A giant econ review

Suppose the real interest rate is 2.1% and the nominal interest rate is 5.4%. Then the expected inflation rate is:

3.3%

If the labor force is 100 million persons and 5 million are unemployed but actively seeking work, then the unemployment rate is ________.

5%

If the actual unemployment rate is 7% and the cyclical unemployment rate is 2%, then the natural rate of unemployment is:

5%.

If a production possibility curve is a straight line, it tells us that the opportunity cost of producing one more unit of good X:

is a constant amount of good Y.

Frictional unemployment:

is due to time workers spend in job search.

GDP is the:

total market value of all final goods and services produced in one year.

Sally works twenty hours a week for an accounting firm. She would like to work forty hours a week and expects that she will in the future. Sally is a(n):

underemployed worker

Double counting would occur if:

used goods were included in the GDP calculation.

A worker classified as frictionally unemployed is one who is:

voluntarily looking for work, somewhere a job exists that demands his or her skills.

Khalil is offered a free ticket to the opera. His opportunity cost of going to the opera is:

whatever Khalil would have done had he not gone to the opera.

Margo spends $10,000 on one year's college tuition. The opportunity cost of spending one year in college for Margo is:

whatever she would have purchased with the $10,000 plus whatever she would have earned had she not been in college.

Anna recently moved to Boston in order for her husband Joe to begin a new job as an economics professor at Harvard. Anna is an experienced surgeon who is currently interviewing with several different hospitals in Boston. Anna is currently:

frictionally unemployed.

A laptop computer purchased by an accounting firm is considered to be:

investment spending.

Unanticipated inflation:

helps borrowers and hurts lenders.

n an attempt to reduce shooting deaths, some cities have offered money to people who turn in their guns. This program is an example of the government using ________ to influence behavior.

incentives

A tariff is most likely to ________ prices and ________ consumption of the good or service being protected.

increase; decrease

If government decided to increase taxes or decrease its spending, most likely this was to correct:

inflation.

A college student is faced with a difficult decision of how to spend one hour tonight. She could babysit her professor's child at an hourly wage of $7, she could work at the college library at a wage of $6, or she could finish her economics homework assignment. If she chooses to complete her homework assignment, she has incurred an opportunity cost equal to:

$7.

Which of the following most accurately describes how to calculate the unemployment rate?

(unemployed/labor force. ´ 100

Which of these is one of the four principles of individual choice? - Resources are scarce. - The real cost of something is impossible to measure. -People take advantage of opportunities to make themselves better off only if there is no risk involved. -The government redistributes income through progressive taxation.

- Resources are scarce.

Which of the following is an example of a normative statement? -The federal government spends half of its budget on national defense. - The rate of unemployment is 4%. - A high rate of economic growth creates more jobs for the country. - Everyone in America deserves to be covered by national health insurance. -High school graduation rates in the U.S. are lower than they are in some European nations.

-Everyone in America deserves to be covered by national health insurance.

If during a period of several months we observe the economy to be simultaneously increasing its level of output and employment, we could assume that the economy is in:

. an expansion.

An example of cyclical unemployment is a(n): -. autoworker who is laid off from an automobile company due to a decline in sales caused by a recession. - worker at a fast-food restaurant who quits work and attends college. - geologist who is permanently laid off from an oil company due to a new technological advance. -real estate agent who leaves a job in Texas and searches for a similar, higher paying job in California. -ski instructor who stops working at the ski resort in the spring when the snow melts.

. autoworker who is laid off from an automobile company due to a decline in sales caused by a recession.

Suppose that nominal GDP is $1000 in 2006 and nominal GDP is $1500 in 2007. If the overall price level ____ between 2006 and 2007, we could say that real GDP _____.

. increased by 50%; stayed constant.

Inflation can be measured by:

. the percentage change in the CPI.

At the point at which it is currently producing, Britain must give up the production of 75 hats to produce 25 additional sweaters. The opportunity cost of producing 3 hats is ________ sweater(s).

1

Japan, at the point at which it is currently producing, must give up the production of 75 computers to produce 25 additional cellular telephones. Which of the following is the opportunity cost of producing 3 computers?

1 cellular telephone

If a country has a working-age population of 200 million, 135 million people with jobs, and 15 million people unemployed and seeking employment, then its unemployment rate is:

10%.

Two countries, A and B, currently produce two goods, wheat (W) and steel (S). They each have a linear production possibility frontier in both goods. For Country A, if it spends all of its available resources to produce wheat, it can produce 500 units of wheat and zero units of steel. If it uses all of its resources to produce steel it can produce 250 units of steel and zero units of wheat. For Country B, if it spends all of its available resources producing wheat, it can produce 400 units of wheat, and if it spends all of its resources on the production of steel, it can produce 400 units of steel. If Country B produces 300 units of steel, how much wheat can it produce?

100 units

If the cost of a market basket is $200 in Year 1 and $230 in Year 2, the price index for Year 2 with a Year 1 base is:

115.

At the point at which it is currently producing, Britain must give up the production of 75 hats to produce 25 additional sweaters. The opportunity cost of producing 4 sweaters is ________ hats.

