Macroeconomics- all homeworks/quizzes
How does fiat money differ from commodities like gold and silver that were used as money?
Fiat money is intrinsically worthless, whereas gold and silver have intrinsic value.
2017: Q4
$17272.4
What does the current account include?
-Net transfers from abroad. -Net exports. -Net factor payments from abroad.
Mexican income per capita in U.S. dollars is _______ thousand USD.
11 thousand. Divide your last answer by (12)
April 2013: April 2015:
2.6, 0.6
Now suppose the GDP deflator in 2012 was 121.3. Uplandia's year-over-year inflation rate is ________ percent
9.9
Given the data above, Ascot's GNP is $
Ascot's given GDP minus half of the revenue earned by the firms at the end.
If narrow banking reduces systemic risk, why do banks still practice maturity transformation?
Banks still practice maturity transformation simply because it is generally very profitable to do so.
What would be the impact of the Central Bank of New Yorkland's expansionary monetary policy on Bostonia's net exports?
Bostonia's net exports will decrease.
What are the consequences of this decrease in real GDP for real GDP per capita and real GDP per worker?
Both of these items will decrease.
What policies can be used to raise real GDP in a country?
Increase technology, Improve efficiency in the allocation of resources, Raise physical and human capital
Which of the following years is an outlier, that is, a year where Okun's Law does not hold?
Look at the graph (2012, 1950 and 1975 were all correct answers)
To generate estimates of gross domestic product (GDP), the Bureau of Economic Analysis must aggregate a variety of data sources, such as expenditure surveys. Which of the following are likely to be problems while estimating GDP? (Select all that apply).
Measuring physical depreciation of capital, Measuring black-market production
Golf Question: To optimize, you should _____ golf.
Multiply how much you are paid hourly by the hours you are going to play golf. If it is more than your net benefit, do NOT PLAY. If it is less than the net benefit, PLAY.
What would be the impact of the Central Bank of New Yorkland's expansionary monetary policy on New Yorkland's net exports?
New Yorkland's net exports will increase.
Thus, ______ started out with a lower base and had _______ growth rate.
Niger, a higher
The GDP deflator is calculated using ____________.
Normal GDP over Real GDP
Nikki decided to take the first available parking space as she entered the student lot. She felt that the first available space had a $5 premium compared with all other possible spaces since she did not want to risk being late for her exam.
Optimization in differences, since she is calculating the change in net benefits between alternatives.
Using your answer above, how does a pendulum-like structure contradict this property in economic fluctuations?
Pendulums swing in an easily-measured rhythm that would make predicting fluctuations simple.
Your client has asked you to plot crude oil prices and gasoline prices on a graph
Plot points in a line (80, 2.75) (90, 3) (100, 3.25) (110, 3.5)
Which of the following is not one of the five major factors that shifts the demand curve when it changes?
Prices of inputs used to produce the good or the price of the good itself
In the context of this chapter, what is meant by an institution?
Regulation
Now suppose that you only care about equity or inequality. In this case, you would prefer ________, which has a rich-to-poor ratio of _____.
Scenario B, 10 (divide rich by poor)
Which of the following examples do you provide as a normative question?
Should welfare be repealed?
An example of catch-up growth is ____________.
South Korea, which by 1970 had become poorer relative to the United States, but over the last 40 years grew faster than the United States, closing the gap that had opened up previously.
Which factor is the most important contributor to growth in the United States?
Technology
Assume that an American worker can produce 15 cars per year or 5 tons of grain per year, whereas a Japanese worker can produce 5 cars per year or 10 tons of grain per year. Assume labor is the only input used in car and grain production. ___________ has the absolute advantage in the production of cars, and ___________ has the absolute advantage in the production of grain.
The United States Japan
___________ has the comparative advantage in the production of cars, and ___________ has the comparative advantage in the production of grain.
The United States Japan
Which of the following is not one of the factors that can increase wage rigidity in the labor market?
The economy falling into a recession, an increase in the time needed to search for available jobs, or Government taxation of labor income
In Ascot, the per capita GDP is
The given GDP divided by the population.
In Delwich, the per capita GNP is
The given GNP divided by the population.
During the financial crisis of 2007-2008, the federal government decided to bail out the big banks, but not any of the households that had lost money because of their investments or house purchases. Which of the following justifies this type of government federal policy?
The government can easily impose restrictions on the transactions of banks, but it is difficult for the government to monitor the finances of individuals.
Which of the following pieces of information are needed for national income accounting? (Select all that apply).
The government would need information on both quantities produced and market prices, for every good produced in an economy, The government would need information on all sales, including the size of all inventories in every company.
What are the two components of technology?
The knowledge of how to produce new products, A more efficient means of production
All of the above exchange rates are quoted in:
Units of foreign currency per U.S. dollar.
The national income accounting identity associated with the expenditure-based accounting method is represented by ___________.
Y = C+I+G+X-M
Are the predictions of the quantity theory of money borne out by historical data?
Yes, the long-run data show a one-for-one growth rate of money supply and inflation.
Transfers to foreigners are ____________.
gifts made to foreigners by domestic residents
A policy such as whether to increase the money supply would be studied under _______ , since it deals with ____.
macroeconomics, the economy as a whole
Free riding occurs when _________ are out of sync with _______.
people's private benefits, the public interest
The amount of new building permits for residential buildings is likely to be ____________ with real GDP.
positively correlated
To optimize, you _______ become a department head.
should
Which of the following news stories (all published in early 2014) would typically be studied in macroeconomics? (Select all that apply.)
"Expectations High for March Employment.", "What If Economic Growth Is No Longer Possible?", "We Believe Inflation Should Rule Monetary Policy."
2016: Q4
$16,851.4
Group A is the _________ and Group B is the _________.
treatment group, control group
If the additional revenue (the marginal revenue) from staying open until 10.00 p.m. is $129, the profit earned during the last hour of operation will be _____.
$0
Which of the following are included in bank reserves for private banks?
-Deposits at the central bank. -Vault cash.
According to the Taylor rule, the Federal Reserve should raise the federal funds rate when the ____________.
-Fed's inflation rate target falls -output gap rises -Fed's long-run target for the federal funds rate rises -inflation rate falls/rises
If there are two countries, A and B, and they are capable of producing two goods, pizza and beer, which of the following is true with regards to comparative advantage?
-Neither country has a comparative advantage in the production of either good. -If Country A has a comparative advantage in the production of either pizza or beer, then Country B must have a comparative advantage in the production of the other good.
Assets
-Reserves -Cash equivalents -Long-term investments
Money makes a variety of economic transactions possible. In the following three situations, determine whether money is involved in the transaction. In prison camps during World War II, and in some prisons today, cigarettes circulate among prisoners. For example, an iPod might cost two cartons of cigarettes, whereas a magazine might only cost two cigarettes. Which functions of money are cigarettes fulfilling in this case?
-Store of value. -Unit of account. -Medium of exchange.
The 2012 crop is ____ percent larger.
25.00
If the wage is $25/hour, but the price of a bracket declines to $1.00, it should employ ____ worker(s).
3
The equilibrium returns to entrepreneurs is R= _________
620 (plug your last answer into the R equation as N)
The new equilibrium returns to entrepreneurship is R=
640
Graph:
First plot the points, then draw the line
Given that grape juice and orange juice are substitutes and that the previous graph illustrated how the nasty fungus led to an increase in the price of orange juice, graph the following:
Make D2 to the right of D1 and label the intersection with S1 B
A nasty fungus sharply reduces the supply of oranges. What will happen to the equilibrium price and quantity of both orange juice and grape juice as a result of this event?
Make S2 higher up than S1 and label the intersection with D1 A
A simple economic model predicts that a fall in the price of bus tickets means that more people will take the bus. However, you observe that some people still do not take the bus even after the price of a ticket fell. Is the model incorrect?
No, because it predicts the outcome of increased bus ridership on average.
Could the country achieve a high level of economic development?
No, the country's extractive institutions limit prosperity.
John is attempting to decide on a movie. He determines that the new Batman movie provides him with $5 more of a net benefit than the new Spiderman movie.
Optimization in differences, since he is calculating the change in net benefits between alternatives.
The Evidence-Based Economics in the chapter identifies three key factors that caused the recession of 2007dash2009. How would Keynes's concept of animal spirits explain the creation of a housing bubble?
People believed that a house was a worthwhile investment, which led to an increased demand for housing and thus pushed prices up. This confirmed to people that housing was a worthwhile investment, which led to more demand, resulting in an upward spiral driven by optimism.
Using the graph, demonstrate the impact of a fall in the real exchange rate.
Plot a point on the NX curve line that is lower and to the right of E* and label it E1
Illustrate the impact of union pay that pushes the wage to $10 per hour.
Plot a point where the two lines intersect and label it market clearing. Plot a point on the demand line at 10 and label it A. Plot a point on the supply line at 10 and label it B.
______________ provides a better way to convert GDP in domestic currencies into common units because it reflects the differences in the ____________ between countries.
Purchasing power parity, cost of living
chart
add the quantities for pizza hut and domino's at each price
The definition of economics states that it is the study of how _________.
agents choose to allocate scarce resources and the impact of those choices on society
The _______ in the net asset value of other mutual funds ___________.
decline, is an example of systemic risk
For a market to be in equilibrium, the cost of making a product must be _________ the final price at which the product sells.
less than
graph
make a vertical line to the right of the red line and plot the intersection
New developments that enable natural gas and oil fracking are examples of _______, which contribute to economic growth.
technology
The labor supply curve shows that the quantity of labor supplied will decrease as _________.
wages decrease
The Malthusian cycle ___________.
was common prior to the Industrial Revolution
CY = 0.6 G = 4 Using the government expenditure multiplier from the simple model presented in the chapter, the plan to spend $4 million on highways will increase Y (GDP) by ____ million.
$10 ((1/(1 - 0.6)) * 4)
Using this equation, the dollar cost to Sam of buying a tire from Mexico is ______.
$169.23 (2200 x (1/13))
For the the fourth quarter of 2017 this amount was ________ billion
$8.8
This exercise utilizes two balance sheets, one for the Federal Reserve and one for BHZ Bank, a representative member of the banking system. Given the following balance sheet showing the Fed's initial position, suppose the Federal Reserve wants to raise bank reserves by $200 million by transacting with BHZ Bank.
(Add 200 to Treasury Bonds and Reserves)
After its transaction with the Fed is completed, show how BHZ Bank's balance sheet will look
(Add 200 to the Reserves and subtract it from Bonds and other investments)
The real exchange rate for the United States is calculated as ____________.
(Dollar price of basket of goods * Nominal exchange rate) / Foreign price of same basket of goods
Beer: Country A: ____________ Country B: ____________
(country A pizza/beer) (country B pizza/beer)
The culture hypothesis states
(societal values/cultural beliefs) are responsible for differences in prosperity.
Optimizing economic agents use the real interest rate when thinking about the economic costs and returns of a loan. Suppose the average rate paid by banks on savings accounts is 0.85% at a time when inflation is around 0.9%. For the average saver, the real rate of interest on his or her savings is ______%.
-0.05% (0.85% - 0.9%)
February 2018:
-0.6
Which of the following is an example of foreign direct investment?
-A U.S. company opens a factory in India. -A Chinese company opens a factory in Nigeria that is jointly owned with a Nigerian company.
Which of the following could be the source of the productivity advantage in Country A compared to Country B?
-Access to more physical capital. -More education.
Liabilities and Stockholders' Equity
-Short-term borrowing -Demand deposits -Long-term debt -Stockholders' equity
If the government taxation multiplier is 0.8, the tax cut portion of the stimulus package will add ___ percentage points of extra growth to the economy.
0.67 (100 * 0.8 / 12,000)
Thailand and Taiwan are both rapidly growing economies in East and Southeast Asia that trade actively with other countries. Suppose rice wine is the only good produced in Thailand and Taiwan. A bottle of wine costs 50 baht in Thailand and 250 NT (New Taiwan dollars) in Taiwan. The nominal exchange rate is 0.20 baht per NT. Calculate the real exchange rate from Thailand's perspective (that is, using Thailand as the "domestic" economy). The real exchange rate from Thailand's perspective is
1 (find e to use in the next equation: 250/50=5) (50*e/250)
The civilian unemployment rate including persons who are underemployed (part-time for economic reasons) is _________.
6.18 percent (add unemployment and employment level part-time, then divide by labor force)
How does a flexible exchange rate differ from a managed exchange rate?
A managed exchange rate involves government intervention, while a flexible exchange rate does not.
If you were trying to improve macroeconomic growth and lower poverty rates in the developing world, which of the following would you encourage the U.S. government to fund?
A mix of well-targeted programs that improves the productivity and provides financial aid to poor segments of the population.
If fiat money is intrinsically worthless, then why is it valuable?
Fiat money is used as legal tender by government decree and other people will accept it as payment for transactions.
