Module 6 Practice Homework
When consumers' incomes rise by 5 percent and other things remain the same, the quantity of frozen mixed vegetables demanded decreases by 3 percent and the quantity of fresh asparagus demanded increases by 12 percent. The income elasticity of demand for frozen mixed vegetables is nothing.
-0.6
When Elle's Espresso Bar increased its price by 10 percent, the quantity of coffee that Elle sold decreased by 40 percent. When Elle and all her competitors cut their prices by 10 percent, the quantity of coffee sold by Elle increased by only 4 percent. The price elasticity of demand for Elle's Espresso Bar coffee is The price elasticity of demand for coffee is
4; 0.4
The table gives data about Northland's economy in 2015. What is the value of GDP in Northland in 2015? The value of GDP in Northland in 2015 is _______. A. $1 comma 153 billion B. $1 comma 291 billion C. $866 billion D. $2 comma 019 billion
A. $1153 The table gives data about Northland's economy in 2015. Using the expenditure approach, GDP is equal to the sum of consumption expenditure, investment, government expenditure on goods and services, and net exports. GDP = $656 billion + $193 billion + $253 billion + $51 billion, which is $1 comma 153 billion.
If the marginal private cost of producing one kilowatt of power in California is ten cents and the marginal social cost of each kilowatt is fourteen cents, then the marginal external cost equals ________ per kilowatt. A. four cents B. nineteen cents C. fourteen cents D. ten cents E. zero cents
A. four cents
Countries that enjoy economic growth A. have property rights and markets which provide incentives for discovering new technologies. B. place controls on property rights so that firms are protected from competition. C. place high taxes on saving and investment. D. restrict international trade so that domestic industries can grow. E. have economies that allow the government to make decisions in everyone's best interests.
A. have property rights and markets which provide incentives for discovering new technologies.
Bank deposits ______ and the quantity of money ______. A. increase; increases B. decrease; decreases C. decrease; increases D. increase; decreases
A. increase; increase When the Fed makes an open market purchase, bank deposits increase because loans increase, and the quantity of money increases.
The marginal cost of production that is borne by the entire society is called the marginal A. social cost. B. private cost. C. external cost. D. public cost. E. user cost.
A. social cost.
When the Fed sells securities in the open market, the monetary base _______ and the interest rate _______. A. decreases; falls B. decreases; rises C. increases; falls D. increases; rises
B. decreases; rises The purchase or sale of government securitieslong dashU.S. Treasury bills and bondslong dashby the Federal Reserve in the open market is called an open market operation. When the Fed sells securities in the open market, the monetary base decreases and the interest rate rises.
Reserves in the banking system ______. Banks ______ loans. A. decrease; make more B. increase; make more C. increase; call in D. decrease; call in
B. increase; make more The Fed increases the reserves of the banks. Reserves in the banking system increase. Banks make more loans because they have excess reserves.
By increasing the required reserve ratio, the Fed forces banks to hold a _______ quantity of monetary base and the interest rate _______. A. larger; falls B. larger; rises C. smaller; rises D. smaller; falls
B. larger; rises The required reserve ratio is the minimum percentage of deposits that the Fed requires banks to hold as reserves. By increasing the required reserve ratio, the Fed forces banks to hold a larger quantity of monetary base and the interest rate rises.
If the Fed wants to increase the quantity of money, it makes an open market _______. A. sale B. purchase
B. purchase If the Fed wants to increase the quantity of money, it makes an open market purchase.
The central bank of the United States is ______. A. the FOMC located in New York City, which sets the interest rate B. the bank that provides services to commercial banks and governments and that regulates the banking system C. the Bank of America, which provides general banking services for businesses and individual citizens D. the bank that finances the federal government and regulates other banks
B. the bank that provides services to commercial banks and governments and that regulates the banking system
Money in the United States today includes _______. A. currency and deposits at both banks and the Fed B. the currency in people's wallets, stores' tills, and the bank deposits that people and businesses own C. the banks' reserves and bank deposits owned by individuals and businesses D. currency in ATMs and people's bank deposits
B. the currency in people's wallets, stores' tills, and the bank deposits that people and businesses own Money in the United States today consists of currency and deposits at banks and other financial institutions.
Classify each of the following items as a final good or an intermediate good, and identify whether it is a component of consumption expenditure, investment, or government expenditure on goods and services: Item 1. Banking services bought by Target. Item 2. New cars bought by Hertz comma the car rental firm. Item 3. Upper A DVD bought by a household. Item 4. Security system bought by the White House.