12

If a country has a working-age population of 200 million, 135 million people with jobs, 10 million people who were looking for a job but have given up, and 5 million people unemployed and seeking employment, then its labor force is:

140 million.

If a country has a working-age population of 200 million, 135 million people with jobs, and 15 million people unemployed and seeking employment, then its labor force is:

150 million.

If actual unemployment is 6.2% and the natural rate of unemployment is 4%, cyclical unemployment is:

2.2%.

You read in the newspaper that the CPI in 2008 was 120, you will conclude that a typical market basket in 2008 would have cost

20 percent more than the same market basket purchased in the base year.

If the CPI is 120 in Year 1 and 150 in Year 2, then the rate of inflation from Year 1 to Year 2 is _____.

25%

Alexander has a straight line or linear production possibility curve when he produces soybeans and corn. If he uses all of his resources for soybean production, he can produce 200 bushels of soybeans; if he uses all of his resources for corn production, he can produce 400 bushels of corn. Which of the following combinations of corn and soybeans are not possible for him to produce? - 100 bushels of soybeans and 200 bushels of corn -. 600 bushels of corn and 200 bushels of soybeans -200 bushels of soybeans and zero bushels of corn

600 bushels of corn and 200 bushels of soybeans

The United States, at the point where it is currently producing, must give up the production of 300 motorcycles to produce 20 additional SUVs with the same resources. In this case, the opportunity cost of producing 5 SUVs is ________________ motorcycles.

75

Assume that Colombia gives up 3 motorcycles for each ton of coffee it produces, while Bolivia gives up 7 motorcycles for each ton of coffee it produces.

Colombia has a comparative advantage in coffee production and should specialize in coffee production.

France and England both produce wine and cloth under conditions of constant opportunity costs. France can produce 150 units of wine if it produces no cloth, and 100 units of cloth if it produces no wine. England can produce 50 units of wine if it produces no cloth, and 100 units of cloth if it produces no wine. Using this information, we can conclude that comparative advantage in cloth belongs to.

England has a comparative advantage in cloth production.

Which of the following statements would be a part of macroeconomics? I. The central bank has lowered interest rates to lessen the impact of a recession. II. A severe drought in the American Midwest has reduced the corn harvest and increased corn prices. III. The U.S. Gross Domestic Product has risen sharply, indicating that the recession might be near an end.

I and III only

Of the following statements, which reflect(s) a normative view? I. The U.S. needs to increase the minimum wage to $10 per hour. II. An effective minimum wage results in unemployment. III. An effective minimum wage is a form of a price floor.

I only

Mark and Julie are going to sell brownies and cookies for their third annual bake sale fund- raiser. In one day, Mark can make 40 brownies or 20 cookies and Julie can make 15 brownies or 15 cookies. Based on this information, ________ has the comparative advantage in making brownies and ________ has the comparative advantage in making cookies.

Mark; Julie

Which of the following demonstrates how people respond to incentives to make themselves better off? -More students major in economics when they hear that salaries for economists are rising. - Students are encouraged to donate blood because it is the "right thing to do." -The government randomly selects some travelers at airports for more thorough security screenings. - Students are assigned dorm rooms through a lottery system.

More students major in economics when they hear that salaries for economists are rising.

Dr. Colgate is a dentist who employs an assistant, Ms. Crest. If Dr. Colgate worked all day at the front desk, she could answer 40 phone calls. If she worked all day with patients, she could clean the teeth of 40 patients. If Ms. Crest worked all day at the front desk, she could answer 60 phone calls. If she worked all day with patients, she could clean the teeth of 20 patients. Which of the following is true?

Ms. Crest has a comparative advantage in answering phones.

An example of a government transfer is a(n):

Social Security payment.

Which one of the following is an example of consumption spending that would be counted toward GDP this year?

Stephanie bought a laptop for her brother.

Which of the following statements is a normative statement? -The federal minimum wage is higher today than it was in 1990. -Children in the United States are required to go to school until they reach a certain age. -The women's labor force participation rate has increased during the past 100 years. - The best way to encourage growth in the economy is through government spending. -A higher demand for ethanol will likely cause a higher price of corn.

The best way to encourage growth in the economy is through government spending.

The production possibility curve will shift outward because:

better technology that improves worker productivity

In periods of unexpected inflation:

borrowers benefit since they repay their loans in dollars with lower real value.

Which of the following statements is a positive statement? Which is a normative statement? X. The federal minimum wage is increasing to $6.50 an hour. Y. The minimum wage should be high enough that families will not live in poverty. Z: A higher minimum wage typically increases the unemployment rate for teenagers.

X is positive; Y is normative; Z is positive

Donna was laid off by her employer at the beginning of 2008. She looked for a job for three months, but could not find anything suitable. She then decided to volunteer for a soup kitchen. Donna is considered to be

a discouraged worker.

Which of the following would be classified as consumption?

a new car purchased by an employee of a company for personal use.

In terms of the production possibility curve, inefficient use of available resources is shown by:

a point located inside the production possibility curve.

If the opportunity costs of production are constant, then the production possibility curve is:

a straight line.