What type of unemployment does job search lead to?
Frictional unemployment
Early theories of business cycles assumed that economic fluctuations had a pendulum-like structure with systematic swings in economic growth. Which property of economic fluctuations do these early theories contradict?
Limited predictability.
If consumers were to shift funds from checking accounts to savings accounts, which of the following is true?
M1 decreases and M2 does not change.
Use the graph to determine which of the following statements is true:
M1 fluctuates quite a bit from week to week, but is fairly stable month to month.
Using Okun's Law, we can infer that the change in the growth rate of GDP will _______________.
accelerate the decrease in the unemployment rate
A surge in cocoa prices is _______ and a pest attack on the cocoa crop is ____.
an effect, the cause
The labor supply curve is derived from the concept that ____________.
as wages increase, the opportunity cost of leisure increases, leading people to work more hours.
When making your decision about which activity to choose, you should consider the monetary cost ________ the opportunity cost of the activities. The goal is to choose the option that offers the greatest _____
as well as, net
On a household's annual balance sheet, a one-time loan made to a relative would __________ and purchasing a car with cash would __________.
be included as a loan on the assets side, decrease the cash available to the buyer on the assets side
The Industrial Revolution had a positive impact on living standards __________.
because of the introduction of new capital and technology that shifted the production curve upward.
If you had 1 hour, you should study ______.
biology
Policy decisions made by the government are analyzed by _________.
both microeconomics and macroeconomics
Since optimization is used to analyze people's choices and help them improve the outcomes of their choices, it's ____________.
both normative and positive
What is meant by randomization in the context of an economic experiment?
Subjects are assigned by chance, rather than by choice, to a group.
Using the concepts discussed in the chapter, which of the following is a reason that an economy experiences economic growth with a simultaneous increase in unemployment?
Technological improvement, resulting in capital substituting for labor.
How does foreign direct investment benefit the recipient country?
Technology transfer ultimately improves productivity in the recipient country.
Which factors explain economic growth in the United States over the past few decades?
Technology, Human capital, Physical capital
In the market for loanable funds depicted by the figure to the right, the supply of loanable funds is determined by gross saving in the economy. Gross saving in the economy is composed of gross private saving and gross government saving. This latter magnitude reflects the condition of the government's _______.
budget
According to the calculations shown in the preceding table, the five-year period produced the least amount of inflation in
Transportation
Based on the data above, _______________ is 0.05 percent of M1. or Based on the data above, _______________ is 57.48 percent of M1
Travelers checks outstanding or Total checkable deposits
Treasury Bonds: 1200 Other bonds: 800 Total Assets: 2000 Reserves: 1400 Currency: 600 Total Liabilities: 2000
Treasury Bonds: 1400 Other bonds: 800 Total Assets: 2200 Reserves: 1600 Currency: 600 Total Liabilities: 2200
Are multinational companies harming factory workers in the developing world by hiring them at low wages?
Uncertain, because it is unclear as to whether the positives outweigh the negatives.
Which of the following is more susceptible to the free-rider problem: government−funded symphonies or city−wide pest control?
Use of city−wide pest control is more susceptible since even those who don't pay taxes still benefit, while government−funded symphonies can charge for admission, so that everyone who goes pays their share
Which of the following is not an example of causation?
Wearing your lucky socks while watching the football game will lead to your team winning.
In a perfectly competitive market, sellers _______ and buyers _________.
cannot charge more than the market price, cannot pay less than the market price
The most liquid assets for a household are _____________.
cash and checking accounts
Given the supply and demand curves on the right, when the price of the good is $20, we say that the market is in _________ . At this price, we know that the quantity supplied is _______ the quantity demanded.
competitive equilibrium, equal to
Recessions are periods in which the economy _________, while economic expansions are defined as the periods ____________.
contracts, between recessions
Debbie's method is a _______ and Troy's method is a ________.
controlled experiment, natural experiment
Household saving decisions impact investment in the economy by having ___________.
a direct impact on investment, as saving is correlated with investment
Assuming no transportation costs, you could make the highest profit by buying Big Macs in __________ and then selling them in __________.
China Japan
What are the similarities and the differences between monetary and fiscal policies? The manner (or ways) in which they work. The aspect of the labor market they impact. The result their implementation seeks to achieve. The entities (or authorities) that oversee them
D S S D
Firms, households, and governments use the credit market for borrowing. The credit demand curve shows the relationship between the quantity of credit demanded and the real interest rate. The credit demand curve slopes downward because ____________.
a lower real interest rate raises a borrowing firm's profit and hence its willingness to borrow.
A factor payment is ____________.
a payment received for assets owned
Lenders (creditors) are better off when this rate is ________ and borrowers (debtors) are better off when this rate is _______.
high, low
If wages were flexible, employment would have been __________ employment with rigid wages.
higher than
Since both pinot noir wine and Gravenstein apples use the same land in Sonoma, California, a sharp increase in demand for pinot noir wine will result in a ___________ price for Gravenstein apples and a _________ equilibrium quantity.
higher, lower
Your university or college is an example of _______, which contributes to economic growth.
human capital
The ________ implies that a college student who drops out of school one month before graduation should earn almost the same as a student who graduates.
human capital argument
Based on the data recorded above, it can be seen that the government budget in the third quarter of 2017 was ___________.
in deficit
When large firms and the general banking community lose confidence in a weak bank, FDIC insurance is _______________ the situation.
incapable of alleviating
If opportunity cost were to suddenly increase, total cost would _________.
increase and net benefit would decrease
Furthermore, compared to the third quarter of 2016, the saving effort by government has ___________.
increased
Using the figure to the right, this latter observation indicates, on the assumption of constant gross private saving, that the level of investment in the economy will be _________.
increased
How did the fall in housing prices cause the entire financial system in the United States to freeze up? The fall in housing prices resulted in ____________, leading to enormous ____________, disrupting the banks' ability and willingness to make loans to ____________.
increased defaults bank losses consumers and firms
When the Fed buys government bonds from private banks, it ________ the electronic reserves that banks hold.
increases
When the Fed buys government bonds from private banks, it __________ the electronic reserves that banks hold.
increases
As a firm produces more of a good, the cost of producing each additional unit ______. his implies that the marginal cost of producing a good _______ as you make more of that good.
increases, increases
The difference between gross private domestic investment and fixed private investment represents _____________.
inventory investment
Given this information, if the price of a book is $25, the quantity demanded of books will be ________ the quantity of books demanded when the price is $10 per book.
less than
Suppose instead that the price of the good dropped below the competitive equilibrium price to a price of $15 per unit. If this were to occur, then the quantity supplied would be __________ the quantity demanded, resulting in ________, which is also known as _________.
less than, an excess demand, a shortage
Mining changes the price of a 2,000-square-foot home (with three bedrooms) by
multiply the given price by .08 and put a negative sign in front of it
In order to make the exchange rate stay at 9 zips per dollar, instead of adjusting it to the equilibrium level, the Zeronian government would _____________.
need to buy dollars and sell zips in order to keep the dollar strong and the zip weak.
There is a ______ correlation between GPD and gasoline prices.
negative
The average number of initial applications for unemployment insurance is likely to be ______________ with real GDP.
negatively correlated
The relationship that exists between these two variables can be described as ___________.
negatively related
The trade balance is known as ___________.
net exports.
Equilibrium describes a situation where __________________.
no one would benefit from changing his or her behavior
If tariffs are set too high, ____________.
no revenue will be raised because there will be no imports to tax.
The statement that the United States has too many illegal immigrants is a _______ statement since it describes what people __________.
normative, ought to do
The ethical implications of a hotly debated government policy would best be considered a _________.
normative question, since it deals with a subjective issue based on personal preferences
A country's gross national product would exceed its gross domestic product when the ____________.
production of domestically-owned factors operating abroad exceeds the production of foreign-owned factors operating in the United States.
A country's gross domestic product would exceed its gross national product when the ____________.
production of foreign-owned factors operating in the domestic economy exceeds the production of domestically-owned factors operating abroad.
When government statisticians gather and analyze data on the value added by the firms value added by the firms in the domestic economy, they are measuring GDP using the ____________.
production-based accounting method
A relatively simple method of gauging the change in living standards over time within a country is to compute _______ GDP per capita.
real
When checking for the true cost or benefit from a change in the inflation rate people will look at the _______ interest rate.
real
Y stands for _____________.
real GDP
Using the information given in both of these tables to compare living standards in Lusitania and Arctica, you should use ____________.
real income per capita
When one of the five major factors changes, causing an increase in demand, the demand curve shifts __________.
rightward
When one of the four major factors changes, causing an increase in supply, the supply curve shifts ________.
rightward
The change in gross saving from the third quarter of 2012 to the third quarter of 2017 would be displayed in the figure to the right as a ___________ curve.
rightward shifting supply
The Sylvania Central Bank decides that it wants to cut the money stock in half. It is considering an open market operation. With commercial banks holding 9 percent of their checking deposits as excess reserves and the required reserve ratio equal to the value computed above, the Central Bank should _______ bonds worth ______.
sell, $62,500 (divide your last answer by two)
Tariffs are ____________.
special taxes levied only on imports
The plan that appears to be the most effective in achieving Congress's goal is to ____________.
spend $4 million on highways.
Use the following diagram to explain the relationship between a country's physical capital stock and GDP. The diagram shows ____________.
the aggregate production function, holding total efficiency units of labor constant, both the increasing relationship between capital and output and the law of diminishing marginal product
Optimization is the process that describes __________.
the choices people make
Using your graph, the most likely explanation for the shift of the labor demand curve is ____________.
the increase in productivity increases the marginal product of labor, leading to an increase in labor demand.
The supply curve represents ___________.
the minimum price sellers are willing to accept to sell an extra unit of a good
Suppose traditional monetary and fiscal policy has had only limited success in promoting higher employment. Governments sometimes seek to directly stimulate hiring by the private sector by engineering a shift in the labor _______ curve.
demand
A country with a very low per capita GDP can have a very high growth rate because mathematically, when the
denominator, lower, numerator
Suppose that a deep and prolonged recession induces some job seekers to discontinue their job search efforts due to the belief that no jobs are available for them. These individuals are known as ________ workers, and an increase in their numbers, all else constant, will cause the unemployment rates computed above to _________.
discouraged, decrease
Unemployment: 6,706 Civilian labor force: 16,921 Employment level part-time for economic reasons: 3,302 When employed individuals become unemployed, the civilian labor force _________.
does not change
The geography hypothesis states ____________. A. geography is a proximate cause of prosperity. B. prosperity may affect a country's climate. C. ecology has a common effect on prosperity in all countries. D. ecology is responsible for differences in prosperity.
ecology/geography is responsible for differences in prosperity.
More _________ and _____ employment levels is likely to be __________.
economic growth, higher, causation
Empiricism describes a situation where __________________.
economists use data to analyze what is happening in the world
Real business cycle theory ____________.
emphasizes the role of changing productivity and technology in causing economic fluctuations.
Unlike extractive economic institutions, inclusive economic institutions ____________.
enforce contracts, uphold the law, or promote open markets
Sam Walton, the founder of Walmart, is an example of the power of _________, which creates economic growth.
entrepreneurship
For a market to be in equilibrium, the amount produced by sellers must be __________ the amount purchased by the buyers.
equal to
It follows that the growth rate of money supply and the growth rate of nominal GDP will be the same. In this case, inflation is ____________.
equal to the gap between the growth rate of money supply and the growth rate of real GDP
It follows that the growth rate of money supply and the growth rate of nominal GDP will be the same. In this case, inflation is ____________.
equal to the gap between the growth rate of money supply and the growth rate of real GDP.
The net flows in the financial account ____________.
exactly offset the net flows in the current account
Given the change in cyclical unemployment over this two-year period, it can be concluded that the economy has __________.
expanded
Factors that help households decide whether to consume or save their income are ___________.
expectations of future income growth, the interest rate, expectations about taxes
When government statisticians gather and analyze data on the purchases of goods and services produced in the domestic economy, they are measuring GDP using the ____________.
expedniture-based accounting method
Increasing taxes is the only way that government saving can be increased. This claim is _________.
false
Market demand is derived by __________.
fixing the price and adding up the quantities that each buyer demands
According to your completed figure, a recession impacts employment less severely when wages exhibit downward _________.
flexibility
The saving rate in an economy is defined as the ____________.
fraction of total income that households save
An open economy _______________, and a closed economy ________________.
freely trades with the rest of the world does not trade with the rest of the world
With a $15-per-hour summer job, ________ would increase.
the opportunity cost of your time
The demand curve for dollars shows the relationship between ____________.
the quantity of dollars demanded and the exchange rate
Recall the discussion in the chapter about the "quantity theory of money." The quantity theory of money assumes that ____________.
the ratio of money supply to nominal GDP is exactly constant
Recall the discussion in the chapter about the "quantity theory of money." The quantity theory of money assumes that ____________.
the ratio of money supply to nominal GDP is exactly constant.
