ECON

Which of the following would be part of a nation's physical capital?

. Its infrastructure like its road system

Based on the data in the table above, what is the GDP for this economy, based on the national spending approach?

1,831

If an economy's GDP per capita was growing at 5% a year, how many years will it take for the GDP per capita to double?

14 years

Suppose a nation has a GDP per capita of $25,000. If the GDP per capita is growing at 5% a year how long will it take before GDP per capita reaches $100,000?

28 years

Which of the following countries are likely to grow faster?

countries in the "catch-up" growth phase

Refer to the graphs above. It shows the production possibilities frontier for two countries, A and B, producing 2 goods, tomatoes and oranges. According to the graph, which is true?

country A has the comparative advantage in oranges

Compared to command based systems, market systems have shown to:

create stronger incentives to use resources in productive ways and do a very good job organizing resources to their most valued use.

According to the economic way of thinking, Marginal Benefit:

decreases as the quantity increases

OPEC is able to raise oil prices by:

decreasing the supply of oil by cutting production

Imagine a free market in which at a price of $10, quantity supplied is 50 units and quantity demanded is 50 units. Equilibrium price in this market:

is equal to $10

Which of the following would help keep our level of growth sustainable?

laws that increase competition in output an input markets

Nations with high GDP per capita have:

lots of physical and human capital that is organized using the best technological knowledge

When comparing high income nations to low income nations, economists observe that the common thing that low income nations have is:

low levels of the factors of production

In free markets, surpluses lead to

lower prices

What is the condition needed to maximize the net gain from an action

marginal benefit = marginal cost

All else being equal, a working-age person whose time preference favors delayed gratification tends to have

more savings

If demand decreases, ceteris paribus, the quantity exchanged will be ______ at the new market equilibrium point.

smaller

Which of these statements is consistent with the insights from the Solow Growth model and New Growth Theory?

Poor nations that have high levels of investment, plus a strong incentive system, can rapidly increase their standard of living.

If you want to track the progress of an entire economy across time, the best variable to use is?

Real GDP

The difference between real GDP and nominal GDP is that:

Real GDP has been adjusted for inflation

The main function of financial intermediaries, and the way they add value in loanable funds markets is by:

Reducing transaction cost and reducing risk to individual lenders

Which question below would best fit under the fundamental question "how to produce?"

Should the government ban the use of bovine growth hormones?

The famous book written by Adam Smith is titled:

Wealth of Nations

Which statement is correct regarding the division of labor?

When workers are charged with doing the same task over and over they are more likely it innovate develop new ideas.

Refer to the table above. Some of the cells or missing, they are labeled W, X, Y, Z. Which of the following states the correct value for the given cell?

Y is 5 lbs of firewood

If the government institutes a tax on suppliers of Cheesy-Poofs, the market for Cheesy-Poofs will see:

a decrease in supply, a decrease in quantity demanded, and an increase in price.

Which of the following would be classified as an intermediation failure

a. A sudden decrease in confidence in banks that create bank runs b. A nationalization of the banking system c. The government creating new usury laws that put legal limits on interest rates d. All of the above ALL OF THE ABOVE

Which of the following variables has been shown to improve when Real GDP per capita increases:

a. infant mortality rates b. life expectancy c. maternal death rates after birth d. all of the above D. all of the above

When discussing economic growth theory, which of the following is on the economics list of factors of production?

a.Physical capital b. Human capital c. Technological knowledge d. All of the above All of the above

When a surplus exists in a market, we know that the actual price is:

above equilibrium price, and quantity supplied is greater than quantity demanded

Which statement about the determinants of savings is correct?

an increase in wealth would lead to a decrease your current savings rate

Which of the following would NOT be count towards our U.S. 2015 GDP?

All of the above would not count a. The sale of a used 1981 Ford Bronco b. The value of a stock traded on the New York Stock Exchange c. The value you place on the grass you cut yourself

Which option correct states the relationship between bond prices and interest rates?

As interest rates fall, bond prices rise

The Law of Diminishing Returns states:

As the quantity of capital increases the amount produced increases by at a slower and slower rate, holding all else constant

Which of the following is a "big idea" that comes from the field of Economics (as stated by Cowen and Tabarrok in chapter 1 of your text)?

Booms and busts are unavoidable but they can be moderated

In one day Brandon can either plow 40 acres of land or plant 20 acres. In one day Christopher can either plow 28 acres of land or plant 7 acres. Which of the following statements about absolute advantage is correct?

Brandon has an absolute advantage in both plowing and planting

In economies with "catch up" growth the main driver of economic growth is:

Capital accumulation

To determine if a country has had economic growth over time and experienced an increase in its standard of living, economists look at:

Changes in GDP per capita

The United States is the largest economy in the world but it averages a GDP growth rate of around 3.5%. China on the other hand has been averaging around 10% GDP growth. Why can China grow so much faster than the U.S.?

China was starting with a smaller capital stock and still has a high marginal product from additional capital.

Which of the following actions would NOT contribute to the U.S. 2014 GDP?

Chopping your own firewood in your backyard

Refer to the graphs showing the production possibilities frontiers for two countries, A and B. Which one the following is true given the graphs? Country A:Rice and copper, 60-30 Country B: Rice and copper, 20,20

Country B has the comparative advantage in copper

Consistent with the law of demand, a decrease in the interest rate:

Creates an incentive to borrow more

Refer to the graph above. The function labeled (X) is:

Depreciation

Which of the following is NOT a pro-growth policy?

Encourage more protectionism (policies that limit international trade)

Refer to the graph above. Which of the following would cause interest rates to increase?

Firms become more optimistic about their expected profits

Real GDP is

GDP that has been corrected for inflation

Wealthy nations in the world are the ones that:

Have good institutions that align self-interest with social interest

What this the definition of comparative advantage?

