how did prices change between 2015 and 2016?
decreased by 4%
An increase in individual income taxes ________ disposable income, which ________ consumption spending.
decreases, decreases
Which of the following is not one of the key services provided by the financial system?
decreasing taxes
The willingness of consumers to buy a product at different prices is shown on a
demand curve.
The simple deposit multiplier is the ratio of the amount of
deposits created by banks to the amount of new reserves
The required reserves of a bank equal its _______ the required reserve ratio.
deposits multiplied by
The difference bw GDP and net taxes is
disposable income
Gross domestic product in the economy is measured by the
dollar value of all final goods and services produced in the economy
There is often a trade-off between
economic efficiency and economic equity.
Labor force is ______ workers in the economy
employed + unemployed
The equilibrium quantity is the quantity that appears in the market at the
equilibrium price
The output of Mexican citizens who work in Texas would be included in the
gross national product of Mexico
The difference between the ________ for a good and the ________ is called consumer surplus.
highest price a consumer is willing to pay; price the consumer actually pays
Gross domestic product understates the total production of final goods and services because of the omission of
household production
In 1980, one Zimbabwean dollar was worth 1.47 U.S. dollars. By the end of 2008, the exchange rate was one U.S. dollar to 2 billion Zimbabwean dollars. When an economy experiences rapid increases in the price level such as what occurred in Zimbabwe, the economy is said to experience
hyperinflation
During a business cycle expansion, total production ________ and total employment ________.
increases; increases
As the income increases and people buy less of the good, then the good is called
inferior good
Which of the following is not a function of the Fed Reserve System
insuring deposits in the banking system
Which of the following is not a function of the Fed?
insuring deposits in the banking system
Which of the following is not directly counted in GDP?
intermediate goods
Which of the following increases labor productivity?
inventions of new machinery, equipment, or software
If the per-worker production function shifts down,
it now takes more capital per hour worked to get the same amount of real GDP per hour worked.
The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D2 and S2 (point E). If the technology to produce motorcycles improves and the number of buyers increases
it will move from point E to A
Which of the following labor market statistics best indicates the amount of labor that is available to the economy from a given working-age population?
labor force participation rate
The quantity of goods and services that can be produced by one worker or by one hour of work is referred to as
labor productivity
For a good to be included in the GDP, it must be produced
legally
If inflation increases unexpectedly, then
lenders receive a lower real interest rate than they expected.
________ is the ease with which a financial security can be exchanged for money.
liquidity
The industrialized group of countries has growth rates that are consistent with the findings of the economic growth model. That is, Taiwan, Korea, and Singapore had ________ incomes in 1960 than the United States and Switzerland, and Taiwan, Korea, and Singapore grew ________ than the United States and Switzerland between 1960 and 2010.
lower; more rapidly
The branch of economics which studies the behavior of entire economies and policies that affect the economy as a whole is called
macroeconomics
The additional cost to a firm of producing one more unit of a good or service is the
marginal cost
The additional cost to a firm of producing one more unit of a good or service is the
marginal cost.
The quantity theory of money predicts that, in the long run, inflation results from the
money supply growing at a faster rate than the real GDP.
Durable good is a good that can be used for:
more than one period
Cost of living for KSU student increased ________ than the national avg
more than twice
If firms pay what are called "efficiency wages," they pay wages that
motivate workers to increase their productivity
The income effect of a price change results in a
movement along the demand curve due to a change in purchasing power brought about by the price change.
To affect the market outcome, a price floor
must be set above the equilibrium price
In order to be binding, a price floor
must lie above the free market equilibrium price
The purchase by a foreign government of an airplane produced in the United States is included in U.S.
net exports
We need to privatize the social security program in the State of Kansas is a
normative statement
Credit card balances are
not part of the money supply
Of the 3 primary tools the Fed Reserve uses to conduct monetary policy, the tool used most often is
open market operations
Of the 3 tools the Fed reserve uses to conduct monetary policy, the tool used the most is
open market operations
If the PPF is linear, then
opportunity costs are constant as more of one good is produced.
The Bureau of Labor Statistics would categorize a retiree who is not working as
out of the labor force
Full employment is not considered to be zero unemployment because
people do not find jobs instantaneously.
Dollar bills in the modern economy serve as money because
people have confidence that others will accept them as money
Suppose the U.S. government encouraged new teachers to take jobs in underperforming schools by paying the new teachers a $20,000 bonus. These teachers would be exemplifying the economic idea that
people respond to economic incentives
On the 45-degree line diagram, for points that lie below the 45 degree line
planned aggregate expenditure is less than GDP
the PPI is the avg prices faced by the _____ of goods and services
producers
The only way the standard of living of the average person in a country can increase is if ________ increases faster than ________.
production; population
The change in price of the same good or service causes a change in
quantity demanded
The assumption that people are ______ is one of the basic assumptions in economic studies
rational
On the 45-degree line diagram, the 45-degree line shows points where real aggregate expenditure equals
real GDP
A good measure of the standard of living is
real GDP per capita
If prices are rising on average, then
real GDP will be greater than nominal GDP in the years before the base year.
period bw business cycle peak and trough is called
recession
An increase in the real interest rate does which of the following?
reduces consumption spending
A consumer price index of 160 in 1996 with a base year 1982-1984 would mean that the cost of the market basket
rose 60% from the cost of the market basket in base year.