Using the exhibit, in general, in the short run the nominal pound-dollar exchange rate moves in ___________.
the same way as the real exchange rate.
A country has a trade deficit when _______________ and a trade surplus when _______________.
the value of exports is less than the value of imports the value of imports is less than the value of exports
Productivity is ____________.
the value of output that a worker generates for each hour of work.
The institutions hypothesis explains the difference in prosperity among nations is due to ____________.
the way societies (organize themselves/ encourage people to innovate).
Proximate causes of Burondo's lack of prosperity are ___________.
the workforce is not skilled, the oil extraction process is inefficient, most of the adult population is illiterate
Using the graph, we can see that if the minimum wage were set at $6 per hour, then ____________.
there would be no structural unemployment due to wage rigidity, since the minimum wage is non-binding at $6 per hour
Optimization in levels examines ___________, while optimization in differences analyzes ____________.
total net benefits of alternatives, the change in net benefits
When John determines what choice of walking shoes will give him the best bang for his buck, he is using optimization based on ______. When Janet looks at the additional value of purchasing a new laptop to the cost as compared to keeping her old one, she is using optimization based on __________.
total value, marginal analysis
Maturity transformation is the process by which banks ____________.
transfer short-term liabilities into long-term investments.
In the United States, recessions are usually defined as ____________.
two consecutive quarters of negative growth in real GDP
According to the geography hypothesis, incomes in poor countries are
unlikely to be changed, because ecology is largely out of their control
Okun's Law states that ____________.
when growth in real GDP is above 2%, unemployment drops and when it is below 2%, unemployment increases.
PPP Price
take your given US price of the burger and divide it by the price from the other country.
Tariffs are ___________.
taxes levied on imports only
Technology is _____________.
the ability to use labor and capital more efficiently
How do economists distinguish between models that work and those that don't?
They test their models against real-world data
The functions of a central bank are to ____________.
-control certain key interest rates -indirectly control the money supply -monitor financial institutions
From October, 2012 to October, 2017, real GDP per capita increased at an average annual rate of __________.
1.6% (divide the 2012 real GDP per capita by that of 2017 and raise it to 1/5. then subtract 1.)
For the people of Polonia, life satisfaction was likely higher in
2013
The following table contains the most recent observations (March 19, 2018) from FRED* on M2 and several series relevant to the measurement of alternative monetary aggregates. M2 Money Stock: $13900.9 Total Savings Deposits at all Depository Institutions: $9120.3 Retail Money Funds: $706.6 Institutional Money Funds: $1828.5 Small Time Deposits: $426.9 *Real-time data provided by Federal Reserve Economic Data (FRED), Federal Reserve Bank of Saint Louis. Using the data recorded above, the most recent observation of M1 must be $________ billion.
3647.1 ($13900.9 - 9120.3 -706.6 - 426.9)
If the additional revenue during the last hour is $39, the profit earned during the last hour of operation will be ______.
39-129 $-90
If the wage paid to workers in Die Cast's plant is $25/hour, it should employ ____ worker(s).
4
The civilian unemployment rate is _________.
4.14 percent (unemployed / labor force)
According to the quantity theory of money, what must the growth rate of the money supply be given the following information? The growth rate of real GDP is 2.3%. The growth rate of nominal GDP is 4.3%. The nominal interest rate is 6.3%. The real interest rate is 4.3%. The money supply (M2) is $10,612 (in billions) According to the quantity theory of money, the growth rate of the money supply must be _______%
4.3 (equal to growth rate of nominal GDP)
Suppose the government enacts a stimulus program composed of $500 billion of new government spending and $100 billion of tax cuts for an economy currently producing a GDP of $12,000 billion. If all of the new spending occurs in the current year and the government expenditure multiplier is 1.5, the expenditure portion of the stimulus package will add ________ percentage points of extra growth to the economy.
6.25 (500 * 1.5 / 12,000)
Using the multiplier estimate of the second economist and the same current value of GDP, the percentage increase in GDP is _____ percent.
6.33 (multiply 1.2 by 0.7 to get 0.84 and divide that by 13.28. Then multiply by 100)
What could explain why a decrease in taxes could lead to a less-than-proportionate increase in output?
A and B only: - Consumers may choose to save much of the tax cut in anticipation of having to pay higher taxes in the future. - As a result of diminishing returns to current consumption, consumers may choose to spread the extra spending over the long term rather than consuming the proceeds of a tax cut all at once.
Parts of the world that were relatively more prosperous 500 years ago have experienced a reversal of fortune and are relatively poorer today. What factors could explain this?
A and C only (The establishment of inclusive institutions by European colonialists in areas previously not well developed; The establishment in those previously prosperous places of extractive institutions by European colonialists)
Production-based accounting is used to estimate GDP by ____________.
A and C only. (summing each firm's value added to the production process, computing for each firm the difference between sales revenue and the purchase of intermediate products, then summing this difference across all firms)
Recall from the chapter that banks in the United States hold a fraction of their checking deposits as reserves, either as vault cash or as deposits with the Federal Reserve (where they earn very little interest). Regulations require them to hold a certain percentage (currently 10 percent) of their checking deposits as reserves. However, banks are free to hold additional reserves if they choose. The latter are called excess reserves. Ordinarily, banks held very few excess reserves. However, starting in the financial crisis of 2007dash2009, the amount of excess reserves held by banks went from virtually zero to over 1.8 trillion dollars. Explain why banks would be expected to try to minimize the amount of excess reserves that they hold.
All of the above
Which of the following factors does not cause a shift in the labor demand curve?
Changes in the wage rate.
Two economists estimate the government expenditure multiplier and come up with different results. One estimates the multiplier at 0.75, while the other comes up with an estimate of 1.2. Explain why these estimates are different in terms of the assumptions that each economist is making.
Compared to the first economist, the second economist must be assuming either a larger induced increase in consumption, a smaller crowding out effect, or both.
____________ should produce pizza, and ____________ should produce beer.
Country B Country A
Show the effects of the 1990 reforms. Using the line drawing tool, graph either a new return-to-entrepreneurship curve (R3), a new cost-of-entrepreneurship curve (C3), or both. Label your curve(s) appropriately.
Draw line C3 under C1
Between 1959 and 1963, the Cuban government passed a series of laws called the Agrarian Reform Laws. These laws expropriated any landholdings above a certain size and turned them over to peasants and cooperatives. Using the line drawing tool, graph either a new return-to-entrepreneurship curve (R2), a new cost-of-entrepreneurship curve (C2), or both. Label your curve(s) appropriately.
Draw line R2 below R1
In 2007 and 2008, the Venezuelan dictator Hugo Chavez nationalized many large firms in several key sectors of the country's economy, including telecommunications, electric utilities, steel, and banking. Subsequently, taxes on banking and other activities were also raised significantly. Using the line drawing tool, graph either a new return-to-entrepreneurship curve (R3), a new cost-of-entrepreneurship curve (C3), or both. Label your curve(s) appropriately.
Draw line R4 under line R1, and draw line C4 above line C1
Scott's optimal parking is ___________.
East river parking
Assume that a sharp increase in demand for pinot noir leads to an increase in the price for land. Graph the impact of this price increase for land on the market for Gravenstein apples.
Make the new line S2 start at zero and intersect with D1 higher up than S1. Plot a point where they intersect.
The graph on the right represents the economy of Freedonia, which is currently faced with a decrease in net exports, causing its labor demand curve to shift to the left. The county has downward rigid wages, resulting in a drop in labor demand and unemployment, as labeled on the graph. How can this economy that is currently faced with negative net exports and high unemployment be restored to full employment?
The government could lower interest rates, which would cause a depreciation of the domestic currency and an increase in net exports.
What policies could the government and the central bank use to achieve the goal of slowing down the economic expansion?
The government could raise taxes and/or reduce expenditures, while the central bank could raise interest rates.
Consider that Argentina has had a tumultuous economic history, with periods of high inflation and economic volatility. In particular, right before the restrictions were put in place, foreign investors (who were holding Argentinian assets) were starting to get skittish. Given this environment, which of the following explain why the government of Argentina put these exchange restrictions in place?
The government of Argentina imposed these restrictions to dissuade investors from selling off their assets in Argentina and hinder the devaluation of pesos against dollars. The government of Argentina imposed these restrictions to reduce the demand for pesos and hinder the devaluation of pesos against dollars.
Which of the following is likely to be true of the behavior of an investor who anticipates large redemptions in a day?
The investor will likely redeem on that day because he would know that the net asset value on the next day would be lower.
Why is the rise in housing prices between the late 1990s and 2006 characterized as a bubble by some economists?
The large increase in the price of housing assets did not reflect the true long-run value of the assets.
How does the sample size affect the validity of an empirical argument?
The larger the sample size the better
What did Malthus predict about economic growth?
The number of children per family would adjust so that income would remain close to a subsistence level.
Give an example of a pair of variables that have negative correlation.
The number of winter coats sold and the temperature outside.
Let's say that you are trying to decide what to do on Friday at 11 a.m. You rank your possible options from the one you value the most to the one that you value the least in the following order: going to class, sleeping in late, going to work early, getting lunch, going to the gym to exercise, and watching television. If you decide to go to class, then what do we know about the opportunity cost of your decision?
The opportunity cost would be sleeping in late, since it was your next-best option.
Why was there no sustained economic growth before modern times, that is, before 1800?
The pace of technological change was much slower than in modern times, Increases in aggregate income were offset by increases in population, keeping per capita income low.
Given this information, what is the relationship between pinot noir wine and Gravenstein apples?
They share a common input
How does a change in a country's real exchange rate affect its net exports?
When a country's real exchange rate depreciates, it imports less and exports more, causing its net exports to fall. Or When a country's real exchange rate appreciates, it imports more and exports less, causing its net exports to fall.
Suppose the Fed decides to sell $15 billion in Treasury bonds. Assume that the reserve requirement is 6 percent, banks hold 3 percent in excess reserves, and the public holds no cash. This action by the Fed causes the money supply to _________ by _________ billion.
decrease, $166.67 (15 billion/(6+3))
Imagine a new technology emerged, allowing for increased productivity and driving U.S. real GDP growth from 2.5 percent one year to 3 percent in the next year. Given this information, the change in the unemployment rate when the growth rate is 2.5 percent will be to _______ by _____ percent.
decrease, 0.25
The change in the unemployment rate when the growth rate increases is 3 percent will be to ________ by ___ percent.
decrease, 0.5
According to the graph, this perception causes the equilibrium real interest rate to __________ and the equilibrium quantity to ___________.
decrease, be indeterminate
To say that private property rights are well-enforced in an economy means that
individuals can securely hold assets
The Federal Reserve conducts open market operations when it wants to ____________.
influence the federal funds rate
The Federal Reserve conducts open market operations when it wants to ____________.
influence the federal funds rate.
In a perfectly competitive market, if one seller chooses to charge a price for its good that is slightly higher than the market price, then it will _________.
lose all or almost all of its customers
When equilibrium is restored in the credit market, the flow of credit will be __________.
lower
When comparing the equilibriums in the lobster market for August and November, the equilibrium quantity is ______ in November than in August, while the equilibrium price is ______.
lower; higher, lower, or unchanged.
The value of the marginal product of labor is the ____________.
market value of a worker's additional output for a firm
The impact of the minimum wage on the labor market as a whole is _________, since ___________ of workers earn the minimum wage rate.
modest, around 1 percent
The opportunity cost of an activity is a measure of ________ when you do that activity.
opportunity cost
graph
plot the points
Using the real business cycle approach, it can be concluded that the new technology will _______________.
stimulate both employment and GDP
Golf Question: The net benefit of the round of golf is
subtract the total price from the value
___________ should do the typing, and ___________ should do the outlining. You determined this allocation of tasks on the basis of ___________.
your roommate you comparative advantage
If pi denotes the rate of inflation and i denotes the nominal rate of interest, then the amount a borrower repays in a year on a one-dollar loan is ________ and the inflation-adjusted purchasing power of the originally borrowed dollar is _________.
1 + i, 1 + pi
If you had 2 hours, then you should study _____ hour(s) for chemistry and ______ hour(s) for biology.
1,1
If you had 3 hours, then you should study _____ hour(s) for chemistry and ______ hour(s) for biology.
1,2
Suppose the Fed commits itself to the use of the Taylor rule (shown below) to set the federal funds rate. Federal funds rate = Long-run target + 1.5(Inflation rate - Inflation target) + 0.5(Output gap) Suppose the Fed has set the long-run target for the federal funds rate at 1.25 percent and its target for inflation at 1.5 percent. If the economy is currently hitting the Fed's inflation target and GDP exactly equals the trend GDP, then the Fed will set the federal funds rate at ________ percent.