Banking services bought by target is an intermediate good New cars bought by Hertz, the car rental firm is a final good that is an investment item 3 is a final good bought for consumer expenditure item 4 is a final good bought for government expenditure
In the United States today, money includes ______. A. a student loan and an American Express traveler's check B. coins in Coke vending machines and unwritten checks C. U.S. dollar bills in your wallet and an American Express traveler's check D. a student loan and unwritten checks E. a check written by a student to pay her rent and the unused credit limit on a VISA card account
C. U.S. dollar bills in your wallet and an American Express traveler's check Money is any commodity or token that is generally accepted as a means of payment. A means of payment is a method of settling a debt. Both U.S. dollar bills in your wallet and an American Express traveler's check are money because they are a means of payment.
The velocity of circulation is the _____ number of times in a _____ that each dollar of money gets used to buy final goods and services. A. total; day B. total; year C. average; year D. average; month
C. average; year The velocity of circulation is the average number of times in a year that each dollar of money gets used to buy final goods and services.
Explain the Fed's policy tools and briefly describe how each works. The Fed uses its policy tools to _______. A. influence the exchange rate and the country's trade balance by adjusting the interest rate B. keep the government budget debt under $20 trillion by adjusting loans to Congress C. regulate the amount of money circulating in the United States by printing enough money each year for the purchase of consumer goods and services D. influence the interest rate and regulate the amount of money circulating in the United States by adjusting the reserves of the banking system
D. The Fed uses its policy tools to influence the interest rate and regulate the amount of money circulating in the United States by adjusting the reserves of the banking system.
The Commerce Department reported that in December 2015, retail sales rose by 0.2 percent, net exports decreased, inventories held by businesses rose by 0.1 percent, and total sales by businesses fell by 0.6 percent. Source: Commerce Department, February 2016 Explain the effect of the fall in net exports on GDP. The fall in net exports ______. A. has no effect on GDP B. decreases GDP only if exports decrease. An increase in imports has no effect on GDP C. increases GDP D. decreases GDP E. increases or decreases GDP depending on whether it is composed of a decrease in exports or an increase in imports
D. decreases GDP
By lowering the interest rate, the Fed makes it _______ costly for the banks to borrow monetary base and the interest rate _______. A. more; rises B. more; falls C. less; rises D. less; falls
D. less; falls The discount rate is the interest rate at which the Fed stands ready to lend reserves to commercial banks. By lowering the discount rate, the Fed makes it less costly for the banks to borrow monetary base and the interest rate falls.
If the quantity theory of money is correct and other things remain the same, an increase in the quantity of money increases _______. A. the price level and potential GDP B. real GDP C. nominal GDP and the velocity of circulation D. nominal GDP and the price level
D. nominal GDP and the price level The quantity theory of money is the proposition that when real GDP equals potential GDP, an increase in the quantity of money brings an equal percentage increase in the price level. And when the price level rises, nominal GDP, which equals the price level multiplied by real GDP, also increases.
In January 2011, currency held by individuals and businesses and traveler's checks was $nbsp 925 billion; checkable deposits owned by individuals and businesses were $nbsp 926 billion; savings deposits were $5 comma 378 billion; small time deposits were $905 billion; and money market funds and other deposits were $705 billion. Calculate M1 and M2 in January 2011. M1 in January 2011 is $__billion.
M1 consists of currency, traveler's checks, and checkable deposits owned by individuals and businesses, which is $nbsp 925 billion + $nbsp 926 billion = $1 comma 851 billion M2 is equal to M1 plus savings deposits plus small time deposits plus money market funds and other deposits. So M2 equals $1 comma 851 billion + $5 comma 378 billion + $905 billion + $705 billion, which is $8 comma 839 billion.
What are the three vital functions that money performs? Which of the following items perform some but not all of these functions, and which perform all of these functions? Which of the items are money? a. A blank check b. A checkable deposit at the Bank of America c. A dime d. Upper A diamond ring e. The copper used to produce pennies f. Ancient Roman coins g. GM bonds The three vital functions that money performs are ______. medium of exchange, store of value, and a method of saving medium of exchange, unit of account, method of borrowing and lending method of borrowing and lending, record keeping, and a store of value medium of exchange, unit of account, and store of value method of borrowing and lending, record keeping, and saving
Money performs three vital functions. It serves as a medium of exchange, unit of account, and a store of value. items b and c perform all the functions of money, all others do not.
Which of the following is an example of government expenditure on goods and services? A. Salaries received by lobbyists from the interest groups that they represent B. The payment of unemployment benefits C. Secret service protection for the President D. Subsidies paid to farmers
Secret service protection for the president
Which of the following are included in the expenditure approach to measuring GDP? A. consumption expenditure; profit; rent B. government expenditure on goods and services; investment; profit C. government expenditure on goods and services; investment; consumption expenditure D. investment; consumption expenditure; interest
The expenditure approach measures GDP by using data on consumption expenditure, investment, government expenditure on goods and services, and net exports.
