Econ Make-Up Exam
Assume that in 1995, the CPI was 150. Which is greater, in 1995, nominal GDP or real GDP?
nominal GDP
At his job, Don Draper was paid $100,000 in 2000 and in 2001 he again was paid $100,000. During this time the inflation rate was 15% annually. Therefore, from 2000 to 2001, Don Draper's
nominal income did not change.
According to the Bureau of Labor Statistics, discouraged workers are classified as being
not in the labor force.
According to Hubbard (your textbook), as the economy goes into a recession, inflation tends to decrease but unemployment
tends to increase.
By specializing and engaging in trade, a society can consume a combination of goods
that is greater than its production possibility frontier.
An increase in the price level will lead to a
higher real interest rate and a decrease in borrowing and spending.
Assume that gross domestic product... equals $3000 the unemployment rate is 10% the CPI is 120 and the GDP gap equals $200. This economy's potential GDP is closest to which of the following amounts? $500 $1.000 $2.500 $2,700 $3.200 $4,000
$3,200
Assume that 28 people are employed, 7 people are unemployed, the working age population is 50, and the natural rate of unemployment is 8%. In this economy, the unemployment rate equals
20%
Assume that the money rate of interest on a loan is 7% and the inflation rate during the life of the loan is 4%. The real rate of interest on this loan is
3%
What is the difference between an "increase in demand" and an "increase in quantity demanded"?
An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.
Assume that a French company builds a factory in Canada. From the Canadian point of view, this transaction is counted as
Capital inflow
Don Draper says that "people buy less vodka when the government taxes the sale of vodka." Roger Sterling says that "the federal government should not impose any taxes on cigarettes because taxing cigarettes is immoral." We can conclude that Roger Sterling's statement is normative, but
Don Draper statement is positive.
Assume that in Estonia the opportunity cost of producing each widget is 5 gadgets and in Ruritania the opportunity cost of producing each widget is 10 gadgets. Which of these countries has a comparative advantage in producing widgets?
Estonia
Which of the following answers is a reason why GDP is not an accurate measure of an economy's level of production of goods and services? GDP excludes financial transactions. GDP excludes government transfer payments. GDP excludes the sale of goods in the underground economy. GDP excludes the sale of intermediate goods. GDP excludes the sale of used goods.
GDP excludes the sale of goods in the underground economy
A country that has a large trade deficit will tend to
Have more capital inflows than capital outflows.
If there was a significant increase in the level of cyclical unemployment, then the GDP gap would
Increase
When widgets buyers' incomes increase, the demand for widgets increases. This information tells us that widgets are
Normal goods
The highest valued alternative forgone in making any choice is called
Opportunity cost
Assume that in Estonia the opportunity cost of producing each widget is 5 gadgets and in Ruritania the opportunity cost of producing each widget is 10 gadgets. If there is free trade between these two countries, which country will probably import widgets?
Rutitania
Which of the following items is not an injection? (Think of the circular flow model.) government purchases. Exports. Investment. Taxes.
Taxes
Which of the following is the best example of a macroeconomic statement? Car sales in the U.S. increased 4% from 2011 to 2012. The price of beef in the U.S. increased by 4% last year. The productivity of U.S. steelworkers increased 4% last year. The U.S. unemployment rate in 2013 was 4%.
The U.S. unemployment rate in 2013 was 4%.
Suppose the economy is at a short run equilibrium real GDP that is greater than its potential real GDP. In this situation, why does the short run aggregate supply curve shift to the left in the long run?
The high demand for resources leads to higher resource prices, in the long run.
Assume that the price of oil is $10 per barrel and the equilibrium price of oil is $20 per barrel.
This tells us that the oil market has a shortage of oil.
Assume that the dollar value of a country's exports is less than the dollar value of that country's imports This tells us that this country has a
Trade deficit
Jones is looking for a full time job, but while he looks for the job he is working part time at Burger Barn. Smith is in the hospital recovering from his injuries that were caused by an automobile accident. Smith is trying to find a job, so that he can go to work when he gets out of the hospital in three months. Wesson does not have a job, he is looking for a job, and he is ready to go to work today. According to the federal government,
Wesson is unemployed, but Smith and Jones are not unemployed.
An increase in real interest rates will lead to
a decrease in aggregate demand.
A decrease in foreign income (incomes abroad) will lead to
a decrease in net exports.
Other things constant, a higher price level will result in
a decrease in net exports.
According to the law of demand an increase in the price of cars will tend to lead to
a decrease in the amount of cars buyers are willing and able to buy.