1.25 (1.25 + 1.5(1.5-1.5) + 0.5(0))
The GDP price deflator for the fourth quarter of 2016 was 112.19. Using this value along with the index computed above gives a year-over-year rate of price inflation of _______ percent
1.9
Assume that there is a shock to the economy, such that the labor demand curve is now described by the equation: LD = 55-0.5w If wages are flexible, the new equilibrium wage is $______ and the level of employment is _______ million workers.
10 50
This implies that if the money supply grows by 10 percent, then nominal GDP needs to grow by ________.
10 percent
This implies that if the money supply grows by 10 percent, then nominal GDP needs to grow by __________.
10 percent
As with all index numbers, the overall CPI and its several categories assign to the arbitrarily selected base year (or period) the numerical value ___.
100
The figure on the right depicts the labor market in equilibrium with employment at _____ million jobs.
100
Given these values, the GDP deflator for this period is _______.
114.28
The GDP deflator is __________. Relative to potential real GDP, real GDP is _______ percent above potential real GDP.
114.28 .54
Using the data recorded above, complete the following table by computing, for each category, the percentage change in prices over the five-year period from Jan/2013 to Jan/2018.
6.76%, -1.71%, -3.49%, 14.33%
Over the ten-year interval under examination, the average hourly nominal wage changed by 25.7% and the real average hourly wage changed by _____%
6.9
As a result of the stimulus program, the economy's GDP was increased by _______ percentage points over its value without the program.
6.92 (6.25 + 0.67)
According to the table, 80 percent of the citizens in country A (#1 through #8) have incomes of $715 or less, which means only 20 percent of its citizens have an income greater than $715, compared to country B where _______ percent of its citizens have incomes greater than $715.
60
Let's assume the U.S. dollar/Mexican peso exchange rate is 1/12 pesos and the price of a Big Mac in the United States is $5. Mexico's GDP is 17,000 billion pesos, and its population is 125 million people. Assuming the countries have purchasing power parity, the price of a Big Mac in Mexico is ______.
60 (5 multiplied by 12)
Using the data recorded in the preceding table, complete the following table by computing the value of the real average hourly wage (for private production and nonsupervisory employees). Feb/2008: $_______ Feb/2018: $_______
8.41 8.99
If banks expect that the rate of inflation in the coming year will be 3.9% and they want a real return of 5% on a certain category of loans, then the nominal rate they should charge borrowers on those loans is ______%.
8.9% (3.9% + 5%)
Using the data recorded above, complete the following table by computing, for each period, total gross saving in the economy.
Third/2012: 2850.5, Third/2017: 3462.9 (add the gross private savings and the gross government savings)
(Question about going to the doctor correlating to life expectancy.) Using the concept of a natural experiment, which of the following statements is true about the scenario?
This is a decent natural experiment.
Suppose that you are on a date with an economics major, and you want to impress them by talking about economics. Your date challenges you to state your knowledge of positive and normative questions. You say that positive questions ask ___________ and normative questions ask _________.
what is or what will be, what ought to be
There was no sustained growth in living standards prior to the Industrial Revolution because __________.
with output increasing at a decreasing rate, it is not possible to increase living standards, especially as the population continues to grow.
The cause, or independent variable, should be plotted on the ________ and the effect, or dependent variable, should be plotted on the _________.
x-axis, y-axis
Using your graph, the result of a fall in the real exchange rate is _________ in net exports, which will _________ a country's gross domestic product (GDP).
an increase increase
If the demand for pinot noir suddenly shifts sharply to the right, we would expect to see __________ in the demand for land in Sonoma, which would _________ the equilibrium price of land.
an increase, increase
When a bank experiences withdrawals of deposits and short-term loans by firms and other banks, the situation is described as ____________.
an institutional bank run
To say that economists use the scientific method means that they are using ___________.
an ongoing process to develop models of the world and then test and evaluate those models
Physical capital is ______________.
any good, including machines and buildings, used for production
An economic expansion begins ____________.
at the end of a recession
Lobsters are plentiful and easy to catch in August but scarce and difficult to catch in November. In addition, vacationers shift the demand for lobsters further to the right in August than in any other month. Given this information, we know that _________ is/are higher in August than in other months.
both supply and demand
The length of women's skirts and stock market performance is likely to be _______.
correlation
Comparing a set of feasible alternatives and picking the best one is an optimization process called _________.
cost-benefit analysis
If the economy experiences an unexpectedly low rate of inflation, the group that would tend to benefit is ___________.
creditors (people of institutions that are owed money)
Nominal GDP: $19,754.1 Real GDP: $17,286.5 Potential real GDP: $17,194.2 A variable identified as nominal is one that is measured in _________ dollars.
current
The goal of a country with a healthy economy is to have ____________ equal to zero.
cyclical unemployment
The total efficiency units of labor will _______ because _______.
decrease, less workers are emplyed
However, because actual annual inflation averaged 1.54%, it can be concluded that velocity during this period must have _______________.
decreased
The demand curve for dollars slopes downward because when the dollar ____________.
depreciates in value, U.S. goods become relatively less expensive abroad, causing more people to buy dollars.
Suppose you have been hired as a management consultant by a major oil company to help it optimally price gasoline at its service stations. Your client would like your team to perform a study on customers' gasoline purchasing habits when they notice price increases. You suggest that the team _____________.
design and execute an experiment
Human capital is ____________.
each person's stock of skills to produce output or economic value
H is the _________________.
efficiency units of labor used in production
Items are classified as final goods only if they are the ________ in a chain of production.
end product
Real-time data provided by Federal Reserve Economic Data (FRED), Federal Reserve Bank of Saint Louis. Whenever the economy's actual rate of unemployment falls below its natural rate as was the case in February comma 2018, it can be deduced that potential real GDP _________ actual real GDP for that period.
falls below
Given that the unemployment level of men exceeds the unemployment level of women, it follows that the unemployment rate for men will be higher than the unemployment rate for women. This claim is
false
The following table contains data from FRED* on the consumer price index and the nominal average hourly wage for production and nonsupervisory employees in the private sector for February of 2008 and 2018. Feb/2008: $17.8 211.7 Feb/2018: $22.38 249.0 *Real-time data provided by Federal Reserve Economic Data (FRED), Federal Reserve Bank of Saint Louis. When the nominal wage increases, workers know that their buying power (over goods and services) is unambiguously higher. This claim is __________.
false
The following table holds data from FRED* on real GDP and M2 for the fourth quarters of 2017 and 2012. Nov/2012: 10,320 15,384 Nov/2017: 13,783 17,287 *Real-time data provided by Federal Reserve Economic Data (FRED), Federal Reserve Bank of Saint Louis. The sum of M2 and real GDP represents the gross wealth of the United States. This claim is ______.
false.
For a market to be in equilibrium, buyers must place a value on the uses of the product that is _________ the cost of buying the product.
greater than
If the only change in the market was that the price increased to $30, then we know that the quantity supplied will be ________ the quantity demanded, resulting in ________, which is also known as ___________.
greater than, an excess supply, a surplus
On the graph to the right, potential real GDP is the _______ curve, nominal GDP is the ________ curve, and real GDP is the ________ curve.
grey, blue, red
Explain whether each of these individuals will be counted as a part of the labor force. Alex left his full-time job as a teacher and now works part-time at the library. John is a full-time student that works as a waiter on the weekends at Chili's. We know that Alex is ____________, and we know that John is ____________.
in the labor force, in the labor force
According to the graph, this action by households causes the equilibrium real interest rate to __________ and the equilibrium quantity to ___________.
increase, increase
Okun's Law ____________.
is usually an accurate representation of the data.
How will this result impact people as they decide how close to live to the city where they work?
more willing to locate farther from the city
PPP GDP
multiply the answer you got above by the given GDP.
Explain whether each of these individuals will be counted as a part of the labor force. Alex is a full-time student that volunteers on the weekends at an animal shelter. John recently retired after working for the same company for 30 years. We know that Alex is ____________, and we know that John is ____________.
not in the labor force, not in the labor force
In this situation, sugar mills will __________.
not sell to private buyers at this lower price and will sell to the government instead, which will drive up the domestic price until it reaches 18.75 cents per pound.
This number represents the ________________ it takes to buy one Thai bottle of rice wine.
number of Taiwanese bottles of rice wine
The return-to-entrepreneurship curve shows the ____________.
number of entrepreneurs with at least a particular level of returns.
The national income identity shows that ___________.
output is a function of consumption, investment, government spending, and net exports. Y = C + I + G + N
Optimization describes a situation where __________________.
people weigh costs and benefits when making a decision
The nation's ports are examples of ________, which contributes to economic growth.
physical capital
K is the _________________.
physical capital stock of the nation
Productivity varies across countries because of differences in ____________.
physical capital, human capital, and technology
More ____ and ____ crime rates is likely to be _________.
police officers, lower, causation
If the growth rate of money supply is larger than the growth rate of real GDP, the inflation rate is ________.
positive
If the growth rate of money supply is larger than the growth rate of real GDP, the inflation rate is _________.
positive
There is a ______ correlation between oil prices and gasoline prices.
positive
The statement that the United States has a lower unemployment rate than Spain is a _____ statement since it describes what people _____.
positive, actually do
Consumer sentiment is likely to be ____________ with real GDP.
positively correlated
The amount of new orders for capital goods unrelated to defense is likely to be _________ with real GDP.
positively correlated
The average weekly hours worked by manufacturing workers is likely to be __________ with real GDP.
positively correlated
The S&P 500 stock index is likely to be _____________ with real GDP.
positively correlated
The relationship that exists between these two variables can be described as __________.
positively related
Aggregation consists of fixing the ______________ and adding up the _____________ by each firm.
price of the good, quantity supplied
The fact that unemployment is lower among workers with a relatively higher level of education can be explained in part by the ____________.
principle of optimization
Catch-up growth is the ____________.
process by which relatively poorer nations increase their incomes by taking advantage of the knowledge and technologies already invented in other technologically advanced nations.
Sustained growth is the ____________.
process where GDP per capita grows at a positive and relatively steady rate for long periods of time.
Comparative advantage is the ability to ____________.
produce a good or service at the lowest opportunity cost per unit than any other producer.
Absolute advantage is the ability to ____________.
produce more of a good or service in a given period of time than any other producer.
Imports are goods and services that are _______________, and exports are goods and services that are _______________.
produced abroad and consumed domestically produced domestically and consumed abroad
Private property rights foster economic development by ____________.
providing incentives to borrow money/invest
The Law of Demand states that as the price of a good increases, ceteris paribus, the ________ decreases. This can be shown graphically with ________ demand curve or numerically in a table using a ________.
quantity demanded, a downward-sloping, demand schedule
The Law of Supply states that as the price of a good increases, ceteris paribus, the _________ of that good increases. This can be shown graphically with ________ supply curve or numerically in a table using a __________.
quantity supplied, an upward-sloping, supply schedule
Some developing countries use tariffs to _______________, while developed countries overwhelmingly use tariffs to _______________.
raise revenue protect domestic producers
Suppose the Fed conducts an open market PURCHASE. Such an action would be called for if the economy faced the possibility of _________. (if the question says sale, reverse all answers)
recession
The effect of foreign investments on the poverty rate will depend on the _______.
redistribution of income among the poor segments of society
If an economic shock increases labor demand, equilibrium employment ______________ and real GDP ____________.
rises, rises
Surveys done by social scientists indicate __________ between life satisfaction and real GDP per capita.
robust positive
Economic fluctuations are ____________.
short-run changes in the growth of GDP
The _______ implies that a college student who drops out of school one month before graduation should earn much less than a student who graduates.
signaling argument
If wages are flexible, the increase in employment and real GDP will be __________ the increase if wages are rigid.
smaller than
Trade allows buyers and sellers to exploit gains from specialization because it allows sellers to ____________.
specialize in the production of the good or service for which they have a comparative advantage and buy goods and services for which they do not have a comparative advantage.
Real-time data provided by Federal Reserve Economic Data (FRED), Federal Reserve Bank of Saint Louis. An economy's natural rate of unemployment reflects the combined effect of frictional and __________ unemployment.
structural
According to the graph, when the minimum wage is set at $10 per hour, there will be ____________ unemployment of ____________ workers in this market.
structural, 4 million
Using your graph, the introduction of union pay of $10 per hour leads to _________ unemployment equal to ___________ thousand.
structural, 7.0
Suppose the price of plums increases and the demand for apples increases. You determine that these goods must be ______________.
substitutes
Coffee and tea are likely __________ because an increase in the price of coffee ________ the demand for tea.
substitutes, increases
Given your graph, the total amount of unemployment that would result from the decline in demand for Starbucks products along with having a fixed wage at $9 can be found by ______________.
subtracting the quantity of labor at point B from the quantity of labor at point A
In the loanable funds market displayed in the figure to the right, gross saving is represented by the ________ loanable funds.
supply of
The Fed's open market purchase impacts the federal funds market shown on the right by shifting the __________ reserves.
supply of
Now suppose that firms identify fewer profitable projects worth doing. With this situation, at the previously determined equilibrium real interest rate, we will find a credit __________, causing the real rate to __________.
surplus, decrease
According to real business cycle theory, the economic impact of changing input prices is similar to the economic impact from ____________.
technology changes.
