MACRO MIDTERM 1&2 + FINAL PRACTICE

Refer to Table 23-2. What was country A's investment in 2019?

$1,999

Refer to Table 23-2. What was country A's consumption in 2019?

$3,311

Refer to Figure 9-1. In the absence of trade, total surplus in Guatemala is represented by the area

A + B + C + D + F.

A U.S. grocery chain borrows money to buy a warehouse in Ohio and another in Italy. Borrowing for which warehouse(s) is included in the demand for loanable funds in the United States?

A U.S. grocery chain borrows money to buy a warehouse in Ohio and another in Italy. Borrowing for which warehouse(s) is included in the demand for loanable funds in the United States?

For which of the following individuals would the opportunity cost of going to college be highest?

A famous, highly paid actor who wants to take time away from show business to finish college and earn a degree

Which of the following is an example of an efficiency wage?

An above-equilibrium wage paid by a firm to reduce turnover costs

Refer to Figure 34-2. A decrease in Y from Y1 to Y2 is explained as follows:

An increase in P from P1 to P2 causes the money-demand curve to shift from MD1 to MD2; this shift of MD causes r to increase from r1 to r2; and this increase in r causes Yto decrease from Y1 to Y2.

Fran buys 1,000 shares of stock issued by Miller Brewing. In turn, Miller uses the funds to buy new machinery for one of its breweries.

Fran is saving; Miller is investing.

When the government prevents prices from adjusting naturally to supply and demand, it

adversely affects the allocation of resources.

The willingness of citizens to pay for vaccinations does not include the benefit society receives from having vaccinated citizens who cannot transmit an illness to others. This extra benefit society gets from vaccinating its citizens is known as

an externality

Suppose a country increases trade restrictions. This country would be pursing

an inward-oriented, which most economists believe has adverse effects on the economy.

Refer to Figure 2-3. It is not possible for this economy to produce at point

c

Suppose private saving in a closed economy is $12b and investment is $10b.

The government budget deficit must equal $2b.

Janet is a farmer. Which of the following are included in her human capital?

What she's learned from experience but not her tractor

If Year 1 is the base year and Year 2 is the following year, then the inflation rate in Year 2 equals

[(CPI in Year 2 − CPI in Year 1)/CPI in Year 1] × 100.

If the natural rate of unemployment is 5.2 percent and the actual rate of unemployment is 5.7 percent, then by definition there is

cyclical unemployment amounting to 0.5 percent of the labor force.

If expected inflation is constant and the nominal interest rate decreases by 2 percentage points, then the real interest rate

decreases by 2 percentage points.

Refer to Figure 9-1. When trade in coffee is allowed, consumer surplus in Guatemala

decreases by the area B + D.

If a country sells fewer goods and services abroad than it buys from other countries, it is said to have a trade

deficit and negative net exports.

Refer to Scenario 26-1. This economy's government is running a budget

deficit of $3,000.

When the interest rate increases, the opportunity cost of holding money

increases, so the quantity of money demanded decreases.

A farmer has the ability to grow either corn or cotton or some combination of the two. Given no other information, it follows that the farmer's opportunity cost of a bushel of corn multiplied by his opportunity cost of a bushel of cotton

is equal to 1

Refer to Figure 9-3. When the tariff is imposed, domestic consumers

lose surplus of $450.

Josh is a full-time college student who is not working or looking for a job. The Bureau of Labor Statistics counts Josh as

not in the labor force.

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should

sell the ticket because the marginal benefit exceeds the marginal cost.

Refer to Figure 30-1. If the money supply is MS2 and the value of money is 5, then there is an excess

supply of money that is represented by the distance between points A and B.

If saving is greater than domestic investment, then there is a trade

surplus and Y > C + I + G.

Refer to Figure 32-2. If the real exchange rate is 1, then there is a

surplus of 100 so the real exchange rate will fall.

In the long run, money demand largely depends on

the price level but not the interest rate.

