Econ HW Quizzes & Midterm 1
C) 3%
) A central bank using the Taylor Rule calculates the optimal interest rate in the country should be 6%. Currently, in the country actual GDP growth is 5%, and actual inflation is 3%. The bank desires GDP growth of 7%, desires inflation of 1%, and uses a Taylor Rule weight of 50%. The real interest rate in the economy is A) 1% B) 2% C) 3% D) 4% E) 5%
B) Allows the government to more easily expand the money supply
) Compared to money backed by commodities, fiat money A) Costs the government more B) Allows the government to more easily expand the money supply C) Is safer D) Is trusted by more people
D) Having cash available for unexpected problems is very helpful
) The precautionary motive means that people hold money because A) When interest rates rise bonds are worth a lot less B) Not all stores and restaurants take credit cards C) Not all stores and restaurants take cash D) Having cash available for unexpected problems is very helpful
B 10 year
. In the USA bankruptcy is a____ mark on your credit history. A Permanent B 10 year C 7 year D 5 year
B False
. Individuals, businesses and governments can all declare bankruptcy. A True B False
A. About $4,010
1) I owe you $7,500 in six years and have promised to pay you an interest rate of 11%. How much money is that debt worth today? A. About $4,010 B. About $4,450 C. About $682 D. About $1,126 E. About $14,028
C) Lower interest rates
A country's central bank uses a Taylor Rule to conduct policy. Currently in the country the real interest rate in the economy is 4%, actual GDP growth is 7%, and actual inflation is 1%. The bank desires GDP growth of 9%, desires inflation of 3%, and uses a Taylor Rule weight of 50%. The bank should A) Raise interest rates B) Keep interest rates the same C) Lower interest rates D) Decrease the money supply
A. Micro examines one individual's actions while Macro examines the group
A key difference between Macroeconomics and Microeconomics is A. Micro examines one individual's actions while Macro examines the group. B. Both Micro and Macro examine the individuals' actions C. Neither Micro or Macro examine a single individual's actions D. Micro examines the group's actions while Macro examines the individual
False
A long term drop in the stock market foretells a future recession True False
b. Defined Contribution
A person is expecting over the next 40 years to work for many companies, some of which will likely pay a lot and some probably very little. In general economists expect this person prefers which type of retirement plan? a. Defined Benefit b. Defined Contribution c. Defined Rule d. Defined Payout
B False
A tax rate less than zero is not theoretically possible A True B False
D. Flunking all students who get less than 1/4th of the questions right.
An example of a negative incentive is: A.Providing the answer sheet to people as soon as they finish the exam B.Giving the top students on this exam a guaranteed A for the course C. Giving all students extra points on a curved exam D. Flunking all students who get less than ¼ of the questions right
d. Stock bonuses paid ten years after a leader leaves a company
An example of a positive incentive that could ensure that business managers do not break rules is a. Showing corrupt business leaders on television being arre b. Heavy punitive fines when a business leader makes a major mistake c. Long prison sentences for corrupt business leaders d. Stock bonuses paid ten years after a leader leaves a company
E) A U.S. $100 Federal Reserve Note
An example of something that has not been used as commodity money is A) Cigarettes B) Sea shells C) Nails D) Salt E) A U.S. $100 Federal Reserve Note
True
Based on both GDP per person and total GDP, the U.S. is one of the richest countries in the world. True False
C negative public saving, it decreases national savings.
Because a government budget deficit represents A positive public saving, it decreases national savings. B positive public saving, it increases national savings. C negative public saving, it decreases national savings. D negative public saving, it increases national savings.
d. All of the above
Communism can potentially exist under a. Monarchy b. A dictatorship c. Participatory democracy d. All of the above
A) True
Credit cards are not a form of money A) True B) False
B a government budget deficit makes interest rates rise.