An increase in the expected future price of a good will tend to lead to
a decrease in the current supply of that good.
A decrease in aggregate demand will lead to
a decrease in the demand for resources.
Assume that steak is a normal good. A decrease in steak buyers' incomes would lead to
a decrease in the demand for steak.
Assume that steak is a normal good. A decrease in steak buyers' incomes would lead to
a decrease in the price of steak and a decrease in the amount of steak sold.
An increase in the cost of producing Spam would lead to
a decrease in the supply of Spam.
An increase in long run aggregate supply will lead to
a lower price level.
Assume that the state of Michigan passed a law forbidding milk sellers from charging more than $1.50 for a gallon of milk. This is an example of
a price ceiling.
An increase in the price level will cause
aggregate expenditures to decrease.
An increase in the demand for foreign exchange (foreign currencies) will lead to
an appreciation of the dollar.
Which of the following events would tend to increase the supply of widgets? an improvement in the technology of widget production. an increase in the cost of producing widgets. an increase in the price of gadgets (gadgets and widgets are substitute goods). an increase in the price of trinkets (trinkets and widgets are complements).
an improvement in the technology of widget production
Sustainable economic growth (i.e., sustainable increases in real GDP) would be caused by
an increase in long run aggregate supply.
An increase in the expected future price of a good will tend to lead to
an increase in the current demand for that good.
An increase in long run aggregate supply will lead to
an increase in the economy's potential real GDP.
In the short run, an increase in aggregate demand will lead to
an increase in the price level and an increase in real GDP.
Which of the following events would tend to increase the demand for widgets? an improvement in the technology of widget production. an increase in the cost of producing widgets an increase in the price of gadgets (gadgets and widgets are substitute goods). an increase in the price of trinkets (trinkets and widgets are complements).
an increase in the price of gadgets (gadgets and widgets are substitute goods)
Which of the following events would tend to increase the price of widgets? an improvement in the technology of widget production. an increase in the number of widget sellers. an increase in the price of gadgets (gadgets and widgets are substitute goods). an increase in the price of trinkets (trinkets and widgets are complements).
an increase in the price of gadgets (gadgets and widgets are substitute goods)
An increase in the cost of producing widgets would lead to
an increase in the price of widgets and a decrease in the amount of widgets sold.
An increase in the price of widgets will lead to
an increase in the quantity of widgets supplied.
An improvement in the technology of widget production will tend to lead to
an increase in the supply of widgets and a lower price for widgets
A short run decrease in real GDP will tend to result in
an increase in unemployment.
An unsustainable boom in the economy could be caused by
an unanticipated increase in aggregate demand or an unanticipated increase in short run aggregate supply.
A decrease in the supply of loanable funds would lead to
higher interest rates and a decrease in borrowing and spending.
A decrease in the demand for loanable funds will lead to lower real interest rates and a decrease in net
capital flows.
Assume that the state of Michigan passed a law forbidding milk sellers from charging more than $1.50 for a gallon of milk and assume that the market price of milk is more than $1.50 per gallon. This government policy would
create a surplus of milk
In the short run, if the price level was below the equilibrium price level, business inventories would decrease leading to a
higher price level.
The supply of loanable funds consists of
domestic savings and net capital flows.
Jax Teller is working part time making pizzas at PizzaMart. He is also looking for full time work. The government considers Jax to be
employed.
In 2005, gross investment was $26,000 and capital depreciation equaled $5,000. This information indicates that this economy had more capital at the
end of 2005 than it did at the beginning of 2005.
If the economy was at full employment, the federal government's measured rate of unemployment would be
greater than zero percent.
The marginal utility of having only one gallon of water tends to be greater than the marginal utility from
having the tenth gallon of water.
A decrease in the supply of widgets would lead to an increase in the price of widgets and a decrease
in the quantity of widgets sold.
In the Aggregate Demand-Aggregate Supply model, resource prices are fixed
in the short run.
When the Bureau of Labor Statistics surveys households to determine the unemployment rate, some people who are not in the labor force lie and claim to be unemployed. This deception will
increase the reported unemployment rate.
If government policy increases the demand for government bonds, then the prices of those bonds will tend to
increase.
Remember that the price of loanable funds is the interest rate (loanable funds is the market for borrowing money and the price in this market is the interest rate). If the demand for loanable funds increases, then
interest rates will tend to increase.
Labor unions cause unemployment when the union contract wage is set higher than the equilibrium market wage, causing
labor demand to be less than labor supply.