The basic principle in economic studies is
scarcity
The process of bundling loans together and buying and selling these bundles in a secondary financial market is called
securitization
The opportunity cost of the good in the x-axis is _________ of the PPF
slope
In the long run, ________ differences in economic growth rates result in ________ differences in GDP per capita.
small; large
Shortage happens when Quantity supplied is _________ quantity demanded.
smaller
The seven members of the Board of Governors of the Fed Reserve are appointed by
the President
The GDP is not a perfect measure of standard of living because it does not take into account
social classes
At macroeconomic equilibrium, total ______ equals total _______.
spending, production
A car dealer sells you a car today in exchange for money in the future. This illustrates which function of money?
standard of deferred payment
An increase in demand and supply by the same size will cause the price of the good to
stay the same
Examples of assets that are included in household wealth would be
stocks, bonds, and savings accounts
The Federal Reserve was established in 1913 to
stop bank panics by acting as a lender of last resort.
A farm worker gets paid today in money, but plans to spend the money next week. This illustrates which function of money?
store of value
Which of the following functions of money would be violated if inflation were high?
store of value
Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs is called
structural unemployment
The improvement in technology will lead to increase in the
supply
In a perfectly competitive market, buyers and sellers are price
takers
Which of the following is most likely to be able to sustain economic growth in an economy?
technological change
According to new growth theory,
technological change is influenced by economic incentives.
The key factors in raising standards of living in low-income countries have been increases in
technology and knowledge
The unemployment rate is an important economic statistic that can tell us about the health of the economy. If the unemployment rate turns out to be high or higher than anticipated, we would expect
that stock prices are more likely to fall
The Fed Open Market Committee consists of
the Board of Govnrs plus 5 of the Fed Reserve Bank Presidents
According to Douglass North, the Industrial Revolution occurred in England because
the British Parliament took control of the government and could credibly commit to upholding property rights
What is the name of the organization that defines business cycle peaks and troughs in the United States?
the National Bureau of Economic Research
Potential GDP is defined as
the level of GDP attained when all firms are producing at capacity
The key idea of the aggregate expenditure model is that in any particular year, the level of GDP is determined mainly by
the level of aggregate expenditure
A consumer is willing to purchase a product up to the point where
the marginal benefit is equal to the price of the product.
The figure above represents the market for iced tea. Assume that this is a competitive market. At an output of 30,000 units
the marginal cost of iced tea is greater than the marginal benefit; therefore, output is inefficiently high
The production possibilities frontier shows
the maximum attainable combinations of two products that may be produced in a particular time period with available resources.
All of the following are true statements about the multiplier except
the multiplier is a value between zero and one
IN the US, currency includes
the paper money and coins in circulation
The unemployment rate is
the percentage of the labor force that is unemployed
Suppose that nominal GDP in 2016 was less than real GDP in 2016. Given this information, we know for certain that
the price level in 2016 was less than the price level in the base year
By drawing a demand curve with price on the vertical axis and quantity on the horizontal axis, economists assume that the most important determinant of the demand for a good is
the price of the good
Globalization refers to
the process of countries becoming more open to foreign trade and investment
If, in a competitive market, Marginal benefit is greater than marginal cost
the quantity sold is less than the eq quantity
The nominal interest rate will be less than the real interest rate when
the rate of inflation is negative
Equilibrium in the loanable funds market determines
the real interest rate
When deflation occurs,
the real interest rate is greater than the nominal interest rate.
When an economy faces diminishing returns,
the slope of the per-worker production function becomes flatter as capital per hour worked increases
When an economy faces diminishing returns
the slope of the per-worker production function becomes flatter as capital per hour worked increases.
The more excess reserves banks choose to keep,
the smaller the deposit multiplier
The more excess reserves banks choose to keep,
the smaller the deposit multiplier.
Suppose a drought resulted in a major reduction in the California lettuce crop. In the market for lettuce,
the supply curve shifted to the left resulting in an increase in the equilibrium price
If in the market for bananas the supply curve has shifted to the right, then
the supply of bananas increased
Suppose the demand curve for a product is downward sloping and the supply curve is upward sloping. If a unit tax is imposed in the market for this product,
the tax burden will be shared by buyers and sellers
Gross Domestic product is calculated by summing up
the total market value of final goods and services produced in the economy during a period of time
Suppose that the labor movement has a revival in the United States and the majority of workers join labor unions. As a result we would expect
the unemployment rate to rise
The quantity theory of money assumes that
the velocity of money is constant
When the labor market is at full employment
there is no cyclical unemployment in the economy
Actual investment will equal planned investment only when
there is no unplanned change in inventories
The govt purchases do not include the
transfer payments
The statement "This Dell laptop costs $1,200" illustrates which function of money?
unit of account
Scarcity refers to the situation in which
unlimited wants exceed limited resources
To reduce the bias in the consumer price index, the Bureau of Labor Statistics
updates the market basket every two years, rather than every 10 years.
Real GDP is GDP in a given year
valued in the prices of the base year
Bank reserves include
vault cash and deposits with the Federal Reserve.
Buyers will bear the entire burden of a unit tax if the demand curve for a product is
vertical
Which of the following are not considered part of government purchases?
welfare benefits
An increase in the equilibrium price for a product will result
when there is a decrease in supply and an increase in demand for the product
If households and firms decide to hold less of their money in checking account deposits and more in currency, then initially, the money supply
will not change.