Crowding out occurs when private investment declines because A a government budget surplus makes interest rates fall. B a government budget deficit makes interest rates rise. C a government budget surplus makes interest rates rise. D a government budget deficit makes interest rates fall.
a. GDP will fall
Currently, prostitution is legal in all parts of Nevada that have a low population. Harry Reid, Nevada's senior Senator, awhile ago stated it was time for Nevada to scrap this law and join with the other 49 states in outlawing sex for money. If Senator Reid's proposal passes. a. GDP will fall b. GDP will rise c. GDP will not change d. Not enough information is given to make a decision
b. GDP fails to account for the quality of the environment
GDP is not a perfect measure of well-being; for example a. GDP places too much emphasis on the value of leisure. b. GDP fails to account for the quality of the environment c. GDP incorporates a large number of non-market goods and services that are of little value to society d. All of the other three answers are correct
D) $266.67
If $40 were burnt in a fire and if the reserve ratio is 15% then this means over time a total of _____ is eliminated from the economy A) $6 B) $6.67 C) $40 D) $266.67 E) $400
b. False
If GDP rises in a country we can assume that happiness also has risen a. True b. False
False
If a company's sales currently lag the change in GDP we can be sure they are never coincident or leading True False
A. $8 billion
If a country has consumption of $6 billion, government spending of $2 billion, investment of $1 billion, imports of $4 billion and exports of $3 billion then GDP in this country is A. $8 billion B. $9 billion C. $10 billion D. $16 billion
A) Lower tax revenue
If a country is to the left of the Laffer Curve's peak then cutting tax rates will A) Lower tax revenue B) Increase tax revenue C) Keep tax revenue constant D) Have an uncertain impact depending on the exact size or shape of the curve
c. Citizens of the country who work abroad are earning a lot more than foreign workers in the country
If a country's GDP is a lot lower than its' GNP then we know that a. There are many foreign workers in the country who are earning a lot. b. Citizens of the country who work abroad are not earning a lot compared to foreign workers in the country c. Citizens of the country who work abroad are earning a lot more than foreign workers in the country d. Citizens of the country who work abroad are earning about the same as foreign workers in the country
C commodity money, but not fiat money.
If an economy used gold as money, its money would be A both fiat and commodity money. B neither fiat nor commodity money. C commodity money, but not fiat money. D fiat money, but not commodity money.
B) producing more than it is consuming
If national savings is positive number then the country is A) consuming more than it is producing B) producing more than it is consuming C) Borrowing from other countries D) Moving funds from the private sector to the public.
A) Roughly the amount needed to go to BU for one year
If the U.S. federal debt was evenly divided among all people in the USA then each person owes A) Roughly the amount needed to go to BU for one year B) Roughly the amount needed to go to BU for two years C) Roughly the amount needed to go to BU for four years D) Roughly the amount needed to go to BU for half a year
b. Positive Statement
If the news reports that country's economic output of goods and services has fallen by 3% over the past year then an economist would say this is a a. Normative Statement b. Positive Statement c. Proscriptive Statement d. Normal Statement e. Revisionist Statement
a. True
If the population grows slower than output, then the amount of resources consumed by the average person rises. a. True b. False
d) Down; real
If the prices customers are paying are rising at a slower pace or are falling faster than overall prices your profits are going ___ in _____ terms. a) Up; nominal b) Up; real c) Down; nominal d) Down; real
d. the consumer price index will increase, but the GDP deflator will not increase
If the prices of Australian-made shoes imported into the United States increase, then, as a result a. the GDP deflator increases but the consumer price index does not increase b. neither the GDP deflator nor the consumer price index increases c. both the GDP deflator and the consumer price index increase. d. the consumer price index will increase, but the GDP deflator will not increase
d. 40
If the reserve ratio is 2.5 percent, the money multiplier is a. 25 b. 2.5 c. 1.25 d. 40
b. no change in GDP
If the stock market soars next week, government statistics will show a. an increase in GDP b. no change in GDP c. a decrease in GDP d. an increase in GDP and no change in GNP
D All of the above.