Because Casey can type reports faster and more accurately than Ahmet, Casey has a(n) ________ in typing reports.

absolute advantage

If an economy is efficient, this means:

all opportunities to make people better off without making other people worse off have been taken.

If during a period of several months we observe the economy to be simultaneously increasing its level of output and employment, we could assume that the economy is in:

an expansion.

The effect of an increase in productive inputs such as labor and capital can be shown by:

an outward expansion of the production possibility curve.

Jim has a part-time job and would prefer to have a full-time job, but has been unable to find full-time work. Jim's labor market status is classified as:

an underemployed worker.

The student center on campus has burritos, bagels, or burgers for lunch. You decide to have a burger today, but if they had been out of burgers, you would have bought a bagel. Your opportunity cost is the:

bagel.

Overall, trade between China and the United States will:

benefit both countries.

If the price of gasoline falls and stays low for an extended period of time, we expect people to:

buy larger and less fuel-efficient cars.

The circular-flow diagram illustrates how households ________ goods and services and ________ factors of production.

buy; sell

When someone says resources are scarce, this suggests that:

choices need to be made in order to utilize resources in the best manner possible.

Countries that engage in trade will tend to specialize in goods in which they have a(n) ________ and will ________ those goods.

comparative advantage; export

If Japan levies tariffs on U.S. goods entering Japan, this will tend in the short run to:

damage U.S. producers and benefit Japanese producers.

Resources are being used efficiently when:

every opportunity to make people better off has been utilized.

Which of the following would be included in the calculation of GDP?

expenditure on new construction

In order to be officially unemployed, a person must be:

looking for work in the past 4 weeks.

Trade can be beneficial to an economy because:

more goods and services can be obtained at a lower opportunity cost.

The current rate of unemployment of 5% is too high. This is a ________ statement.

normative

Scarcity in economics means:

not having sufficient resources to produce all the goods and services we want at zero cost.

Individuals gain from trade because

of specialization in production.

Your elderly grandma tells you: "I haven't been taking my beloved walks because I'm concerned about falling and getting hurt. See, there is always a cost to doing something. But if you don't do anything, then there is no cost." Your grandma does not understand the concept of:

opportunity cost in economics.

As long as people have different ________, everyone has a comparative advantage in something.

opportunity costs

When hyperinflation forces Emily to visit her bank very frequently to keep her cash holdings to a minimum, economists say that Emily is experiencing a:

shoe-leather cost.

Grades are low in class and your professor makes available a 10-point extra credit assignment. Most of the students turn in the assignment. This statement best represents the economic concept of:

people usually exploit opportunities to make themselves better off.

An example of investment spending would be:

purchase of a new productive machine.

The most likely effects of tariffs and/or quotas are to ________ prices and to ________ consumption of the protected goods in the importing country.

raise; lower

An example of frictional unemployment is a(n):

real estate agent who leaves a job in Texas and searches for a similar, higher paying job in California.

If money income remains the same, while the average price level doubles, then:

real income will fall.This

"In Colorado, there has been a drought, and rural communities are fighting with urban areas over water." This statement best represents the economic concept of:

resources are scarce.

Use the "Consumer and Capital Goods II" Figure 3-10. Technological improvements will likely:

shift the production possibility curve outward to Curve 2.

Gains from trade arise because of:

specialization in production.

When the demand for labor is falling and employers have committed to high wages, ______ unemployment will result.

structural

Whenever a choice is made:

the cost of that choice could be referred to as opportunity cost.

When there is deflation in the economy:

the general price level falls.

The economy's factors of production are not equally suitable for producing different types of goods. This principle generates:

the law of increasing opportunity cost.

The production possibility curve illustrates:

the maximum quantity of one good that can be produced given the quantity of the other good produced.

The rate of unemployment that exists when the economy is at full employment is:

the natural rate of unemployment.

An example of investment spending is:

the purchase of a freezer by an ice-cream parlor.

Which of the following is included in GDP this year?

the purchase of a ticket to a Rolling Stones concert this year.

When the San Francisco city manager faces a complaint that the city council chamber podium is not accessible to individuals with disabilities, he responds that the one million dollar improvement will not happen because "that money could be spent building 70 curb ramps." This statement best represents the economic concept of:

the real cost of something is what you must give up to get it.

You decide to join the economics club, but this means you can't join the accounting club because it meets at the same time. This statement best represents the economic concept of:

the real cost of something is what you must give up to get it.

The labor force is defined as:

the total of the persons employed and unemployed.

Which of the following principles underlie the interaction of individual choices? -Resources are scarce. - People usually exploit opportunities to make themselves better off. - Marginal analysis is used for "how much" decisions. - There are gains from trade. -Government policies can change spending.

there are gains from trade

"Lena and Jess are roommates. Lena hates to clean the bathroom. Jess will only agree to clean the bathroom if Lena vacuums the living room." This statement best represents the economic concept of:

there are gains from trade.

Based on the "Guns and Butter" Figure 3-1, if the economy were producing 8 units of guns and 12 units of butter per period: (point inside the ppc)

this is a possible choice, but would involve unemployment and/or inefficiency.