The marginal benefit Sabrina gets from purchasing a third pair of gloves is

the total benefit she gets from purchasing three pairs of gloves minus the total benefit she gets from purchasing two pairs of gloves.

Refer to Table 26-1. The quantity of private saving is

$1.6 Trillion

Refer to Table 26-1. The quantity of loanable funds demanded is

$1.8 trillion.

Refer to Table 23-5. What was this country's nominal GDP in 2016?

$10,000

Suppose an economy produces two goods, food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 1,000 units of food and 47 machines. This year it experienced a technological advance in its machine-making industry. As a result, this year the society wants to produce 1,050 units of food and 47 machines. Which of the following statements is correct?

The technological advance reduced the amount of resources needed to produce 47 machines, so these resources could be used to produce more food.

​GDP and GNP are identical when

​all domestic production is by domestically owned producers and no foreign production is carried out by domestic producers.

If an unemployed person quits looking for work, then, eventually the unemployment rate

and the labor-force participation rate both decrease.

Ryan produces hair clips and earrings. Celia also produces hair clips and earrings, but Ryan is better at producing both goods. In this case, trade could

benefit both Celia and Ryan.

Consider two people who are currently out of work. Tim is not looking for work because there have been many job cuts where he lives, and he doesn't think it likely that he will find work. Bev is not currently looking for work, but she would like a job, and she has looked for work in the past. The Bureau of Labor Statistics considers

both Tim and Bev to be marginally attached workers.

If the interest rate is above the Fed's target, the Fed should

buy bonds to increase the money supply.

The dictator of Turan has recently begun to arbitrarily seize farms belonging to his political opponents, and he has given the farms to his friends. His friends don't know much about farming. The courts in Turan have ruled that the seizures are illegal, but the dictator has ignored the rulings. Other things equal, we would expect that the growth rate in Turan will

fall and remain lower for a long time.

The purchase of U.S. government bonds by Egyptians is an example of

foreign portfolio investment by Egyptians.

Other things the same, an increase in the U.S. real interest rate induces

foreigners to buy more U.S. assets, which reduces U.S. net capital outflow.

Refer to Table 29-3. Suppose the bank faces a reserve requirement of 10 percent. Starting from the situation as depicted by the T-account, a customer deposits an additional $60,000 into his account at the bank. If the bank takes no other action it will

have $64,000 in excess reserves.

Suppose that in Brazil total annual output is worth $600 million and people work 30 million hours. In Peru, total annual output is worth $800 million and people work 50 million hours. Productivity is higher

in Brazil. Most variation in the standard of living across countries is due to differences in productivity.

In a closed economy, if Y, C, and T remained the same, a decrease in G would

increase public saving but not private saving.

Refer to Figure 26-4. Starting at point A, the enactment of an investment tax credit would likely cause the quantity of loanable funds traded to

increase to $160 and the interest rate to rise to 7% (point C).

Refer to Table 24-2. The cost of the basket

increased from Year 1 to Year 2 and increased from Year 2 to Year 3.

A Texas household receives a Social Security check for $1500, which it uses to purchase a $40 pair of shoes made in Thailand by a Thai firm, a $1240 television made by a Korean firm in Korea, and $220 on groceries from a local store. As a result, U.S. GDP

increases by $220.

Suppose the cost of operating a 75-room hotel for a night is $6,000 and there are five empty rooms for tonight. If the marginal cost of operating one room for one night is $40, the hotel manager should rent one of the empty rooms only if a customer is willing to pay

more than $40; because the marginal benefit will exceed the marginal cost.

Suppose that a new government is elected in Eurnesia. The new government takes steps toward improving the court system and reducing government corruption. The citizens of Eurnesia find these efforts credible and outsiders believe these changes will be effective and long lasting. These changes will probably raise

real GDP per person and productivity in Eurnesia.

A country reported nominal GDP of $100 billion in 2010 and $75 billion in 2009. It also reported a GDP deflator of 125 in 2010 and 120 in 2009. Between 2009 and 2010,

real output and the price level both rose.