If the unemployment rate rises, we should expect to see? A Increase in hospital visits. B More work for the police. C Increase in TV advertising rates D All of the above.
b. Supply; Down
Imagine drawing a supply and demand graph of the oil market starting a few years ago. As the Alberta oil sands projects came on line these investments caused the ______ curve to shift, helping moving the price of oil _______. a. Supply; Up b. Supply; Down c. Demand; Up d. Demand; Down
C 67.8% and 6.4%.
In 2004, based on concepts similar to those used to estimate U.S. employment figures, the Canadian adult non-institutionalized population was 25.022 million, the labor force was 16.956 million, and the number of people employed was 15.864 million. According to these numbers, the Canadian labor-force participation rate and unemployment rate were about A 63.4% and 4.4% B 67.8% and 4.4% C 67.8% and 6.4%. D 63.4% and 6.4%
A) Rises; Falls
In English auctions the price shouted out by the auctioneer _____ while in Dutch auctions the price ______ A) Rises; Falls B) Falls; Rises C) Rises; Rises D) Falls; Falls E) Not possible to know; Not possible to know
c) Shift demand curve downward and left; shift supply curve upward and left
In a supply demand graph with the quantity of cars on the horizontal axis and the price of cars on the vertical, we expect news of a problem with a cars' quality to a) Shift demand curve downward and left; shift supply curve downward and right b) Shift demand curve upward and right; shift supply curve downward and right c) Shift demand curve downward and left; shift supply curve upward and left d) Shift demand curve upward and right; shift supply curve upward and left e) Downward movement along the demand curve; downward movement along the supply curve.
d. Winners get their winnings from loses
In a zero sum game a. Some of people win all of the time b. Some of people lose all of the time c. Sometimes everyone wins, sometimes everyone losers and sometimes there are both winners and losers d. Winners get their winnings from loses
B) Go in opposite directions
In general stock prices and interest rates A) Go up and down together B) Go in opposite directions C) Are not related D) Are tied together only in the long-run
A) True
It is possible for a U.S. bank to loan out more money than it has in deposits A) True B) False
b. Always a good
Items, like fresh fruit, which last only a few days and then can no longer be sold are a. Always a service b. Always a good c. First a good and then after a few days they become a service d. First a service and then after a few days become a good
False
J.P. Morgan used the panic of 1907 to personally enrich himself. True False
A True
Joe wants to trade eggs for sausage. Lashonda wants to trade sausage for eggs. Joe and Lashonda have a double-coincidence of wants. A True B False
c. Michael Kremer
Laws which force people to wear a seat belt, use a helmet while driving a motor cycle, and obey the rules of the road all save lives. Which person would be most in favor of these laws? a. Alfred Marshall b. Jared Diamond c. Michael Kremer d. Thomas Malthus
a) True
Liquidity is the ease with which an asset can be converted into cash, without losing value, and spent. a) True b) False
d. The program provides money to a very large percentage of the USA's population and any changes would impact huge numbers of voters
Many politicians joke that Social Security is the "3rd rail of USA politics." The 3rd rail is the track that carries the electrical power to a subway car. Touching the 3rd rail in a subway kills a person. Social Security is like a 3rd rail because a. Politicians should not touch programs which reduce elderly poverty b. The typical beneficiary gets a large check and no one wants a large check taken away c. Young people are expecting to retire based on this program and changing people's expectations is bad d. The program provides money to a very large percentage of the USA's population and any changes would impact huge numbers of voters
b. Negative incentive; Did not work
Mexico City attempt to ban cars from driving based on their ending license plate number was a ____ incentive that ______ a. Positive incentive; Worked b. Negative incentive; Did not work c. Negative incentive; Worked d. Positive incentive; Did not work
b. Not change GDP next month
Next month I am planning on having a yard sale. In a yard sale I put all the things that I don't need any more on my front lawn with price tags. The last time I held a yard sale I sold about $300 worth of items. The yard sale will a. Boost GDP next month b. Not change GDP next month c. Lower GDP next month d. Have an uncertain effect since the amount sold is unknown
D) Are regressive
One disadvantage of a consumption tax compared to an income tax is that consumption taxes A) Take less time to pay B) Encourage savings C) Encourage work D) Are regressive
A there is so much currency per person.