He is still unconvinced about the reliability of using economic models to make business decisions. You can answer this concern by sharing that you will confirm the accuracy of the model by ________ with ______________.
testing its predictions, empirical data.
A central bank is the government institution ____________.
that runs a country's monetary system
The recession of 2007dash2009 affected the components of the national income identity by primarily affecting ____________.
the C and I components through a reduction in consumer wealth and a drop in housing construction.
Given your answer, Sam should buy tires from __________.
the United States
If free trade is allowed, ___________ will import grain, ___________ will import cars.
the United States Japan
An example of sustained growth is ____________.
the United States, which demonstrated sustained growth between 1820 and 2007.
Your other options are to buy one online or get a couch custom-made at the same furniture store. How would you arrive at an optimal solution here? Assume that your opportunity cost of time is $5 per hour. You and Jim would need to consider ___________.
the direct costs and the indirect opportunity cost of your time required to shop
Fundamental causes of Burondo's lack of prosperity are ____________.
the farmers have limited incentive to bring their produce to market; the government is an extractive political institution; the geography/ecology/topography is not favorable, there are few constraints to the exercise of power,
Your budget constraint for entertainment illustrates the concept of ________, since as you increase your purchases of one item, you ____.
trade-offs, must decrease your purchase of the other item
An exchange rate is simply the price of one currency in terms of another. As such, exchange rates are largely set by the forces of demand and supply. This claim is _______.
true
Fixing the zip-dollar exchange rate at 9 would be an example of the Zeronian government causing its currency to be ______________.
undervalued
Scarcity is the situation of having ________ wants in a world of _______ resources.
unlimited, limited
A currency is said to depreciate against a foreign currency when the nominal exchange rate goes ____________.
up, meaning the domestic currency now buys more of the foreign currency
This results in a labor supply curve that is _________.
upward-sloping
Based on the equations given, the cost-of-entrepreneurship curve differs from the one drawn in the chapter because it is ____________.
upward-sloping, indicating the opportunity cost of entrepreneurship increases with the number of entrepreneurs.
The trade balance is defined as the ___________.
value of a country's exports minus the value of its imports.
The opportunity cost of entrepreneurship is the ____________.
value to a potential entrepreneur of her best alternate activity.
Using the data above, Bill Gates's net worth measured in 1937 dollars is _________ billion.
$4.39
You are considering renting a city apartment with 1,000 square feet for $1,600 per month. The monthly rent on a larger, 1,500-square-foot city apartment is $2,200. The marginal cost of renting an apartment with 500 additional square feet is _____ per square foot per month.
$1.2 , subtract the price of the small apartment from the price of the large apartment by 500.
If the total money stock (supply) is $500,000, the total amount of reserves held in the banking system is ________.
$125,000
Suppose for the year 2013 the economy of Uplandia has a nominal GDP of $7,000 billion and a real GDP of $5,250 billion. For 2013, this economy's GDP deflator is __________.
$133.3
Assuming an exponential annual growth rate of 6.33 percent, Japan's projected GDP in 2010 was _________ trillion.
$17.02 (GDP= old GDP * (1+rate)^25)
Based on the information given in the tables, in the first quarter of 2016, the estimate for GDI was _______ billion and for GDP was _______ billion.
$18,546 and $18,281.6
Given the cyclical unemployment rate recorded above, this translates into actual real GDP deviating from potential real GDP by _______ billion.
$207.2
For 1950, real GDP per capita (in 2013 dollars) was ______.
$21546.8
Combining this table's data and the estimation method cited above, an estimate of Rockefeller's net worth in 2012 dollars is __________ billion.
$244.54
You are a professor of economics at a university. You've been offered the position of serving as department head, which comes with an annual salary that is $7,500 higher than your current salary. However, the position will require you to work 200 additional hours per year. Suppose the next best use of your time is spending it with your family, which has value of $20 per hour. What is the difference in the net benefit from becoming the department head? The change in net benefit is _________.
$3,500. Multiply the 200 hours by the $ per hour for your family. Subtract that from the salary you can get for the promotion.
Suppose each country sells Big Macs. Using the exchange rates above, convert the foreign price of a Big Mac in each country to its price in U.S. dollars. Japan: 419.64 _________ China: 13.83 ________ Mexico: 48.4 ________
$3.9 $2.2 $2.6 (divide the given foreign price by exchange rate in the first table)
Suppose country A has five families. Their incomes are $11,000, $20,000, $31,000, $41,000, and $50,000. Country A's median income is ______ and its mean income is _________.
$31,000 and $30,600
Suppose country A has five families. Their incomes are $11,000, $20,000, $31,000, $41,000, and $150,000. Country A's median income is ______ and its mean income is _________.
$31,000 and $50,600
According to your graph, the targeted increase in employment can be achieved with the payment of a subsidy to employers of _____ per worker.
$4
You have the option to play tennis or a round of golf (but not both). The tennis match requires you to take 2 hours off from work and the round of golf requires you to take 4 hours off from work. Playing tennis has value to you equal to $60, while golf has value to you equal to $105. Tennis courts are publicly available at no cost, but golf costs $20 per round. Suppose your wage from working is $6 per hour. The net benefit from playing tennis is _____ and the net benefit from playing golf is ______. Therefore, you should play ________.
$48, $61 (multiply the hours from work by the working wage and subtract this from the value you place on each), golf
Using the government taxation multiplier from the simple model presented in the chapter, the plan to reduce taxes by $4 million will increase Y (GDP) by ______ million.
$6 ((-0.6/(1-0.6)) * -4)
For country Upper AA, the real per capita income is $865, while for country Upper BB the real per capita income is ______.
$775 (average them)
Anthony owns a landscaping business that has 4 employees. His company is able to earn revenue of $600 per day. He knows that if he hires another worker, he would have to pay that worker $50 per day and the company would earn revenue of $680 per day if the new worker is hired. Determine the value of the marginal product of labor of the employee that Anthony is considering hiring.
$80 (subtract the original revenue from the new revenue)
The Internet boom of the 1990s transformed the way business is conducted and dramatically increased worker productivity. Using the graph on the right, show the effect of the Internet boom on the labor demand curve in an economy, including the effects of multipliers.
(Draw D2 above D1 and D3 above D2) (Plot e2 where D3 intersects S)
Using the graph on the right, show the effect of a negative shock on the labor demand curve in an economy. Assume that wages in the economy are rigid and cannot change in the short run.
(Draw D2 beneath D1 and D3 beneath D2) (Plot e1 where D3 intersects S and plot e2 where it intersects W)
Assume that both mean and median incomes are $40,000 in 2000 and that median income remains constant through 2010. 1.) Using the line drawing tool, draw a line representing median income from 2000 to 2010. Label your line appropriately. 2.) Using the line drawing tool, draw a line for mean income to represent a rising degree of income inequality over time. Label your line appropriately.
(For the graph make both lines start at 40. Have one continue straight on the 40 until 2010 and label it Median. Have the other increase from 40 and label it Mean. It doesn't matter how much the mean increases to, it just has to increase.)
Pizza: Country A: ____________ Country B: ____________
(country A beer/pizza) (country B beer/pizza)
If the economy's actual growth was 5 percent, then without the stimulus package, growth would have been ______ percentage points.
-1.92 (5 - 6.92)
Which of the following are sources of income-based payments that domestic residents make to foreigners?
-A resident of California buys a bottle of wine from a French producer. -A Canadian citizen working in Seattle, Washington, sends money to his parents in Calgary. -The U.S. government pays interest on the Treasury bonds owned by the Chinese government
Throughout the 1950s and 1960s, many poor countries pursued a policy called "import-substituting industrialization," or ISI for short. India, and many nations in Africa and Latin America, closed themselves off to trade in order to promote the development of domestic industries. As noted in the Economist article "Grinding the Poor" (Sept. 27, 2001), "[o]n the whole, ISI failed; almost everywhere, trade has been good for growth." The article discusses how growth was disappointing in countries that pursued ISI. Nations that were open to trade-primarily in Asia-grew much more rapidly. Based on the discussion in the chapter, what are the possible reasons why ISI was ultimately a failure and why integration with the global economy promotes economic growth and development?
-Capital flows into poorer regions give domestic businesses in developing countries the financing they need to expand. -Comparative advantage allows a country to produce those goods or services in which it is most efficient and therefore scarce resources are directed to their most productive uses. -FDI facilitates technology transfer, resulting in increased productivity that promotes economic growth.
To achieve its target for the federal funds rate, the Fed may ____________.
-Decrease/Increase the reserve requirement. -Purchase/Sell Treasury bonds in the open market. -Increase/Decrease lending from the discount window. -Decrease/Increase the interest rate paid on reserves deposited at the Fed.
Examples of transfers to foreigners include ____________.
-Donations by the U.S. government to countries after the Indian Ocean tsunami in 2004. -A British citizen permanently residing in New Zealand while sending money home to his parents in London.
Which of the following are functions banks perform as financial intermediaries in the economy?
-Identify profitable lending opportunities. -Manage risk through diversification strategies. -Transform short-term liabilities into long-term assets.
If there are two countries, A and B, and they are capable of producing two goods, pizza and beer, which of the following is true with regards to absolute advantage?
-Neither country could have an absolute advantage in the production of pizza or in the production of beer. -Country A could have an absolute advantage in the production of pizza and in the production of beer.
The sharpest one-day percentage decline in the Dow Jones Industrial Average (DJIA) took place on October 19, 1987. The DJIA fell 23 percent on this one day. Foreign exchange markets and other asset markets also exhibit large fluctuations on a daily basis. Eugene F. Fama, Robert J. Shiller, and Lars Peter Hansen shared the Nobel Prize in Economic Sciences in 2013 for their work on the "empirical analysis of asset prices." Based on the information given in this chapter, which of the following factors could explain why asset prices fluctuate?
-There are psychological factors and biases that can produce excessive reactions to booms and busts. -Fluctuations reflect the rational appraisals by investors of new information relevant to asset profitability.
Suppose several large investors in the mutual fund start getting nervous about market conditions and decide to redeem, all on the same day. Given this information, which of the following are likely to happen?
-There will be a decrease in the assets of the fund. -There will be a decrease in the liabilities of the fund.
Which of the following are ways that domestic residents can receive income-based payments from foreigners?
-Which of the following are ways that domestic residents can receive income-based payments from foreigners? -A resident of Norway buys a guitar while on vacation in Nashville, Tennessee. The Chinese government sends money and medical supplies to Miami residents after a hurricane. -Orange Telecom, a French company, pays a stock dividend to a resident of Kansas City.
Barter is a method of exchange whereby goods or services are traded directly for other goods or services without the use of money or any other medium of exchange. Suppose you need to get your house painted. You register with a barter Web site and want to offer your car cleaning services to someone who will paint your house in return. What are the problems you are likely to encounter?
-You might find it difficult to find someone who needs you to wash his car and is willing to paint your house in return. -It might be difficult to agree on how many car washes is equivalent to painting a house. -It may take a lot of time to negotiate and finally settle on a deal that you both find fair.
The chapter discusses different models of how people form their expectations regarding inflation. Consider the following two investors, who are trying to forecast what inflation will be for next year. Sean reasons as follows: "Inflation was 2.5 percent last year. Therefore, I think it is likely to be 2.5 percent this year." Carlos, on the other hand, thinks this way: "The economy has recovered from recession sufficiently that inflationary pressures are likely to build. Likewise, a weaker dollar means that imports are going to be more expensive. I don't think the Fed will risk slowing the recovery and raising unemployment by raising interest rates to fight inflation. So, in light of all these factors, I expect inflation to increase to 5 percent next year." How would you best describe how each investor is forming his expectations of inflation? Sean is forming his forecast based on the ______________ model of inflation and Carlos is forming his forecast based on the ____________ model of inflation.
-adaptive expectations -rational expectations
A shift in the credit supply curve can be caused by ____________. (Check all that apply.)
-an aging population that is ill-prepared for retirement. -a heightened desire on the part of firms to internally fund their future activities. -an elevated perception on the part of households that the future may hold many "rainy days."
An example of a multiplier is when ____________
-an increase in business confidence causes firms to increase production and hire employees, leading to an increase in household spending, causing firms to further increase production and employment. -a drop in consumer confidence reduces household spending, causing firms to cut production and lay off employees, leading to a greater reduction in household spending.
Frictional unemployment can result when ____________.
-firms and workers have imperfect information about the state of the economy. -It takes time for firms to find applicants with the right skills and experience -firms and workers have imperfect information about each other. -it takes time to find what jobs are available in a specific field.