If the supply of dollars in the market for foreign-currency exchange shifts left, then the exchange rate

rises and the quantity of dollars exchanged for foreign currency falls.

The economy of Mainland uses gold as its money. If the government discovers a large reserve of gold on their land the

supply of money increases, the value of money falls, and prices rise.

Suppose that in 2018, the producer price index increases by 1.5 percent. As a result, economists most likely will predict that

the consumer price index will increase in the future.

A production possibilities frontier is bowed outward when

the rate of trade-off between the two goods being produced depends on how much of each good is being produced.

Refer to Figure 2-6. Consider the production possibilities frontier for an economy that produces only sofas and cars. The opportunity cost of each car is

the slope of the production possibilities frontier, or 3/2 sofas.

When the market for money is drawn with the value of money on the vertical axis and the quantity of money on the horizontal axis, long-run equilibrium is obtained when the quantity demanded and quantity supplied of money are equal due to adjustments in

the value of money.

Refer to Scenario 26-1. For this economy, investment amounts to

$15,000.

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $150. If customers deposit $50 into the bank, what is the value of the money supply?

$150

Suppose a closed economy had public saving of −$1 trillion and private saving of $3 trillion. What are national saving and investment for this country?

$2 trillion, $2 trillion

Refer to Table 29-6. Metropolis National Bank is holding 2% of its deposits as excess reserves. Assume that no banks in the economy want to maintain holdings of excess reserves and that people only hold deposits and no currency. The Fed makes open market purchases of $10,000. The person who sold bonds to the Fed deposits all the funds in Metropolis National Bank. If the bank now loans out all its excess reserves, by how much will the money supply increase?

$200,000

If in some year nominal GDP was $20 billion and the GDP deflator was 50, what was real GDP?

$40 billion

Refer to Figure 26-3. Which of the following movements shows the effects of households' decision to save more?

A movement from Point C to Point F

Octavia does not currently have a job, but she has applied for several jobs in the previous week. Eve is an unpaid stay-at-home mom who has not searched for work in recent years. Who does the Bureau of Labor Statistics count as "not in the labor force"?

Eve but not Octavia

As capital per worker rises, output per worker rises. However, this increase in output per worker is smaller at smaller levels of existing capital per worker.

False

If per capita real income grows by 2 percent per year, then it will double in approximately 20 years.

False

If the consumer price index is 120 in 2009 and 139.2 in 2010, then the rate of inflation for 2010 is 39.2 percent.

False

The same size decrease in the amount of capital stock per worker will cause output per worker to fall by more in a country with a relatively high level of capital per worker than in a country with a relatively low level of capital per worker.

False

Two countries with the same saving rates must have the same growth rate of real GDP per person.

False

Refer to Figure 26-1. What is measured along the vertical axis of the graph?

The interest Rate

Refer to Figure 9-1. With trade, Guatemala will

export 22 units of coffee.

The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for

the slope of the aggregate-demand curve.

A country has I = $200 billion, S = $400 billion, and purchased $600 billion of foreign assets, how many of its assets did foreigners purchase?

$400 billion

Refer to Table 24-4. Will's Year 1 food expenditures in Year 2 dollars amount to

$5,250.

Refer to Table 24-4. To the nearest dollar, Will's Year 2 food expenditures in Year 1 dollars amount to

$5,524.

Refer to Table 28-4. If the local government imposed a minimum wage of $4 in Productionville, how many people would be unemployed?

0

Refer to Table 28-2. Suppose that the natural rate of unemployment is 5% for those under 55 and 3% for those 55 and older. The cyclical unemployment rate for those under 55 is

0.88%, which is less than the cyclical unemployment rate for those 55 and older.

In the special case of the 100-percent-reserve banking, the money multiplier is

1 and banks do not create money.