Having the lowest opportunity cost of production

What is Adam Smith's role in the history of Economics?

He is considered the father of modern economics and wrote the book "Wealth of Nations" back in 1776.

In regards to savings, an increase in the real interest rate would:

Increase the amount of savings and decrease the amount of current consumption

Refer to the graph above. Which of the following changes would make point A (output 800) possible in this model?

Increase the amount of technological knowledge

Refer to the graph above. The investment rate is currently at 25% of the output. An increase in the investment rate would:

Increase the steady state level of output

Suppose that an airlines purchases a new airplane for its fleet. This would be classified as:

Investment spending

Which of the following is correct regarding Karl Marx, Adam Smith, and their beliefs on economic systems?

Karl Marx favored a command based system while Adam Smith favored a free market system.

Some people think that saving more is bad for the economy. They say that spending money on consumer goods keeps the money moving through the economy, thus savings stops this flow. According to the economics, is this line of thinking correct?

No, since savings feeds investment and increases the standard of living of an economy.

If you look at GDP per capita over the world's history you would see that GDP per capita:

Only began to increase around the 1800's A.D.

Which of the following is an assumption used in the traditional economic way of thinking?

People take action with the purpose of working in their self-interest

Refer to the graph above. Based on the levels shown, what will be the steady state level of capital and the steady state level of output?

Steady state capital: 50 / steady state output: 600

For most of human history, salt was a rare and valuable commodity that had to be either mined or extracted from the ocean through evaporation. This changed when modern chemistry allowed humans to produce it in factories. How did this development affect the market for salt?

Supply increased, causing the price to fall.

Which of the following is NOT a spending component in the national spending equation?

Taxes

A key principle of economics is that if there is a properly functioning financial system and interest rates are free to adjust, then at equilibrium in the loanable funds market:

The amount saved will equal the amount borrowed

In the Solow growth model if investment is greater than depreciation then:

The capital stock grows

What is the equation needed to find the marginal product of capital:

The change in total output / change in capital

Doing research read about a country that has had rapid growth over the past 2 decades. Entrepreneurs are continuously starting new companies, making investments in new capital. Even foreign companies are investing in the country. Which of the following is the most likely explanation for this scenario based on economic growth theory?

The country has begun to better enforce property rights, both physical and intellectual.

Which of the following would be classified as an intermediate good?

The fabric purchased by a jean manufacturer to make their pants

The term institutions, as used in economics, is best defined as

The formal and informal rules agreed upon by society that define what behaviors are acceptable.

Refer to the graph above. Suppose there is an increase in the supply of savings due to a decrease in perceived risk by the savers. How will this affect the interest rate and quantity of loanable funds?

The interest will decrease and the quantity of dollars saved/borrowed will increase

According to the economic way of thinking as the quantity of an action increases:

The marginal cost of the action increases

When measuring the value of a good for the purposes of GDP, economists use:

The market price the good sold for

What will happen in the market for cotton as a result of a severe drought?

The supply of cotton will decrease, causing the equilibrium price to rise and equilibrium quantity to fall.

An excerpt from a GDP report reads as follows: "GDP increased by 3.5% over the first quarter of 2012." That means:

The value of output produced within the country increased by 3.5%

Opportunity Cost is best defined as

The value of the next best use of resources

The metaphor of the "invisible hand" refers to the notion that:

b. Under the right conditions, behavior based on self-interest can lead to an overall benefit to society.

The national spending equation is equal to:

consumption + investment + government expenditures + net exports

Refer to the table above. Based on the patterns shown, this economy is experiencing:

diminishing returns to capital

Which statement best describe the economic growth over time?

for most of civilianization people's standard of living was quite low and only in the last couple centuries has there been sustained increases in GDP per capita.

In free markets, shortages lead to:

higher prices

Productive knowledge and skills workers acquire through education, training, and experience is called:

human capital

The main difference between ideas and capital goods is

ideas are non-rivalrous and don't have diminishing returns.

According to the economic way of thinking somebody has an incentive to take a given action:

if the marginal benefit is greater than the marginal cost

When the government chooses to use resources to build a dam, these resources are no longer available to build a highway. This choice illustrates the concept of:

opportunity cost.

According to the law of diminishing returns, as the amount of one input, like capital increases, holding all else constant:

output will increase at a decreasing rate

When the quantity supplied of a good exceeds the quantity demanded, there is a/an:

surplus.

The sustained growth that the U.S. has experienced over the past couple centuries is best explained by:

the continuous discover of new ideas

According to the economic way of thinking, firms will be willing to borrow money (be in demand for loanable funds) if:

the expected rate of profit is greater than the real interest rate.

The principle of market forces says that if there is a surplus of funds in a free and competitive loanable funds market, then:

the real interest rate will fall to eliminate the surplus

When economists refer to scarcity they are referring to:

the reality that we don't have enough resources to satisfy all our wants

Refer to the graphs above. It shows the production possibilities frontier for two countries, A and B, producing 2 goods, tomatoes and oranges. Assume the two countries are currently not trading and country A is producing 20 tomatoes and 40 oranges (point A). And country B is producing 25 tomatoes and 10 oranges (point B). If these two countries stopped producing their current points specialized where they had the comparative advantage and then traded, what would be the gains from trade?

total orange production would increase from 50 to 60 , and total tomato production would increase from 45 to 50.

The metaphor of the "invisible hand" refers to the notion that:

under the right conditions, behavior based on self-interest can lead to an overall benefit to society

What is the MOST accurate way to complete this sentence? In the economic way of thinking an incentive is created:

when there is an opportunity to make yourself better off, however the individual's preferences define better off.