Economics: Chapter 6,7,8

The International Monetary Fund lends money to countries to do what?

-stabilize their exchange rates -finance their international transactions

An explanation for the "inverted U" is that increased industrialization and growth A) degrades the environment in the short run, and improves the environment in the long run. B) degrades the environment in the short run and in the long run. C) improves the environment in the short run, and degrades the environment in the long run. D) improves the environment in the short run and in the long run.

A) degrades the environment in the short run, and improves the environment in the long run.

The value of all final goods and services produced during a given time period measures a nation's what?

A) gross domestic product

The World Bank lends money to countries to A) promote their economic development. B) stabilize their exchange rates. C) fund wars against dictatorial regimes. D) finance their international transactions.

A) promote their economic development.

Based on the information in Scenario 1, real GDP in 2010 (in 2009 dollars) in this economy was A) $1,090 B) $1,025 C) $1,345 D) $830

A. $1,090

With a fixed amount of capital, the total amount number of computers produced by 50 workers is 5,000. The average productivity of labor is A) 100 B) 0.01 C) 250 D) 5

A. 100

Economic growth can result from A) all of the above B) more resources. C) technology D) increased labor productivity

A. all of the above

Based on the information in Scenario 1, nominal GDP in 2010 in this economy was A) $830 B) $1,345 C) $1,090 D) $1,025

B. $1,345

Based on the information in Scenario 1, nominal GDP in 2009 in this economy was A) $1,090 B) $830 C) $1,345 D) $1,025

B. $830

A company uses 400 workers and 100 units of capital to produce 2,000 units of output. Its average labor productivity is A) 4 B) 5 C) 25 D) 20

B. 5

Net exports include goods produced A) abroad that are sold domestically, less goods that are produced domestically that are sold abroad. B) domestically that are sold abroad, less goods that are produced abroad that are sold domestically. C) domestically that are sold abroad, less goods produced domestically that are sold domestically. D) domestically that are sold domestically, less goods produced domestically that are sold abroad.

B. domestically that are sold abroad, less goods that are produced abroad that are sold domestically

Transfer payments are excluded from government purchases in GDP accounting because A) they are already included as part of investment. B) nothing is being produced in return for the payment. C) they are difficult to measure. D) they are a reward to individuals who have been productive their entire lives.

B. nothing is being produced in return for the payment

Macroeconomics A) studies the behavior of individual consumers, firms and markets. B) studies the behavior of the economy as a whole. C) studies how computer automation has changed economics. D) involves the interaction between different countries in specific markets.

B. studies the behavior of the economy as a whole

As depicted in the circular flow diagram, firms A) demand the resources that households supply in product markets. B) supply the goods and services that households demand in product markets. C) demand the goods and services that households supply in product markets. D) supply the resources that households demand in factor markets.

B. supply the goods and services that households demand in product markets.

___________ is the exchange of one good for another between two people.

Barter

Characteristics of economic development include all of the following EXCEPT... A) an increase in the standard of living B) improvements in basic education C) a decrease in literacy D) an increase in life expectancy

C) a decrease in literacy

A "brain drain" is the tendency of talented people in developing countries to get education in A) their own countries and leave after graduation. B) developed countries and return home after graduation. C) developed countries and stay there after graduation. D) their own countries and stay there after graduation.

C) developed countries and stay there after graduation.

Statistics show that the ________ a country is, the ________ is the share of agricultural output in its total output. A) more developed; larger B) more populated; smaller C) less developed; larger D) less populated; smaller

C) less developed; larger

Which of the following is an example of expansionary monetary policy for the Federal Reserve? A) Increasing the discount rate. B) Lowering income taxes. C) Buying Treasury securities from commercial banks. D) Increasing the reserve ratio.

C. Buying treasury securities from commercial banks

Which of the following is an investment in human capital? A) An individual decides to enroll in a vocational training program. B) A firm engages in on-the-job training. C) all of the above D) The government expands its programs to improve health care.

C. all of the above

"Recession" refers to a period when the economy A) experiences a rise in living standards. B) suffers due to political instability. C) declines for at least six months. D) grows rapidly.

C. declines for at least 6 months

Which of the following is an investment in human capital? A) Thompson Temp Agency replaces its desktop computers with laptop computers. B) The city government green lights the construction of a new concert arena. C) Displaced workers return to school to update their skills. D) Rayburn Tool and Die Company purchases a new die-cutting machine.

C. displaced workers return to school to update their skills

Exports ________ GDP and imports ________ GDP. A) decrease; increase B) increase; increase C) increase; decrease D) decrease; decrease

C. increase; decrease

All of the following are factors that limit a poor nation's economic growth EXCEPT A) lack of human capital. B) insufficient capital formation. C) increased urbanization. D) lack of entrepreneurial ability

C. increased urbanization

Which of the following is NOT a component of gross domestic product? A) purchases by consumers of finished goods B) government purchases C) purchases by consumers of used goods D) net exports

C. purchases by consumers of used goods

________ refers to the fact that both human and financial capital leave developing countries in search of a higher rate of return.