What must be true for a consumer to buy a good or service? A. The total benefit received must equal the total spent to buy the good or service. B. The consumer must be able to obtain some consumer surplus. C. The price must be equal to or less than the marginal benefit. D. The price must be equal to or greater than the marginal benefit. E. The consumer must not be able to produce the product.
The price must be equal to or less than the marginal benefit.
Which of the following items are components of the opportunity cost of being a full-time student? bullet The things the student would have bought with a higher income bullet A college meal plan bullet A subscription to the Rolling Stone magazine bullet The income the student will earn after graduating
The things the student would have bought with a higher income
Which of the following describes the reason why scarcity exists? A. The gap between the rich and the poor is too wide. B. There is too much unemployment. C. Governments make bad economic decisions. D. Wants exceed the resources available to satisfy them.
Wants exceed the resources available to satisfy them.
Of the three big questions, what, how, and for whom, which of the following is an example of a how question? A. Why do doctors and lawyers earn high incomes? B. Why do college football coaches earn more than professors? C. Why don't we produce more small cars and fewer gas guzzlers? D. Why do we use machines rather than migrant workers to pick grapes?
Why do we use machines rather than migrant workers to pick grapes?
In the figure above, for the 3,000th unit, the maximum price a consumer is willing to pay is A. $0. B. $5. C. $10. D. $15. E. $25.
c. $10
Gustavo graduates from college and his income increases by $20 comma 000. Nothing else changes. Gustavo decreases the quantity of Upper T dash shirts and potato chips that he buys and increases the quantity of gourmet ice cream that he buys. For Gustavo, _______.
gourmet ice cream is a normal good
Classify each of the following items as a final good or service or an intermediate good or service, and identify which is a component of consumption expenditure, investment, or government expenditure on goods and services. A. New airplanes bought by United Airlines B. The purchase of a new aircraft for the vice dash president C. Newsprint bought by USA Today from International Paper D. Banking services bought by a student
item A is a final good that is an investment. item B is a final good that is a government expenditure. item C is an intermediate good. item D is a final service that is a consumption expenditure.
Which of the following situations describing a resource allocation method most resembles the market price method? A. Seventy percent of Austin's chess club wanted to purchase new chess sets and thirty percent did not. The club purchased the sets. B. Matt's mother had the rule that whoever cuts the cake chooses their slice last. C. Jose works at Intel. His manager tells him what work needs to be completed each month. D. Lattes are sold at Starbucks E. Food from the Weld County Food Bank is distributed to families in need.
lattes are sold at starbucks
The price elasticity of demand for Pete's salsa is 2.2. Pete wants to increase his total revenue. Pete should _____ the price of his salsa because the demand for salsa is ______.
lower; elastic
A rational choice is ______. A. made by comparing marginal benefit and marginal cost B. what you are willing to forgo to get something C. the best for society D. the best thing you must forgo to get something
made by comparing marginal benefit and marginal cost
The table shows the demand and supply schedules for chocolate. Now two changes occur in the market for chocolate. Excellent weather in cocoa growing areas increases the quantity supplied by 25 bars a day at each price. A news story on CNN reports that chocolate causes obesity when consumed in excess, which decreases the quantity demanded by 20 bars a day at each price. In the table on the right, fill in the new quantity demanded at each price. Now in the table on the right, fill in the new quantity supplied at each price. The new equilibrium price is $ 1.45 a bar, and the new equilibrium quantity is 155 bars.
new equilibrium price is $1.45 and new equilibrium quantity is 155 bars
Real GDP per person is not an accurate measure of the standard of living because it ______. A. omits the goods and services imported from other countries B. omits the goods and services that people produce for themselves C. includes goods and services bought by firms D. includes the goods and services that governments buy
omits the goods and services that people produce for themselves
The image is a table that shows the production possibilities for an economy. The table had three columns, labeled Possibility, Bread (number), and Books (number). The Possibility column has the values of A, B, C, D, and E. The Bread column has the values of 0, 100, 200, 300, and 400. The Books column has the values of 1,000, 900, 700, 400, and 0. The table above shows the production possibilities for an economy. When the economy produces a combination of 900 books and 50 loaves of bread, A. production efficiency is not achieved. B. production efficiency occurs because resources are not overused. C. allocative and production efficiency are both achieved. D. allocative efficiency is achieved because both goods are produced. E. production efficiency is not achieved but allocative efficiency might be achieved.