One puzzle about the U.S. money stock is that A there is so much currency per person. B there is so little currency per person. C the public holds so much currency relative to banks. D banks hold so much currency relative to the public.
d) If the price goes down people move away from similar products and purchase more of the item.
One reason why demand curves slope downward is because of the substitution effect. This effect is tells us that a) When your income increases you buy more items. b) When the price of an item goes down you can now buy the exact same quantity as before but you have money left over. c) There is a direct one-to-one relationship between price and quantity. d) If the price goes down people move away from similar products and purchase more of the item.
True
Outlet bias in the CPI occurs because it is impossible to combine prices from giant warehouse stores like Costco and Sam's Club with prices from regular supermarkets like Stop & Shop and Shaws. True False
B False
Professor Robert Hall of Stanford has done research which proves all Americans will be unemployed at least once in their lifetime. A True B False
A True
Public saving is T - G, while private saving is Y - T - C. A True B False
C not counted as unemployed or counted as part of the labor force.
Sam just lost his job, but isn't yet looking for a new one. Sam is A counted as unemployed, but not part of the labor force. B not counted as unemployed, but counted as part of the labor force. C not counted as unemployed or counted as part of the labor force. D counted as unemployed and part of the labor force.
c. The potential loss is infinite
Short selling a stock is riskier than going long on a stock because a. You need the money first when going short b. You don't get the money until after the trade is completed c. The potential loss is infinite d. Short sellers are pessimists and there are relatively few pessimistic traders
b. selling a stock first, then buying
Shorting a stock means a. buying first, then selling. b. selling a stock first, then buying c. setting a limit on the amount of money you are willing to let a stock go up or down d. you expect the stock to fluctuate in price.
B False
Since taxes affect only the price paid by the buyer, they cannot have an adverse impact on the allocation of society's resources. A True B False
d. Forced sterilization
Some policies that countries have enacted to decrease the number of children are a. Tax benefits for larger families b. Free day care c. Relaxed legal policies toward out of wedlock births d. Forced sterilization
A. Profit margin
Stock quotes contain a lot of information. The ratio between the "price to sales" ratio and the PE ratio tells a viewer a company's current A. Profit margin B. Revenue margin C. Cost margin D. Bond margin E. Price appreciation
B the unemployment rate would be lower and the labor-force participation rate would be unaffected.
Suppose that some people report themselves as unemployed when, in fact, they are working in the underground economy. If these persons were counted as employed, A both the unemployment rate and labor-force participation rate would be lower. B the unemployment rate would be lower and the labor-force participation rate would be unaffected. C both the unemployment rate and labor-force participation rate would be higher. D the unemployment rate would be higher and the labor-force participation rate would be higher.
A they distort prices and thus distort the decisions of households and firms.
Taxes adversely affect the allocation of resources in society because A they distort prices and thus distort the decisions of households and firms. B not everyone pays taxes. C they do not always fall more heavily on the rich than on the poor. D the taxes collected are not enough to finance government spending.
a. in the key financial centers of 1913
The 13 Federal Reserve Banks are all located a. in the key financial centers of 1913 b. in cities that today are important financial centers c. based on political, not economic, considerations d. in the 13 U.S. cities with the largest populations
a: generally move together
The CPI and the GDP deflator [__________] a: generally move together b: always show different patterns of movement c: always show identical changes d: generally show different patterns of movement
False
The CPI is computed by finding the price of a market basket of goods whose contents vary each year. True False
A. price increases at the same time features have been improved
The CPI is not an accurate measure of the cost of living. One problem is unmeasured quality changes. This problem arises when a product's A. price increases at the same time features have been improved B. price decrease at the same time features have been improved C. price increases at the same time features have not changed D. price decreases at the same time features have not changed
a. operates with almost complete discretion over monetary policy
The Federal Open Market Committee a. operates with almost complete discretion over monetary policy b. is required to keep the interest rate within a range set by Congress. c. is required by its charter to change the money supply using a complex formula that concerns the tradeoff between inflation and unemployment. d. is required to increase the money supply by a given growth rate each year.