A general increase in prices will tend to
lead to an increase in nominal GDP.
Assume that Congress increased the minimum wage to $25 per hour and that all employers and employees obeyed this government command. This increase in the minimum wage would tend to
lead to an increase in unemployment.
A price floor is a
minimum legal price for a good.
If there is no cyclical unemployment and the economy is at its potential GDP, then the unemployment rate at this time is called the
natural rate of unemployment.
From 1999 to 2004, nominal GDP increased 7 percent annually. In this same time period, the rate of inflation was 4 percent annually. Therefore, from 1999 to 2004.
real GDP increased.
At his job, Walter White was paid $100,000 in 2000 and in 2001 he again was paid $100,000. During this time the inflation rate was 5% annually. Therefore, from 2000 to 2001, Walter White's
real income decreased
When the economy is in a recession, what will tend to happen in the long run?
real interest rates will decrease leading to an increase in aggregate demand
When the economy is in a recession, what will tend to happen in the long run?
resource prices will decrease leading to an increase in short run aggregate supply
If there is a large increase in the amount of labor available to work in the economy, the long run aggregate supply curve will shift to the
right.
If a country has a comparative advantage in producing widgets, then the country would have gains from trade by
specializing in widget production and exporting widgets.
Assume that the economy changes from mainly producing agricultural products to producing high tech products. As this change occurs, workers are unemployed as they move from the agricultural sector to the high tech sector of the economy. This type of unemployment is called
structural unemployment.
Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of the job is called
structural unemployment.
According to Rothbard (author of the article "How and How Not to Desocialize"), desocialization reforms should
take be implemented very quickly.
The production possibilities frontier illustrates the attainable combinations of two products that may be produced with the available resources and
technology.
According to your textbook, people behave rationally. This implies that people will engage in an activity only if they believe that
the cost of that activity is less than the benefit o that activity.
Assume that from the buyers' point of view, silver and gold are substitute goods. How would an increase in the price of silver tend to affect the gold market?
the demand for gold would increase
Assume that in Estonia the opportunity cost of producing each widget is 5 gadgets and in Ruritania the opportunity cost of producing each widget is 10 gadgets. Which Estonian industry is most likely to ask the government for protection from foreign competition?
the gadget industry
If there is a decrease in the amount of investment in an economy leading to a decrease in the amount of capital in the economy, then
the long run aggregate supply curve will shift to the left
If there is technological improvement in the economy,
the long run aggregate supply curve will shift to the right.
A shortage will tend to exist whenever
the price of a good is lower than its equilibrium price.
If buyers increase their demand for oranges and decrease their demand for apples, this would cause
the price of oranges to increase and the price of apples to decrease.
Which of the following items is included in the government's calculation of gross domestic product? the enjoyment of leisure. government transfer payments. the sale of exports. the sale of intermediate goods. the sale of used goods.
the sale of exports
An adverse supply shock will cause
the short run aggregate supply to shift to the left.
A favorable supply shock will cause
the short run aggregate supply to shift to the right.
Assume that the price of Chia Pets decreased from July to August and during the same time period the number of Chia Pets sold increased. This indicates that
the supply of Chia Pets increased from July to August.
If unemployed workers get discouraged, quit looking for work, and drop out of the labor force, then
the unemployment rate will decrease.
Assume that were fewer final goods and services produced this year than were produced last year. In spite of this fall in production, nominal GDP during this period could have increased if
there was an increase in the price level.
Assume that many underemployed part-time workers are looking for full-time jobs. If these workers find full-time jobs, then
this will have no effect on the unemployment rate.
Assume that the economy is suffering from a large surplus of labor (we call this surplus unemployment). As labor markets move to equilibrium,
wages will decrease and this will lead to more jobs for workers.
Which of the following events is not an example of the invisible hand principle? high profits in the lumber industry leads to increased competition and lower lumber prices. in order to increase its profits, the ABC tire company develops a new cheaper way to produce tires. when a hurricane hits Mississippi, the federal government pays to rebuild the damaged structures. when a hurricane hits Mississippi, the price of plywood doubles and plywood producers profit when they ship lots of plywood to Mississippi.
when a hurricane hits Mississippi, the federal government pays to rebuild the damaged structures
An increase in the price of widgets
will not affect the demand for widgets (i.e. demand will not change).
The vertical long-run aggregate supply curve reflects the conclusion that in the long run, an increase in the price level
will not affect the economy's potential real GDP.