production efficiency is not achieved
The graph shows the marginal benefit and marginal cost of manatee swims. The horizontal axis measures manatee swims per week, from 0 to 5. The vertical axis measures the marginal benefit and marginal cost in dollars per swim, from 0 to $50, increasing by $10. The graph shows a downward-sloping, linear curve, labeled MB, intercepting the vertical axis at 50 and the horizontal axis at 5. The graph also an upward-sloping, linear curve, labeled MC that starts at the origin. Four points are marked on the graph, labeled A, B, C, and D. Point A lies on the MB curve, corresponding to 0 manatee swims and a marginal benefit of $50. Point B also lies on the MB curve, corresponding to 5 manatee swims and a marginal benefit of $0. Point C lies at the intersection of the MB and MC curves, corresponding to 2.5 manatee swims and a marginal benefit and marginal cost of $25. Point D lies on the MC curve, corresponding to 0 manatee swims and a marginal cost of $0. At 1 manatee swim, the MB is $40 and the MC is $10. At 2 manatee swims, the MB is $30 and the MC is $20. At 3 manatee swims, the MB is $20 and the MC is $30. At 4 manatee swims, the MB is $10 and the MC is $40. The figure above shows Kaley's marginal benefit from swimming with manatees and Scott's marginal cost of providing manatee swimming tours. For Kaley and Scott, allocative efficiency is achieved at what point?
pt. C the intersection
If as the price of a sports car decreases, the quantity of sedans that firms plan to sell increases, then sports cars and sedans are _______
substitutes in production
Which of the following defines economics? Economics is the social science that studies ______. A. the choices made to cope with scarcity, how incentives influence those choices, and how the choices are coordinated B. the best way of eliminating scarcity C. the inevitable conflict between self-interest and the social interest D. how money is created and used
the choices made to cope with scarcity, how incentives influence those choices, and how the choices are coordinated
Mark loves ice cream. At any point in time, he will buy an additional ice cream cone if A. his willingness to pay is less than the price. B. the marginal benefit from it exceeds the price. C. the marginal benefit from it is zero. D. there is no deadweight loss produced by his purchase of a cone. E. None of the above answers is correct.
the marginal benefit from it exceeds the price.
If the price of a laptop falls, with all other influences on buying plans remaining the same, _______. A. the demand for laptops increases B. the demand for laptops decreases C. the quantity of laptops demanded decreases D. the quantity of laptops demanded increases
the quantity of laptops demanded increases
Moving ________ along the marginal cost curve, the ________. A. upward; opportunity cost of one more unit increases B. downward; marginal cost increases C. downward; opportunity cost of one more unit does not change D. upward; opportunity cost of one more unit does not change E. upward; marginal cost decreases
upward; opportunity cost of one more unit increases
Economists measure the benefit you get from something by _______. A. what you are willing to give up to get it B. how popular it is in the marketplace C. the price of it D. what a business must give up to produce it
what you are willing to give up to get it
The New York Times reports that cruise lines have been slashing prices and cruise sales are up. It says this surge of interest tells us that despite the uncertain economic climate, people clearly need more fun in their lives and view their vacations as a valuable and necessary part of it. In deciding whether to take a cruise, would you face a tradeoff? You _____ face a tradeoff because _____.
would; you forgo something else that you might do A tradeoff is an exchangelong dashgiving up one thing to get something else. If you take a cruise, you face a tradeoff because you would have to forgo something else that you might otherwise do with your resources (time and budget).
Almonds galore! The quantity of almonds harvested in 2008-2009 is expected to increase by 22 percent, while total receipts of growers are expected to increase by 17 percent. Source: Almond Board of California Is the price of almonds expected to rise or fall? Did a change in the supply of or demand for almonds bring about this expected change in the price? The price of almonds is expected to ______. This expected change in the price comes about by ______. A. fall; an increase in demand B. rise; an increase in demand C. fall; a decrease in demand D. fall; an increase in supply E. rise; a decrease in supply
fall; an increase in supply
Pricier bread and cereal. Coming soon? Wheat prices surged last week and could hit the items in your grocery basket by mid-summer. It's a case of drought in parts of the United States and in Europe, which have sparked fears of a supply crunch of wheat. Source: CNN Money, May 19, 2011 Explain why the drought will lead to a rise in the price of bread. As a result of the drought, the price of wheat will _____ and in the market for bread, the price of bread will rise because _____. A. rise; the supply of bread will decrease B. rise; the supply of bread will increase C. rise; the demand for bread will decrease D. fall; both the supply of bread and the demand for bread will increase
rise; the supply of bread will decrease