With the quantitative easing policy, the supply curve for reserves ____________, the overnight call rate __________, and the demand for reserves ______________.
-shifts right -decreases -stays the same
A country's financial account includes ____________.
-the change in foreign assets held domestically -the change in domestic assets held by foreigners
Now suppose the economy slows down, causing the actual inflation rate to decrease to 0.5 percent and the economy to fall 1 percent below trend GDP. In this case, the Fed will seek to set the federal funds rate at _____ percent.
0
Assume that the change in the value of the NT with respect to the baht (appreciation or depreciation depending on your answer to the previous question) was 50 percent. Calculate the current nominal exchange rate expressed in baht/NT. The new current nominal exchange rate is _______ baht/NT.
0.3 (0.2* (1+.5))
Cars: United States: ___________ Japan: ___________
0.33 (5/15) 2 (10/5)
Opportunity Cost of 1 Page of Typing: You: ___________ Your roommate: ___________
0.33 (6/18) 0.2 (2/10)
Econia trades with its neighbors, the countries of Governmentia and Sociologia. In Econia, the currency is called the econ; in Governmentia, the currency is called the gov; and in Sociologia, the currency is the soc. Nominal exchange rates are as follows: 200 econ = 1 gov 1 soc = 0.25 gov 100 econ = 1 soc A good that is produced and consumed in all three countries is the Mack Burger. The price of Macks in the three countries is as follows: 1 Mack costs 2 govs in Governmentia, 14 socs in Sociologia, and 700 econ in Econia. From the perspective of Econia, using the nominal exchange rates and prices listed above, the real exchange rate in Mack Burgers between Econia and Sociologia is
0.5 (700 econ from Econia/ 100 econ = 7 soc 7 soc from Econia / 14 soc from Sociologia = 0.5)
Consider a $100 increase in GDP per capita. In 2012, Niger had a GDP per capita of approximately $800, and the United States had a GDP per capita of $50,700. Calculate the corresponding growth rates for these two countries. Niger's growth rate is ________ percent, and the U.S. growth rate is ________ percent.
12.5, 0.2 (divide 100 by the original GDP)
The 2012 crop has increased over the 2009-2011 mean by _______ percent.
13.23
Mexican income per capita is ______ (thousand) pesos
136 thousand. Divide the GPD of Mexico by the population
Reserves: 500 Loans: 1500 Total Assets: 2000 Checking Deposits: 2000 Net Worth: 0 Liabilities and Net Worth: 2000 The required reserve ratio in this economy is _____.
16%
f the additional revenue (the marginal revenue) during the last hour is $189, the profit earned during the last hour of operation will be _______.
189-129 $60.
According to the quantity theory of money, what is the inflation rate? Use the information given above and calculate the inflation rate. According to the quantity theory of money, the inflation rate is ______.
2 (nominal GDP - real GDP)
The mean quantity of coffee that Brazil produced from 2009 to 2011 is ______ tons
2,682,587
Growth in the economy is almost always measured as growth in the real GDP. Using the data in the preceding table, we can say that the growth rate of the economy from the fourth quarter of 2016 to the same quarter of 2017 was ____ percent.
2.5
The figure on the right shows the credit market in equilibrium with the real interest rate at _______ percent and the flow of credit equal to $_________ billion.
2.5, 75
The government enacts a license fee of $50 thousand to file the paperwork necessary to start a firm. The new equilibrium number of entrepreneurs is N=
2.6 (add 50 to your original C=200 + 150N. Repeat your steps from the last problem)
R = 900 - 100N C = 200 + 150N The equilibrium number of entrepreneurs is N= _________
2.8 (set the formulas for R and C equal to each other and solve for N)
Assume labor supply and labor demand are described by the following equations: LS = 5w (Labor supply) LD = 110-0.5w (Labor demand) where w = wage expressed in dollars per hour and LS and LD are expressed in millions of workers. The equilibrium wage is $________ and the level of employment is ________ million workers.
20 (set LS and LD equal to each other and solve for w) 100 (plug w into LS)
The mean quantity of coffee produced is _______ tons.
248
If the wage paid to workers in Die Cast's plant is $35/hour, it should employ ____ worker(s).
3
Grain: United States: ___________ Japan: ___________
3 (15/5) 0.5 (5/10)
Opportunity Cost of 1 Outline: You: ___________ Your roommate: ___________
3 (18/6) 5 (10/2)
The following table and graph contain the most recent money supply data from FRED*. The data are components of M1 that are measured weekly and seasonally adjusted. Using the data in the table, compute the M1 money stock as of March 19, 2018. M1 Money Stock $________ billion. Currency Component of M1: $1,548.9 billion. Total Savings Deposits at all Depository Institutions: $9,120.3 billion. Total Checkable Deposits: $2,096.3 billion. Travelers Checks Outstanding: $1.9 billion.
3,647.1
On the assumption that velocity was constant during this period, it may be deduced that the average annual inflation rate was _____%
3.6
If the current value of GDP is $13.28 trillion and the government is planning to increase spending by $700 billion (all in one year), the percentage increase in GDP using the multiplier estimate of the first economist is _____ percent.
3.95 (multiply 0.75 by 0.7 to get .525 and divide that by 13.28. Then multiply by 100)
The marginal product of labor for the third hour of labor is _______.
30 (change in output)
Okun's Law is defined as: Change in the unemployment rate =-1/2(g - 2%) If the unemployment rate is 4.0% and real GDP grows by 0.5%, the new unemployment rate is ___%
4.8% (fill in the formula like this: 4% + [-1/2(0.5-2%)]
According to the rule of 70, the growth rate computed above, if maintained, would result in a doubling of real GDP per capita in _______ years.
43.8 (divide 70 by the percentage in your last answer)
Now assume that wages are rigid at $20 per hour. Employment at $20 per hour is ______ million workers, and there are ________ million workers unemployed.
45 (plug 20 into the new LD) 55 (subtract 45 from the original 100)
The value of the marginal product of labor for the third hour of labor is
45 (change in output times the $1.5 that it sells for)
Real GDP Per Capita: October/2012 _________, October/2017 ________
48437, 52450 (Divide the Real GDP by the population)
The quantity of labor demanded at the market-clearing wage is _______ thousand, and the quantity of labor demanded at union pay of $10 is _______ thousand.
5.5; 2
The quantity of labor supplied at the market-clearing wage is _______ thousand, and the quantity of labor supplied at union pay of $10 is _______ thousand.
5.5; 9
Using the data recorded above, complete the following table by computing the average annual rate of change in each variable over the given five-year span. LOADING... (Enter your responses rounded to two decimal places and use a minus sign if necessary.) M2: ______% Real GDP: ______%
5.96 2.36
Suppose the following table shows data on transactions between the United States and the rest of the world for the month of May, 2013. Assuming the list is exhaustive, use the information given to fill in the table showing the current and financial accounts for May, 2013. Trade in goods and services: ____________ Factor payments: ____________ Net transfer payments: ____________ Current Account: ____________ Net sales to foreigners: ____________ Financial Account: ____________
6,000,000; 17,700,000; -11,700,000 21,000; 240,000; -219,000 60,000; 16,060,000; -16,000,000 -27,919,000 30,000,000; 2,081,000; 27,919,000 27,919,000
Suppose that in January there were 6,000,000 workers in the labor force, with 5,604,000 employed and 396,000 unemployed, implying a 6.6 percent unemployment rate. A month later, there were 6,170,000 workers in the labor force, with 5,779,000 employed and 391,000 unemployed.
6.34% (divide the unemployed by the # of workers in the labor force for February)
Central banks undertake quantitative easing programs to ____________.
A and C only.
The former chairman of the Federal Reserve, Alan Greenspan, used the term "irrational exuberance" in 1996 to describe the high levels of optimism among stock market investors at the time. Stock market indexes such as the S&P Composite Price Index were at an all-time high. Some commentators believed that the Fed should intervene to slow the expansion of the economy. Why would central banks want to clamp down when the economy is growing?
A and C only.
How does a fixed exchange rate differ from a managed exchange rate?
A fixed exchange rate is set at a long-run value determined by the government, while a managed exchange rate can vary day to day depending on government actions.
Suppose that country A has higher real income per capita than country B. Explain why this does not imply that most citizens of country A have higher real income than most citizens of country B.
A high degree of income inequality in country A may result in most of its citizens having incomes below the average income of country B.
Using the graph on the right, illustrate the impact of an increase in the price of the good from $20 per unit to $30 per unit, assuming everything else in the economy remains the same.
A is point (61,30) B is point (33,30)
Based on what you learned about banking in the chapter, explain why you think that the crisis prompted banks to dramatically expand the amount of excess reserves they held.
All of the above.
In which of the following areas will taking an economics course help benefit you throughout your life?
All of the above.
What would cause the real exchange rate for the United States (dollars) and European Union (euros) to increase?
All of the above.
Which of the following is subject to the free-rider problem?
All of the above.
What is deposit insurance?
A program implemented in most countries to protect bank depositors, in full or in part, from losses caused by a bank's inability to pay its withdrawals.
What other reasons might explain why unemployment is lower among workers with a relatively higher level of education?
All of the above. (Workers with a higher level of education are in greater demand by firms, More educated workers have more human capital, More educated workers have a higher opportunity cost of time)
Which of the following shows the expected relationship between GDP and GDI?
GDP is equal to GDI.
How do expansionary policies differ from contractionary policies?
All of the above: - Expansionary policies seek to reduce the severity of recessions, while contractionary policies seek to slow down the economy when it grows too fast. - Expansionary policies seek to shift the labor demand curve to the right, while contractionary policies seek to shift it to the left. - Expansionary policies seek to increase economic growth and increase employment, while contractionary policies seek to reduce the risk of excessive price inflation.
When deciding whether to install visible countdown timers for pedestrians at crosswalks, which of the following would be considered in the cost-benefit analysis?
ALL OF THESE ARE CORRECT The higher maintenance bill associated with fixing these more complex signals when they break down. The cost in terms of dollars of installing these new timers all over the city. The value of the lives lost by drivers who watch the countdown timers and try to make it through a light. The value of the pedestrians' lives saved by having the timers to assist in crossing the street.
Which of the following could be considered an economic agent?
All of these: Consumers. Criminals. Students. Senators.
Which of the following are considered scarce resources?
All of these: Time Mechanical pencils Gas. Gold.
Interpret the differences you see in the two graphs.
All of the above
The graph on the right shows actual and projected estimates of potential GDP and GDP. Potential GDP is also a measure of trend GDP. When is the output gap, defined as the percent difference between GDP and potential GDP, negative?
All of the above
Which of the following is an example of what economists refer to as job search?
All of the above
What is the shadow banking system?
All of the above describe the shadow banking system (-A group of several thousand disparate nonbank financial intermediaries. -Financial institutions that make loans from funds raised by means other than by accepting deposits. -Nonbank financial institutions that behave like banks in many respects.)
Suppose that you allocate $20 each week for your entertainment budget. This money is spent on two items: either renting movies for $1 each at Redbox or downloading songs from iTunes at $1 each. Given this information, which of the following would represent your budget constraint for entertainment?
Amount spent on iTunes + Amount spent at Redbox = $20.
Which of the following is not one of the four major factors that shifts the supply curve when it changes?
Anything other than these: 1. Prices of inputs used to produce a good 2. Technology used to produce a good 3. Number and scale of sellers 4. Sellers' beliefs about the future
Based on the information, ______ would be considered more productive since its _______ is higher.
Arctica, income per worker
Households, like banks, maintain balance sheets. Although assets and liabilities may not be written down in a neat table, they still influence household decision making. For banks, assets are equal to liabilities. Which of the following is likely to be true of a household's balance sheet?
Assets and liabilities will not necessarily be equal because many households face large debts and their liabilities are greater than their assets.
Country _____ has greater income inequality.
B
Households and firms with savings lend money to banks and other financial institutions. The credit supply curve shows the relationship between the quantity of credit supplied and the real interest rate. The credit supply curve slopes upward because a ____________.
B and C only.
Which of the following assets is an average household likely to hold?
Cash, retirement accounts, and equities
Assume that Country A and Country B are both capable of producing sneakers and basketballs. If Country A is more productive at making both goods than Country B, which of the following statements is true?
Country A has an absolute advantage in the production of both sneakers and basketballs.
____________ has an absolute advantage in the production of pizza, and ____________ has an absolute advantage in the production of beer.
Country B Country A
Which of the following will be considered a final good in the calculation of U.S. GDP? (Check all that apply.)
Defense equipment purchased by the federal government, Golf outings at courses in North Carolina, (or Foot massages at spas in California)
Finding real income per worker
Divide the GDP (2476 billion) by employment (80 million). 30950, 72000
Finding real income per capita
Divide the GDP (2476 billion) by population (192 million). 12896, 36000
Suppose your New Year resolution is to get back in shape. You are considering various ways of doing this: you can sign up for a gym membership, walk to work, take the stairs instead of the elevator, or watch your diet. How would you evaluate these options and choose an optimal one?