If the nominal interest rate is 4 percent and the inflation rate is 3 percent, then the real interest rate is

1 percent

Scenario 24-1 ​ Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2017. Suppose the price index was 17.6 in 1944 and 218.4 in the current year. Refer to Scenario 24-1. In real terms, Josh Holloway's income amounts to about what percentage of Sue Holloway's income?

141 percent

Refer to Figure 9-1. With trade, total surplus in the Guatemalan coffee market amounts to

1870

Suppose that some country had an adult population of about 46 million, a labor-force participation rate of 75 percent, and an unemployment rate of 8 percent. How many people were unemployed?

2.76 million

Refer to Table 23-4. This country's inflation rate from 2016 to 2017 was

23.1%

Refer to Table 3-2. Assume that England and France each has 40 labor hours available. If each country divides its time equally between the production of cheese and wine, then total production is

24 units of cheese and 15 units of wine

If the reserve ratio is 4 percent, then the money multiplier is

25

Suppose that the adult population in the country of Atlantis is 115 million. If 80 million people are employed and 5 million are unemployed, then

30 million are not in the labor force.

Refer to Table 2-2. What is the opportunity cost to Footville of increasing the production of shoes from 400 to 600?

300 socks

Refer to Figure 9-2. Without trade, consumer surplus amounts to

3240

Scenario 29-1 The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the Tazian dollar. Aggregate banking statistics show that collectively the banks of Tazi hold $300 million of required reserves, $75 million of excess reserves, have issued $7,500 million of deposits, and hold $225 million of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank. Refer to Scenario 29-1. Assume that banks desire to continue holding the same ratio of excess reserves to deposits. What is the reserve requirement and the reserve ratio for Tazian Banks?

4 percent, 5 percent

Refer to Table 28-2. In the proper order, which age group has the highest unemployment rate and which has the highest labor-force participation rate?

55 and older, under 55

Refer to Table 3-2. Which of the following combinations of cheese and wine could France produce in 40 hours?

6 units of cheese and 5 units of wine

Refer to Table 3-7. The number of minutes needed by Barb to test a computer is

60

Refer to Table 3-3. Assume that Aruba and Iceland each has 80 labor hours available. If each country divides its time equally between the production of coolers and radios, then total production is

60 coolers and 18 radios.

Refer to Figure 9-2. With trade, consumer surplus is

6760

Refer to Figure 26-3. Which of the following movements would be consistent with the government budget going from deficit to surplus and the simultaneous enactment of an investment tax credit?

A movement from Point B to Point F

Which of the following properly describes the interest-rate effect that helps explain the slope of the aggregate-demand curve?

As the price level increases, the interest rate rises, so spending falls.

Refer to Figure 26-2. Which of the following events would shift the demand curve from D1 to D2?

Firms become optimistic about the future and, as a result, they plan to increase their purchases of new equipment and construction of new factories.

Which of the following would not be directly included in aggregate demand?

Government's tax collections

Refer to Figure 3-1. The rate of trade-off between producing chairs and producing couches is constant in

Graph (b) only.

Refer to Figure 9-1. From the figure it is apparent that

Guatemala has a comparative advantage in producing coffee, relative to the rest of the world.

Refer to Figure 9-1. When trade is allowed,

Guatemalan producers of coffee become better off and Guatemalan consumers of coffee become worse off.

Refer to Figure 26-1. Which of the following events would shift the supply curve from S1 to S2?

In response to tax reform, households are encouraged to save more than they previously saved.

A hair stylist currently cuts and colors hair for 50 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand?

It depends on the marginal cost of serving more clients and the marginal revenue he will earn from serving more clients.

Scenario 33-1 Suppose that political instability in other countries makes people fear for the value of their assets in these countries so that they desire to purchase more U.S assets. Refer to Scenario 33-1. What would happen to the dollar?

It would appreciate in foreign exchange markets making U.S. goods more expensive compared to foreign goods.

One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than exports.

Its trade deficit rose.

Each day Sue works 8 hours and produces 7 units of goods and services. Mary works 10 hours each day and produces 10 units of goods and services. It follows that

Mary's productivity is higher than Sue's.