Capital flight

A company uses 50 workers and 20 units of capital to produce 400 units of output. If this company increases its capital to 30 units and, as a result, its output increases by 100 units, the productivity of labor ________ to ________ units per worker. A) increases; 2 B) decreases; 4 C) increases; 5 D) increases; 10

D) increases; 10

If an economy produced 220 pounds of jelly beans at $5 per pound and 90 pounds of gum drops at $2 per pound in 2010, its real gross domestic product (GDP) was... A) $1,100 B) 310 pounds of candy C) $180 D) $1,280

D. $1,280

Suppose that a sporting goods store had $800 of golf balls on its shelves at the beginning of 2010 and $1,300 at the end of 2010. The amount of inventory investment included in GDP would be A) $2,100 B) $1,300 C) $800 D) $500

D. $500

If labor productivity in a copper mine is 2.5 tons per worker, then 200 copper miners with a fixed amount of capital produce A) 275 tons B) 125 tons C) 450 tons D) 500 tons

D. 500 tons

Which of the following would be a macroeconomic question? A) How has the price of gold increased over time? B) How have the retirement benefits in the auto industry changed over time? C) How has the number of commercial airline flights decreased over time? D) How has inflation increased over time?

D. How has inflation increased over time?

An increase in GDP can result from an increase in.. A) productivity. B) the labor supply. C) physical capital. D) all of the above

D. all of the above

The productivity of an input is the A) per capita cost of an input B) net worth of the input C) sum of the total output produced by all inputs D) amount of output produced per unit of input

D. amount of output produced per unit of input

A(n) ________ in human capital ________ the productivity of labor. A) decrease; has no impact on B) decrease; increases C) increase; has no impact on D) increase; increases

D. increase; increase

A nation's net exports consist of A) its exports plus its imports. B) its exports plus all other nation's imports. C) its imports plus all other nation's exports. D) its exports minus its imports.

D. its export minus its imports

"Final goods and services" are those that are A) used in the production of other goods and services. B) produced outside the United States. C) double counted in the calculation of GDP. D) sold to ultimate or final purchasers.

D. sold to ultimate or final purchasers

________ allows a society to consume more goods per person.

Economic growth

___________ is an increase in the money supply which provides a short term stimulus to the macro economy, resulting in higher levels of output, employment, and incomes.

Expansionary monetary policy

How does real gross domestic product (GDP) differ from nominal GDP?

Real GDP controls for price changes, while nominal GDP does not.

________ relates to the idea that collective ownership may not provide the proper private incentives for efficiency because individuals do not bear the full costs of their own decisions, but enjoy the full benefits.

The tragedy of commons

The GDP equation is

Y = C + I + G + NX

Disembodied technical change results in..

a change in the production process.

A period in which the economy declines for at least six months is referred to as...

a recession

Embodied technical change results in what?

an improvement in the quality of capital

The term ________ refers to the tendency for talented people in developing countries to become educated and remain in developed countries.

brain drain

What type of spending is the most important component of the GDP?

consumption

The largest component of GDP is what?

consumption expenditures

Which prices are used to measure goods and services in calculating the nominal GDP?

current prices

When there are sustained increases in real GDP over time, we say that the economy is undergoing what?

economic growth

Export promotion is the policy in which industrial production is oriented towards what?

foreign consumers

Advocates of a ________ transition approach from socialism to a market economy recommend moderate changes starting with the development of market institutions, the gradual decontrol of prices, and the privatization of only the cost efficient firms.

gradualism

Increased human capital is a source of what?

increased productivity

Disembodied technical change is one reason why what?

labor productivity has increased over time

In 2006, the largest population group (2.4 billion people) occurred in countries classified as A) low-income. B) high-income. C) lower middle-income. D) upper middle-income.

low-income.

Macroeconomics differs from microeconomics in that

microeconomics is the study of individual markets, while macroeconomics deals with the nation's economy as a whole.

When GDP is measured in "current prices" it is known as the what?

nominal GDP

A rancher raises sheep. Once a year he shears them and sells the raw wool to a processor who cleans it and spins it into yarn. The yarn is then sold to a knitting mill, which produces and sells sweaters. In calculating GDP we would count...

only the sweaters

What are the two critical measures of a nation's economic health?

production and income

The circular flow is used to make the point that...

production generates income

When the GDP is measured using "adjustments for price changes" it is known as the what?

real GDP

When real GDP falls for two consecutive quarters the economy is in a what?

recession

The period of time in which the level of output moves from a trough to a peak is called a what?

recovery

The ___________ of a good is an expression of the price of a unit of the good in terms of number of units of some other good.

relative price

Import substitution is the process of developing local industries to manufacture goods to what?

replace imports

The immediate and total deregulation of prices, liberalization of trade, privatization, and development of financial institutions represent the ________ transition approach from socialism to a market economy.

shock therapy

The transition from socialism to market capitalism by the ________ approach suggests that the transition proceed immediately and impact all economic variables at once.

shock therapy

For the purposes of GDP accounting, government purchases include what?

the purchases of new military equipment

Social security payments are examples of what?

transfer payments

The ________ hypothesis states that poor countries are unable to save and invest enough to accumulate capital stock that would help them grow.

vicious-circle-of-poverty