Do a cost-benefit analysis to compare the alternatives.
Sam owns a tire shop. He needs to decide whether to stock tires from a firm in Mexico that sells tires at a price of 2 comma 200 pesos per tire or from a U.S. firm that sells tires for $159 per tire. Assume the peso-dollar exchange rate is 13 (this means 13 pesos can be purchased with $1). Which of the following equations should Sam use to convert the peso cost of tires to U.S. dollars?
Dollar cost= Peso cost x (Dollars/Pesos)
The figure on the right depicts the pre-recession condition of the labor market in equilibrium at point 1. Complete the following to illustrate the impact of a recession in the labor market.
Draw a new demand line under the demand line and label it D2. Plot a point at the intersection of D2 and the top part of the dotted box and label it 2. Plot a point at the intersection of D2 and the supply line and label it 3.
Your client becomes critical of your "sloppy" technique of using a model that does not include all factors. What is the most appropriate reply to this criticism?
Economic models are meant to be approximations that predict what happens in most circumstances.
Would Zimbabwe be considered to have extractive or inclusive institutions? Explain your answer.
Extractive institutions, because it doesn't protect property rights
Suppose a country has well-enforced private property rights for entrepreneurs, but a large fraction of the population does not have access to education and thus cannot become entrepreneurs and would have low productivity as workers. Would you say this country has inclusive or extractive economic institutions?
Extractive institutions, because barriers block access to education.
What is liquidity?
Funds that are available for immediate payment.
What is the empirical relationship between urbanization in 1500 and GDP per capita? How has this relationship changed over time? 1.) Using the line drawing tool, illustrate the relationship between urbanization in 1500 and GDP per capita in 1500. Label your line 'GDP per capita in 1500.' 2.) Using the line drawing tool, show the relationship between urbanization in 1500 and GDP per capita in 2010. Label your line 'GDP per capita in 2010.'
Graph a line with a negative slope and label it 2010. Graph a line with a positive slope and label it 1500. Don't make the lines touch the axes.
The graph on the right shows an economy that is initially in labor market equilibrium at point A. What would be the impact on the labor market for a decrease in the real exchange rate as described above?
Graph a new demand line above the original and plot point B at its intersection with Labor Supply
The concept of diminishing returns to a factor of production applies not only to capital but to labor as well. Prior to the Industrial Revolution, there was no sustained growth in living standards.
Graph one line that stays fairly stagnant and label it "Pre", graph another line that shows an increase and label it "Post"
If firms expect future price increases, how would the supply of smartphones be impacted?
Graph shifts left
If the number of sellers increases, how would the supply of smartphones be impacted?
Graph shifts right
Using the line drawing tool, depict the government's demand curve for sugar. Label your curve 'D'.
Graph the line y=18.75
Which of the following are not included in GDP but probably should be? (Check all that apply.)
Home production, the value of externalities, the value of leisure, or transactions in the underground economy
How can your answer be interpreted?
How many Macks in Sociologia can be bought with 1 Mack in Econia.
Which of the following do you provide as a positive question?
How much is the national debt?
Your net benefit is maximized at ___ slices of pizza.
I had 8x-x^2. Plug numbers into x starting at 1 and working your way up. Each time, subtract the cost, 2x, from your answer. As you go, these outcomes will increase and then decrease. Look at the biggest number, whatever you used as x to get that is your answer. Mine was 3.
In the book "Dead Aid," economist Dambisa Moyo argues that humanitarian aid-provision of food or medicine to poor families, for example-is an ineffective tool for promoting growth in the developing world. Instead, she argues in favor of foreign aid policies that encourage/subsidize foreign investments in the businesses of developing countries. Which of the following will be the short-term and long-term effects of foreign investments on aggregate growth?
In the short run, the productivity of workers and the GDP per capita of an economy will increase, while in the long run, the effect on the GDP per capita of the economy will depend on the productivity enhancing investment.
Using the concepts discussed above, which of the following statements is true of inequality?
Inequality is likely to increase in an economy if the jobs lost due to technological improvement are low-skilled jobs.
What factors explain the dramatic increases in life expectancy that we saw in most countries in the twentieth century?
Innovations in disease control, including the use of DDT against malaria, Scientific breakthroughs leading to the development of antibiotics and vaccines, The establishment of simple but effective medical and public health practices
What is foreign direct investment?
Investments by foreign individuals and companies that generate an ownership stake in domestic businesses.
Which of the following is true regarding the concept of causation?
It describes how one event can bring about change in another.
Based on the information in the chapter, and perhaps your own reading, explain why foreign aid designed to spur investment usually does not work.
It is frequently diverted to corrupt officials.
In February 2014, the United States added 175,000 jobs to the economy. Given this information, what can we say about the unemployment rate of the country?
It may increase, decrease, or not change depending on how many people started searching for jobs during the month.
Which of the following is true regarding wage rigidity?
It occurs when wages are held fixed above the competitive equilibrium level.
According to the Taylor rule, should the Fed raise or lower the federal funds rate when the output gap is negative?
It should lower the federal funds rate.
What does the information in the table below suggest about the relationship between income per capita and HDI in a country?
It suggests that HDI in a prosperous country may be largely unrelated to income per capita.
Banks that practice narrow banking match the maturity of their investments with the term of the deposits that they collect from the public. In other words, narrow banks take short-maturity deposits and invest in assets that carry a low level of risk and are also of short-term maturity, like short-term government debt. Suppose that all FDIC-insured banks decide to adopt narrow banking. How would narrow banking reduce the level of risk in the banking system?
It would reduce risk in the banking system by reducing the likelihood of bank runs and liquidity problems for banks.
If people expect future price increases, how would the demand for a normal good be impacted?
Just draw the same line but over to the right one spot.
Suppose you have just been hired as a management consultant by a major oil company to help it optimally price gasoline at its service stations. During a meeting with your client, the CEO asks if your economic models include all factors that impact gasoline prices. What is your response to his question?
No, the model is a simplified representation of reality.
Suppose a country's economic institutions make entry barriers for entrepreneurial activities less(or more) expensive.
Less: graph a line below C1 and label it C2. Plot and label the intersection between C2 and R1 as E2. More: graph a line above C1 and label it C2. Plot and label the intersection between C2 and R1 as E2.
If these three currencies can be freely traded so that their exchange rates are flexible or floating, can the nominal exchange rates listed above persist over time?
No, there are opportunities for investors to engage in arbitrage by exchanging govs for socs, then socs for econs, and finally econs back to govs.
Suppose that, due to concerns about the high number of calories in many Starbucks drinks, the demand for Starbucks products declines. Use a graph to explain what will happen to employment in the market for baristas?
Make a line below D0 and label it D1. Plot a point on the S0 line at 9 and label it A. Plot a point on the D1 line at 9 and label it B.
The graph on the right shows the economy's credit market in equilibrium. Using this graph, illustrate how the equilibrium real interest rate and the equilibrium quantity of credit would change if the following event occurs. As the real estate market recovers from the 2007 minus 2009 financial crisis comma households begin to buy more houses and condominiums comma and apply for more motgages to enable those purchases.
Make a new demand line above the original and label it D2
Let the credit market return to its initial equilibrium, and now consider the following event. Households begin to fear that the recovery from the 2007 minus 2009 recession will not last comma and become more pessimistic about the economy.
Make a new demand line below the original and label it D2. Make a new supply line below the original and label it S2.
In the market on the right, suppose the government seeks to directly stimulate the employment of an additional 20 million workers. 1.) Using the line drawing tool, shift the demand curve such that this employment target is achieved.
Make a new demand line to the right of the demand curve that will intersect the supply curve at 120 Quantity of labor
In 2011, the government of Argentina developed a new policy (sometimes called the "dollar clamp") to prevent Argentines from exchanging pesos, the local currency, for U.S. dollars. New restrictions hampered currency exchange: for example, buying dollars required advance approval from the national tax authority. The adjacent graph shows the dollar demand and dollar supply curves in the foreign exchange market in relation to pesos, along with the initial equilibrium exchange rate E0.
Make a new demand line under the original
From 2001 to 2006, Japan's central bank, the Bank of Japan (BOJ), engaged in a monetary policy program called quantitative easing. The BOJ increased the value of the excess reserves that commercial banks held with the central bank by buying assets from these commercial banks. Use the graph on the right to show how this policy is likely to have affected the overnight call rate. Note that the overnight call rate in Japan is similar to the federal funds rate in the United States.
Make a new vertical line to the right of S0 and label it S1. Plot the intersection of S1 and D0 and label it r1.
Suppose that the country Argonia follows a flexible exchange rate regime. The exchange rate between the Argonian dollar (AGD) and the U.S. dollar (USD) is currently 1 AGD = 5 USD. Use the graph on the right to show the equilibrium in the foreign exchange market.
Make a positive slanted line (supply) and a negative slanted line (demand) that intersect at point (1,5). Plot the point and label it as E.
On the right is a graph of the supply and demand for lobsters in August. Compare the equilibrium price and quantity of lobsters in August to the equilibrium price and quantity of lobsters in November.
Make the line DN parallel to DA but further down and to the left. Make the line SN parallel to SA but higher up and to the left. Plot the point where DN and SN meet as N.
Before 1800, a pattern developed showing that increases in aggregate income led to an expanding population, which in turn reduced income per capita and put downward pressure on the population. This pattern is known as the __________.
Malthusian cycle
Does the shape of the market demand curve differ from the shape of an individual demand curve?
No, they both tend to be downward-sloping curves.
Unemployment Level - Men 3,582 Unemployment Level - Women 3,124 Labor Force - Men: 86,267 Labor Force - Women: 75,654 Use the values recorded above with the information in the following table to compute the unemployment rate for men and women for February of 2018.
Men - 4.2 Women - 4.1
Almost every day, many people sign their names to little pieces of paper called checks, which are then accepted in exchange for goods and services. Do these checks constitute money?
No, because checks simply represent a means of access to money, not money itself.
Did his predictions come true?
No, because he failed to account for the demographic transition and the impact of the Industrial Revolution.
Using the information, which of the following factors is responsible for the discrepancy between GDP and GDI?
Net exports are accounted for in GDP but not in GDI.
Does the information in the table below suggest, in any way, that people in China were better off than the people in Switzerland in 1999? Explain your answer.
No, it only implies that China's HDI rank was much higher than its per capita income rank, while Switzerland's HDI rank was lower than its per capita income rank.
In the 1980s, the saving rate in Japan was extremely high. The saving rate ranged between 30 percent and 32 percent. Since saving leads to investment, is a very high saving rate always good for the economy?
No, a high saving rate cannot lead to sustained economic growth because there is a maximum amount of aggregate income that an economy can achieve by increasing saving, since the economy can never exceed a saving rate of 100 percent.
Over the last 10 years, the dollar has depreciated sharply vis-à-vis the euro. Suppose that in the short run the Fed wanted both to defend the dollar (that is, stop its decline and/or cause it to appreciate) and stimulate investment. Can it achieve both of these goals simultaneously through monetary policy?
No, to stimulate investment the Fed will use expansionary policy that will lower interest rates. The lower interest rates, however, will reduce investment into the United States, which will increase the supply of dollars and cause a depreciation of the dollar.
Suppose that there is technological advance from period 1 to period 2 but, at the same time, a decrease in the physical capital stock? Can you say whether real GDP will increase or decrease?
Not really, since the two items have offsetting effects.
Which of the following is the best example of causation (versus correlation)?
Oil prices go up and gasoline prices go up.
Marcia finds that the net benefit of flying from Chicago to Honolulu on a non-stop United Airlines flight is $400, and the net benefit for the same trip flying on a one-stop American Airlines flight is $200.
Optimization in levels, since she is comparing the net benefits between alternatives.
Reagan determined that the net benefit of taking the combination of two lecture courses and an online lecture course was $100. The same three courses online gave her a net benefit of $80, and all three in a lecture-based format gave her a net benefit of $90.
Optimization in levels, since she is comparing the net benefits between alternatives.
When workers are laid off, what happens to physical capital?
Physical capital becomes less productive, leading firms to reduce capacity utilization.
Show the impact on the graph if a minimum wage of $10 per hour is enacted.
Plot a point on labor demand at 10 and label it A. Plot a point on labor supply at 10 and label it B.
Consider the market for coffee illustrated in the figure on the right. Show the effect of the drought on the coffee market.
Plot point e2 further left on the D1 line than e1 and have S2 pass through e2, parallel to S1
What do you think the impact of this drought has been on the equilibrium price and quantity of tea? Draw a supply and demand diagram for the tea market to explain your answer.
Plot point e2 further right on the S1 line than e1 and have D2 pass through e2, parallel to D1
Your client has asked you to plot GDP and gasoline prices on a graph.