C increasing taxes first increases government revenue and then decreases revenue
The Laffer Curve tells politicians that A increasing taxes always increases government revenue B increasing taxes always decreases government revenue C increasing taxes first increases government revenue and then decreases revenue D increasing taxes has an uncertain impact on revenue
a. is an intergenerational transfer program that takes money from current workers and transfers it to current retirees
The Social Security program in the United States a. is an intergenerational transfer program that takes money from current workers and transfers it to current retirees b. collects taxes from current workers and invests this money to repay workers when they retire c. is designed so that administrative decisions can be made independent of political concerns d. is based on the same principles as private insurance programs
b. Around 90 people per square mile
The U.S. covers roughly 3.5 million square miles. This means the population density is approximately a. Around 9 people per square mile b. Around 90 people per square mile c. Around 1 person per square mile d. Around 11 people per square mile e. Around 1,100 people per square mile
a. Malthus' theory
The UN created a chart of world population from 500 BC to the year 2300 that was shown in class. The graph shows population reaching about 10 billion people. Once it reaches 10 billion the population will first dip and then rise back to 10 billion. The creator of this graph believes in a. Malthus' theory b. Diamond's theory c. Kremer's theory d. Zagorsky's theory e. A theory not covered in class or in the book
c. Number of retirees supported by each worker
The dependency ratio tracks a. Number of children an adult supports b. Number of adults supported by each child c. Number of retirees supported by each worker d. Number of workers supported by each retiree
False
The famous economist Thorstein Veblen (1857-1929) was in the eyes of his students a great teacher. True False
C temporary and lasted just about ten years
The first U.S income tax was A Struck down by the Supreme Court as unconstitutional B A flat tax C temporary and lasted just about ten years D not very effective at raising money
D) You must adjust for the time frame when money is received.
The idea behind present value is A) That you don't get something for nothing. B) The present is always better than the past C) Money today is always better than money tomorrow D) You must adjust for the time frame when money is received.
D) Effectively have more money, which could lead you to buy more of the item or more of a different item
The income effect means that when the price of an item goes down you A) Always buy more of the item B) Always buy less of the item C) Always buy the same amount of the item D) Effectively have more money, which could lead you to buy more of the item or more of a different item.
c. In a socialist system the government owns the key businesses while individuals own smaller less important businesses; in a capitalist system, individuals own almost all businesses
The key economic difference between a capitalist system and a socialist system is that a. In a socialist system individuals own the key businesses; in a capitalist system the government owns the key businesses b. In a socialist system, individuals own the key businesses while the government owns smaller less important businesses; in a capitalist system, individuals own almost all businesses c. In a socialist system the government owns the key businesses while individuals own smaller less important businesses; in a capitalist system, individuals own almost all businesses d. In a socialist system the government owns the key businesses while individuals own smaller less important businesses; in a capitalist system, government own almost all businesses
D) M4
The least liquid money measure is A) M1 B) M2 C) M3 D) M4
D. No one can predict with any confidence what will happen in the future to the stock market
The lesson of Irving Fisher's life is A. Smart people should always invest in the stock market B. Smart people should never invest in the stock market C. Investing in the stock market is for suckers and losers D. No one can predict with any confidence what will happen in the future to the stock market
C. This number shows how changes in the stock and bond market change spending
The marginal propensity to consume out of wealth is important because A. This number causes changes in the stock and bond market B. The stock and bond market cause changes in this number C. This number shows how changes in the stock and bond market change spending D. This number provides a relationship between the stock and bond market
D exists because of past government budget deficits.