Refer to Figure 26-3. What, specifically, does the vertical axis represent?

The interest Rate

Refer to Table 3-1. Assume that John and Jane each work 24 hours. What happens to total production if instead of each person spending 12 hours producing each good, Jane spends 21 hours producing wine and 3 hours producing bread and John spends 3 hours producing wine and 21 hours producing bread?

The total production of bread and wine each rise.

Refer to Figure 2-3. Suppose this economy is producing at point D. Which of the following statements would best explain this situation?

There is widespread unemployment in the economy.

An increase in a country's saving rate permanently raises its productivity.

True

Assuming constant returns to scale, if two countries are otherwise the same, the one that is poorer grows faster.

True

Choosing not to attend a concert so that you can study for your exam is an example of a tradeoff.

True

Henry Ford paid his workers $5 a day in 1914, when the CPI was 10. Today, with the price index at 177, the $5 a day is worth $88.50.

True

If Country A produces 7,000 units of goods and services using 700 hours of labor, and if Country B produces 5,500 units of goods and services using 500 units of labor, then productivity is lower in Country A than in Country B.

True

If a production function has constant returns to scale, then if all inputs double so does production.

True

If the CPI today is 120 and the CPI five years ago was 80, then something that cost $1 five years ago would cost $1.50 in today's prices.

True

If the current year CPI is 140, then the price level has increased 40 percent since the base year.

True

If the current year CPI is 90, then the price level has decreased 10 percent since the base year.

True

In 2014 income per person in the United States was about 10 times that in India.

True

Indonesians, for example, have a lower standard of living than Americans because they have a lower level of productivity.

True

Journey Motorcycles produced 100 motorcycles using 50 workers who each worked 8 hours a day. Journey's productivity was 1/4.

True

Suppose one county in Missouri decides it wants to reduce alcohol consumption, so the county passes a law that raises the price of a bottle of beer by $1. As a result, people drive to other counties to drink alcohol, which results in an increase in drunk driving. This illustrates the principle that people respond to incentives.

True

A bank loans Kellie's Print Shop $350,000 to remodel a building near campus to use as a new store. On their respective balance sheets, this loan is

an asset for the bank and a liability for Kellie's Print Shop. The loan increases the money supply.

An increase in the saving rate permanently increases the growth rate of real GDP per person.

False

Refer to Figure 9-3. The imposition of a tariff on roses

Refer to Figure 9-3. The imposition of a tariff on roses

For an open economy, the equation Y = C + I + G + NX is an identity. If we define national saving, S, as the total income in the economy that is left after paying for consumption and government purchases, then for an open economy, it is true that

S = I + NX.

If the reserve requirement is 10 percent, which of the following pairs of changes would both allow a bank to lend out an additional $10,000?

The Fed buys a $10,000 bond from the bank or the Fed lends the bank $10,000.

You go to the movieplex where movies ordinarily cost $9. You are intending to see a movie for which you have a $3-off coupon good for only that movie at that time. However, when you get there you see a friend who asks if you would rather see a new release. Both movies start and end at the same time. If you decide to see the new release with your friend, what is your opportunity cost?

The amount you value the first movie + $3

Which of the following is an example of a normative, as opposed to a positive, statement?

Universal healthcare would be good for U.S. citizens.

Refer to Figure 26-2. What is measured along the horizontal axis of the graph?

The quantity of loanable funds

For a closed economy, GDP is $11 trillion, consumption is $7 trillion, taxes are $2.5 trillion and the government runs a surplus of $1 trillion. What are private saving and national saving?

$1.5 trillion and $2.5 trillion, respectively

Scenario 29-1 The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the Tazian dollar. Aggregate banking statistics show that collectively the banks of Tazi hold $300 million of required reserves, $75 million of excess reserves, have issued $7,500 million of deposits, and hold $225 million of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank. Refer to Scenario 29-1. Assuming the only other thing Tazian banks have on their balance sheets is loans, what is the value of existing loans made by Tazian banks?