Plot points in a line (17, 2.75) (16.9, 3) (16.8, 3.25) (16.7, 3.5)
The following table shows the cost of producing dollar notes of various denominations. As you can see in the table, it costs only 12.7 cents to produce a $100 bill. Suppose the government decided that it will print new notes to fund its fiscal deficit as well as all its ongoing expenditure. What would be the effects of such a policy?
Printing paper money has a small direct cost and so gives the government money to spend.
Identify a possible problem with this policy.
Printing too much money may lead to a high rate of inflation, reducing the amount of goods and services that the government can purchase with the newly printed notes.
In the figure to the right the red line represents ______ GDP and its intersection point with the blue line denotes the __________
Red: real Blue: nominal, all of the above
Reserves: 300 Bonds and other investments: 700 Total Assets: 1000 Deposits and other liabilities: 800 Shareholders' equity: 200 Liabilities + Shareholders' equity: 1000
Reserves: 500 Bonds and other investments: 500 Total Assets: 1000 Deposits and other liabilities: 800 Shareholders' equity: 200 Liabilities + Shareholders' equity: 1000
Suppose you thought income inequality in the United States had increased over time. Based on your answers to this question, would you expect the ratio of the mean income in the United States to the median income has risen or fallen? Explain.
Risen, because means change more with extreme values.
The Taiwanese trade balance (its current account) with the rest of the world is initially running neither a deficit nor a surplus. Taiwan alone experiences an economic boom while its real interest rate rises at the same time. Thoroughly explain the mechanisms by which the Taiwanese current account is affected by its boom and the increase in its real interest rate.
Rising real interest rates will result in an appreciation of the real exchange rate, and the economic boom will result in inflation that will also appreciate the real interest rate. Thus, the current account will go into deficit as imports increase and exports decrease.
Suppose that the GDP in current dollars for Polonia is higher than Ruritania's GDP. However, using purchasing power parity-adjusted dollars, Ruritania's GDP is higher than Polonia's GDP. Based on this information, you can conclude ___________.
Ruritania's standard of living is likely to be better than Polonia's.
Finally, suppose you only care about living standards. In this case, you would prefer _______ because it has lower poverty.
Scenario A
Assume a society consists of two economic groups: one group is rich and the other group is poor. Suppose that 50 percent of the population is rich while the other 50 percent of the population is poor. Consider two scenarios. Scenario A: The rich have $60,000 each, while the poor have $2,000 each. Scenario B: The rich have $7,500 each, while the poor have $750 each. If you only care about average income and not about equity, you would prefer ________ which has an average income of ________.
Scenario A, $31,000 (find the average)
Scott's optimal seat type is _______.
Scout Box
What are possible criticisms of the way each investor is forming his expectations? Economists might argue that _____________________.
Sean is not maximally rational, and Carlos can not be as good at understanding how the economy works as he thinks he is.
Following the Fed's successful open market purchase, the process that ensues is given by ____________.
Short-term interest rates fall>Long-term interest rates fall>Demand for goods and services increases>Labor demand shifts right.
Economists Andrew McAfee and Erik Brynjolfsson have written about "The Great Decoupling"-the divergence between productivity growth and employment. Since the mid-1990s, labor productivity and GDP have continued to increase, while employment and wages have remained stagnant. Using the concepts discussed in the chapter, which of the following reasons would explain an increase in productivity and GDP at a given level of employment?
Technological improvement
Suppose instead that the European Central Bank (ECB) conducts expansionary monetary policy. What is the short-run effect, if any, of this policy on the euro/dollar nominal exchange rate and on the real exchange rate between the United States and the European Monetary Union?
The nominal dollars per euro exchange rate will decrease and the real exchange rate will decrease as long as inflation in the European Monetary Union is not significantly higher than inflation in the United States.
From 1950 to 1966, the nominal exchange rate was pegged between the United States and the United Kingdom. Using the exhibit, what was the relationship between the nominal and real exchange rates over this period?
The nominal exchange rate was fixed and flat, while the real exchange rate was decreasing due to differences in inflation rates across countries.
Even with the restrictions in place, dollars were still available in the flourishing black market (if you're interested, the twitter feed @dolarblue posts the daily black market exchange rate in Argentina). In these circumstances, which of the following is likely to be true of the black market exchange rate (pesos per dollar)?
The black market exchange rate is likely to be higher (pesos per dollar) than the official exchange rate because the government of Argentina is stifling the demand for pesos.
Suppose that the global demand for apricots grown in Argonia increases sharply. Other things being unchanged, how would this affect the value of the Argonian dollar?
The demand for AGD would shift rightward, causing an increase in the USD-AGD exchange rate and an appreciation of the AGD.
In fact, Japan's 2010 GDP was $5.7 trillion. Which of the following reasons could explain any discrepancy between this number and your answer to the previous part?
The discrepancy might have occurred because of the catch-up effect. Japan's initial post-war growth may have been high, but it declined in later years.
What does it mean to say that, at an exchange rate of 1 USD = 80 INR, the U.S. dollar is overvalued and the Indian rupee is undervalued?
The dollar is worth more rupee than it would be under a flexible exchange rate system; thus, the quantity of dollars supplied exceeds the quantity of dollars demanded.
Which of the following statements explains why the new technology is likely to lead to higher unemployment than estimated using Okun's Law?
The effect of the new technology on the unemployment rate would be moderated by substituting capital for labor.
At the end of 2015, the new president of Argentina, Mauricio Macri, eliminated restrictions on foreign exchange. Given this information, which of the following is likely to be true of the official exchange rate when Macri enacted his policy of unrestricted foreign exchange transactions?
The elimination of restrictions is likely to cause an increase in the demand for dollars, leading to a depreciation of the peso and an increase in the peso-dollar exchange rate.
Consider a simple mutual fund. Households and businesses invest in the fund by buying shares; the fund uses this money, in turn, to invest in a range of assets, including equities and bonds. If an investor wishes to divest from the fund, she can "redeem" her shares. Redeeming involves selling the shares back to the mutual fund for a price called the 'net asset value" (NAV). The NAV is equal to the difference between assets and liabilities, divided by the total number of investors in the fund. The NAV is updated at the end of each day. Thus, every investor who redeems on a given day will get the same price. Which of the following statements is likely to be true of the fund's balance sheet?
The liabilities side will show the money given by the individual investors, and the assets side will show all the investments that the manager of the fund has chosen.
Suppose you are comparing the income per capita in the United States and Ghana. You try two approaches. In the first approach, you convert the Ghana values into U.S. dollars using the current exchange rate between the U.S. dollar and the Ghanaian cedi. In the second approach, you also convert both values to U.S. dollars using the purchasing power parity-adjusted exchange rate. Which approach is likely to give you a more accurate picture of the living standards in both countries?
The second approach, because it takes into account the relative costs for each country.
Advances in wireless communication technology reduce the non-financial costs of long commutes: People who ride trains can get work done, and people who drive cars have more entertainment options. Given this information, which of the following will be an effect on the geographic area of cities?
The total cost of commuting from any given distance to work will reduce because the indirect cost of the commute will fall.
Assume that the economy has 15 other identical mutual funds. As the fund discussed in the previous step begins selling assets to pay back its investors, the market price of those assets drops. Given the information, which of the following is likely to be true of the balance sheets of the other mutual funds that invest in those assets?
The value of the assets will decrease, leading to a decrease in the net asset value of the mutual funds.
What does it mean to say that an economic fluctuation involves the co-movement of many aggregate macroeconomic variables?
These variables grow or contract together during booms and recessions.
Which of the following is one of the three important elements that define institutions?
They determine incentives or They are determined by individuals.
Imagine that there are two economies in the world: Bostonia and New Yorkland. Bostonia's currency is the sock and New Yorkland's is the yank. Despite the long-standing rivalry between their citizens, Bostonia and New Yorkland are trading partners. The Central Bank of New Yorkland decides to conduct expansionary monetary policy. What would be the short-run effect, if any, on the yank/sock nominal exchange rate?
This policy will decrease the interest rate in New Yorkland, making its assets less attractive to Bostonia's investors. This will cause an increase in the supply of yanks, resulting in a depreciation of the yank relative to the sock.
Why would a government undertake policies that would adversely affect the lives of its citizens?
To maintain its power.
After the Second World War, Germany was divided into two parts, East Germany and West Germany. East Germany was controlled by the former Soviet Union while West Germany was controlled by the other Allied governments: the United States, the United Kingdom, and France. The war had destroyed most of Germany's economy. The Soviet Union as well as the Allied occupation forces sought to rebuild the economies of their respective parts. Before the fall of the Berlin Wall reunited East and West Germany in 1990, West Germany's economy grew at an annual average growth rate of 4.4 percent, which was about 3 times higher than East Germany's rate. Draw the parallel between the natural experiment discussed in the chapter and the case of East and West Germany. Based on the information given in the question and your own research, why do you think two otherwise similar areas had such divergent growth rates? East and West Germany likely had different growth rates because ____________.
West Germany's economic institutions were market oriented/ East Germany's economic institutions mandated central planning
An old saying goes: "Nothing succeeds like success." How could this saying relate to Keynes's animal spirits view of economic fluctuations?
When people succeed, they become confident and optimistic, which can lead to actions that stimulate further success.
Complete the formula for the aggregate production function.
Y = F(K,H)
What are the consequences of this increase in unemployment for GDP?
Y1>Y2
Some barter Web sites allow the use of "barter dollars." The registration fee that you pay to a barter Web site gets converted into barter dollars that can be exchanged with other users to buy goods and services. Would the use of barter dollars resolve the problems you identified above?
Yes, because you could both pay and be paid in "barter dollars."
Excluding cases where banks had accumulated a lot of non-deposit liabilities that are not covered by FDIC insurance, would analysts generally agree that deposit insurance has been successful in preventing bank runs?
Yes, since bank runs and bank failures have been relatively rare since the advent of deposit insurance.
The change in the real average hourly wage indicates that individuals have, since February of 2008, experienced __________ in their standard of living.
an increase
Suppose that GDP in New Yorkland recently plummeted. At first, the citizens in Bostonia cheered, happy to see their rivals taken down a notch. But then an economist (always a killjoy) asserts that the fall in New Yorkland's GDP is likely to hurt Bostonia's GDP in the short run. Could the economist be correct?
Yes, the decrease in GDP will cause a decrease in incomes in New Yorkland. As trading partners that means that New Yorkland will buy fewer Bostonian exports. Since net exports is part of GDP, Bostonia's GDP will fall.
How would you test this model?
You should run a natural experiment by analyzing bus ridership and price changes.
Now, the impact from the decline in demand for Starbucks products would lead to ____________.
a decrease in employment but not by as much as under the fixed-wage rate system
Causation occurs when there is ____________.
a logical cause-and-effect relationship
If oil, which is a major input to most production processes, abruptly falls in price, the impact on the economy would be similar to ____________.
a productivity increase, with a resultant increase in real GDP.
F is best described as __________.
a relationship between the variables
Economics is divided into two broad fields of study: microeconomics and macroeconomics. Microeconomics studies _________, while macroeconomics studies _________.
a small piece of the overall economy; the economy as a whole
Productivity varies across countries because ___________.
all of the above
The inflation-adjusted purchasing power of the originally borrowed dollar is subtracted from the amount a borrower repays in a year on a one-dollar loan. The result is the ____________.
all of the above
A shift in the credit demand curve can be caused by ___________.
all of the above.
Quantitative easing is ____________.
all of the above.
The concept of multipliers was one of the key elements of John Maynard Keynes's theory of fluctuations. A multiplier is ____________.
an economic mechanism that causes an initial shock to be amplified by follow-on effects.
Low infant mortality is _____ and an improvement in nutrition is ______.
an effect, the cause
An open market operation is ____________.
an exchange between a private bank and the Federal Reserve where the Fed buys or sells government bonds to private banks
You and your roommate are enrolled in the same course: Postmodern Deconstruction of Postmodern Deconstructionism. The course requires a term paper. Since the professor encourages collaboration on the paper, you decide to work on it together, "trading" tasks. In 8 hours, you can type 18 pages, whereas your roommate can only type 10. If you do outlining instead of typing, in the same 8 hours you could produce 6 summary outlines of the course readings, while your roommate could only produce 2. ___________ the absolute advantage in typing, and ___________ the absolute advantage in outlining.
you have you have
There is a _____ correlation between mustaches grown and gasoline prices.
zero
There is a proverb "anything worth doing is worth doing well." Do you think an economist would agree with this proverb?
No, because the marginal cost of extra effort may be greater than the marginal benefit.
Over the last 50 years, credit cards have become an increasingly popular way for people to purchase goods and services. Are credit cards money?
No, because you credit cards are not assets.
The losers when the minimum wage is $10 would be ___________.
low-skill workers who now cannot find jobs due to increased competition for jobs, low-skill workers who lose their jobs due to a lack of demand for workers, firms that hire low-skill workers at the new wage.