The national debt A is the difference between the government's spending and revenue in a given year. B is the amount households owe on credit cards, mortgages and other loans. C is the same as the government's budget deficit. D exists because of past government budget deficits.
a. GDP per capita is rising over time
The population density in Eastern Europe has been falling since 1991. Nominal GDP has been rising about 6% in the typical country. The GDP deflator has been rising about 4%. These facts mean a. GDP per capita is rising over time b. GDP per capita is falling over time c. GDP per capita is stable over time d. Changes over time to GDP per capita cannot be determined with this information
c. 5%
The price level rises from 120 to 126. What is the inflation rate? a. 3% b. 6% c. 5% d. 4.76%
c. stayed roughly constant in the US over time
The real/inflation adjusted price of beer has a. gone down in the US over time b. gone up in the US over time c. stayed roughly constant in the US over time d. Has jumped up and down in the US
False
The stock market model presented in chapter 3 suggests that when interest rates rise investors should buy stocks. True False
d. fact that consumers substitute toward goods that have become relatively less expensive
The substitution bias in the consumer price index refers to the a. substitution of new prices for old prices in the CPI basket of goods and services from one year to the next. b. substitution by consumers of new goods for old goods c. substitution by consumers of a smaller number of high-quality goods for a larger number of low-quality goods d. fact that consumers substitute toward goods that have become relatively less expensive
B False
There is a strong relationship between the number of payments and the amount of time required to pay taxes A True B False
A True
When the government budget deficit rises, national saving is reduced, interest rates rise, and investment falls. A True B False
d. The number of workers paying into the system is expected to decline relative to the number of retirees collecting benefits
Which of the following best explains why the Social Security system is expected to face financial difficulties in the near future? a. Too much Social Security revenue was invested in the private sector rather than in government bonds b. The federal government does not pay interest on the money it borrows from the Social Security system c. The funds in the Social Security trust fund were invested in high-risk ventures that failed to pay off d. The number of workers paying into the system is expected to decline relative to the number of retirees collecting benefits
a. Money is a signal of quantity
Which of the following is not a reason why money is important in macroeconomics? a. Money is a signal of quantity b. Money allows societies to produce more c. Money is a measuring stick d. Money is a big incentive
A American families have been saving more money as a percentage of income over time
Which of the following is not correct? A American families have been saving more money as a percentage of income over time. B When people fell richer they feel less need to save when assets are worth more. C People have switched in the USA from a "earn it - save - buy it" mindset to a new mindset "want it - buy it now on credit." D Credit cards and home equity lines in the 1950s and 1960s were for just the very rich.
D John Stuart Mill
Which one of the following economists played a central role in the development of the branch of economics called "public finance?" A John Maynard Keynes B Simon Kuznets C Thorstein Veblen D John Stuart Mill
B medium of exchange
You get money for babysitting the neighbors' children. This best illustrates which function of money? A store of value B medium of exchange C Liquidity D unit of account
C. $6.00 per hour
You have a choice between walking directly to class, which takes 10 minutes or taking the long way to class which takes 15 minutes. Walking directly to class means you will pass by the homeless man who always asks you for 50 cents, which you always give to him. Taking the long way means you don't have to give him 50 cents. You decide to take the long way today. You value your time at: A. $0.50 per hour B. $2.00 per hour C. $6.00 per hour D. $7.50 per hour E. No way to calculate from the information given
A 30.5
You owe $100,000 in student loans. The loans are at 7% per year. You think you can afford to pay back $8,000 per year. You expect to pay off the loan in about ___ years. A 30.5 B 9.3 C 8.3 D 12.5 E 7.8
A) $9,434
You work in sales and just landed a big order for $200,000. You are supposed to get a 5% commission. Your boss says you need to wait 1 year to collect the commission since the customer has not yet paid. If the interest rate is 6%, how much is your commission worth today? A) $9,434 B) $10,600 C) $10,000 D) $8,900