$6,900 million

Refer to Table 23-2. What was country A's GDP in 2019?

$7,253

A bank's reserve ratio is 8 percent and the bank has $1,000 in deposits. Its reserves amount to

$80

Refer to Table 23-2. What were country A's exports in 2019?

$88

Refer to Table 29-2. What is the M2 money supply in Florencial?

$880 billion

Refer to Figure 3-3. If the production possibilities frontier shown for Arturo is for 100 hours of production, then how long does it take Arturo to make one burrito?

1/3 hour

Refer to Table 28-1. How many in the sample are in the labor force?

10

Refer to Figure 3-3. If Dina must work 0.25 hour to produce each taco, then her production possibilities frontier is based on how many hours of work?

100 Hours

If the price index was 90 in Year 1, 100 in Year 2, and 95 in Year 3, then the economy experienced

11.1 percent inflation between Years 1 and 2, and 5 percent deflation between Years 2 and 3.

Refer to Figure 9-1. In the absence of trade, total surplus in the Guatemalan coffee market amounts to

1650

A bank has $8,000 in deposits and $6,000 in loans. It has loaned out all it can, given the reserve requirement. It follows that the reserve requirement is

25 percent.

Refer to Table 28-1. How many in the sample are unemployed?

3

Refer to Figure 28-1. If the government imposes a minimum wage of $8, then how many workers will be unemployed?

4,000

Refer to Table 2-1. If the production possibilities frontier is bowed outward, then which of the following could be the maximum number of tennis balls produced when 300 tennis rackets are produced?

4,500

Refer to Table 3-4. Assume that Zimbabwe and Portugal each has 180 machine minutes available. If each country divides its time equally between the production of toothbrushes and hairbrushes, then total production is

48 toothbrushes and 24 hairbrushes.

Refer to Table 29-4. The Bank of Pleasantville's reserve ratio is

6.0 percent.

Scenario 24-1 ​ Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2017. Suppose the price index was 17.6 in 1944 and 218.4 in the current year. Refer to Scenario 24-1. In real terms, Sue Holloway's income amounts to about what percentage of Josh Holloway's income?

70.9%

Refer to Figure 3-3. If Arturo and Dina both spend all of their time producing tacos, then total production is

800 tacos and 0 burritos.

In one year, you meet 52 people who are each unemployed for one week and eight people who are each unemployed for the whole year. What percentage of the unemployment spells you encountered ended within one week and therefore was short term, and what percentage of the unemployment you encountered in a given week was long term?

86.7% was short term; 88.9% was long term

Refer to Table 23-3. What are the GDP deflator and the inflation rate for 1931?

9.16, −10.3

Country A has a population of 1,000, of whom 800 work 8 hours a day to make 128,000 final goods. Country B has a population of 2,000, of whom 1,800 work 6 hours a day to make 270,000 final goods.

Country A has lower productivity and lower real GDP per person than country B.

If the value of the consumer price index is 110 in 2005 and 121 in 2006, then the inflation rate is 11 percent for 2006.

False

Matilda just graduated from college. In order to devote all her efforts to college, she didn't hold a job. She is going to tour around the country on her motorcycle for a month before she starts looking for work. Other things the same, the unemployment rate

and the labor-force participation rate are both unaffected.

Gabrielle, an Italian citizen, uses some previously obtained dollars to purchase a bond issued by a U.S. company. This transaction:

does not change U.S. net capital outflow.

If Y and V are constant and M doubles, the quantity equation implies that the price level

doubles.

Other things the same, if the U.S. price level falls, then U.S. residents want to buy

more foreign bonds. The real exchange rate falls.

Refer to Figure 33-2. If the economy starts at A and moves to D in the short run, the economy

moves to C in the long run.

Chloe's college raises the cost of room and board per semester. This increase raises Chloe's opportunity cost of attending college

only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges. An increase in opportunity cost reduces Chloe's incentive to attend college.