EC 202 final exam (15 of the questions)

mid 2: 11. If the interest rate is 7.5 percent, then what is the present value of $4,000 to be received in 6 years? a. $3,040.63 b. $2,420.68 c. $2,996.33 d. $2,591.85

d. $2,591.85

52. In 2014, a farmer grows and sells $3 million worth of corn to Big Flakes Cereal Company. Big Flakes Cereal Company produces $8 million worth of cereal in 2014, with sales to households during the year of $7 million. The unsold $1 million worth of cereal remains in Big Flake Cereal Company's inventory at the end of 2014. The transactions just described contribute how much to GDP for 2014? a. $7 million b. $11 million c. $3 million d. $8 million

d. $8 million

mid 2: 28. Suppose a basket of goods and services has been selected to calculate the CPI and 2009 has been selected as the base year. In 2007, the basket's cost was $64; in 2009, the basket's cost was $68; and in 2011, the basket's cost was $70. The value of the CPI in 2011 was a. 100.10. b. 97.14. c. 109.38. d. 102.94.

d. 102.94.

mid 2: 34. In the production function , which symbol reflects the state of technology? a. N b. H c. K d. A

d. A

5. Which of the following statements is true about scarcity? a. Scarcity refers to the situation in which unlimited wants exceed limited resources b. scarcity arises when the market has not been allowed to operate freely c. scarcity is only a problem for those with incomes below the poverty level d. scarcity arises when there is a wide disparity in the income distribution

a. Scarcity refers to the situation in which unlimited wants exceed limited resources

31. Which of the following is an example of a normative, as opposed to positive, statement? a. Universal health care would be good for U.S. citizens. b. An increase in the cigarette tax would cause a decrease in the number of smokers. c. A law requiring the federal government to balance its budget would increase economic growth. d. A decrease in the minimum wage would decrease unemployment.

a. Universal health care would be good for U.S. citizens.

26. Rachel babysits for her sister for no pay. When she babysits for someone else she charges $8 an hour. When is Rachel's babysitting included in GDP? a. When she babysits for someone else, but not when she babysits for her sister. b. When she babysits for her sister, but not when she babysits for someone else. c. When she babysits for her sister and when she babysits for someone else. d. Neither when she babysits for her sister nor for someone else.

a. When she babysits for someone else, but not when she babysits for her sister.

mid 2: 37. Which of the following is not correct? a. With a growth rate of about 2 percent per year, average income per person doubles about every 60 years. b. In some countries real income per person has changed very little over many years. c. Across countries there are large differences in the average income per person. These differences are reflected in large differences in the quality of life. d. The ranking of countries by average income changes substantially over time.

a. With a growth rate of about 2 percent per year, average income per person doubles about every 60 years.

6. Suppose in 2012, you purchased a house built in 2003. Which of the following would be included in the gross domestic product for 2012. a. the value of the services of the real estate agent b. the value of the house in 2012 c. the value of the house in 2003 d. the value of the house in 2012 minus depreciation

a. the value of the services of the real estate agent

18. If an economy is producing efficiently, then a. there is no way to produce more of one good without producing less of another good. b. it is not possible to produce more of any good at any cost. c. it is possible to produce more of one good without producing less of another good. d. it is possible to produce more of both goods without increasing the quantities of inputs that are being used.

a. there is no way to produce more of one good without producing less of another good.

mid 2: 4. In the 1800s, Europeans purchased stock in American companies that used the funds to build railroads and factories. The Europeans who did this engaged in a. foreign indirect investment. b. foreign portfolio investment. c. indirect domestic investment. d. foreign direct investment.

b. foreign portfolio investment.

mid 2: 23. The supply of loanable funds is upward sloping if the ________ the interest rate, the ________ the share of their incomes that households will save, and the ________ the quantity supplied of loanable funds a. lower; smaller; greater b. higher; greater; greater c. higher; smaller; greater d. lower; greater; greater

b. higher; greater; greater

mid 2: 22. In a small closed economy investment is $50 billion and private saving is $45 billion. What are public saving and national saving? a. $5 billion and $45 billion b. -$5 billion and $50 billion c. $5 billion and $50 billion d. -$5 billion and $45 billion

c. $5 billion and $50 billion

Ch. 11: 4. Which of the following is not included in M1? a. a $5 bill in your wallet b. $100 in your checking account c. $500 in your savings account d. All of the above are included in M1.

c. $500 in your savings account

mid 2: 2. You are tearing down a building and find $1 in change that someone lost when working on the building 140 years ago. If, instead of being careless with the $1 in change, this person had deposited it into a bank and earned 2 percent interest every year for 140 years, how much would be in the account today according to the rule of 70? a. $8 b. $32 c. $4 d. $16

d. $16

35. If a pizza maker pays $1 for tomatoes, $1 for cheese, and $2 for sausage, all of which were produced in the U.S., and sells the pizza made with these ingredients for $7, then these activities contribute how much to current year GDP? a. $3 b. $11 c. $4 + the wages it paid its own employees d. $7

d. $7

29. Consider Noah's decision to go to college. If he goes to college, he will spend $80,000 on tuition, $15,000 on room and board, and $4,000 on books. If he does not go to college, he will earn $22,000 working in a store and he will spend $13,000 on room and board. Noah's cost of going to college is a. $108,000. b. $121,000. c. $99,000. d. $103,000.

a. $108,000.

mid 2: 53. Yoyo's Frozen Yogurt, Inc. is thinking of building a new warehouse. They believe that this will give them $50,000 of additional revenue at the end of one year, $60,000 additional revenue at the end of two years, and $70,000 in additional revenue at the end of three years. If the interest rate is 5 percent, To build the warehouse now, Yoyo would be willing to pay a. $160,000, but not $170,000. b. $170,000, but not $180,000. c. $140,000, but not $150,000. d. $150,000, but not $160,000

a. $160,000, but not $170,000.

mid 2: 48. Suppose the economy is closed with national saving of $3 trillion, consumption of $10 trillion, and government purchases of $4 trillion. What is GDP? a. $17 trillion b. $11 trillion c. $9 trillion d. $3 trillion

a. $17 trillion

mid 2: 13. If the CPI was 95 in 1955 and is 475 today, then $100 today purchases the same amount of goods and services as a. $20.00 purchased in 1955. b. $4.75 purchased in 1955. c. $500 purchased in 1955. d. $95.00 purchased in 1955.

a. $20.00 purchased in 1955.

Ch. 11: 10. Suppose the Fed requires banks to hold 9 percent of their deposits as reserves. A bank has $18,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have to lend out if it decides to hold only required reserves? a. $27,000 b. $27,190 c. $26,190 d. $9,000

a. $27,000

mid 2: 16. Sari puts $100 into an account with an interest rate of 10 percent. According to the rule of 70, about how much does she have at the end of 21 years? a. $800 b. $210 c. $1,010 d. $300

a. $800

51. Peg's Nail salon did 4,000 manicures in the year 2000 and 4,500 manicures in the year 2001. The price of a manicure was $20 in 2000 and $22 in 2001. If the year 2000 is the base year, Peg's contribution to real GDP in 2001 was _____ and to nominal GDP in 2001 was _____. a. $90,000; $99,000 b. $80,000;$88,000 c. $80,000; $99,000 d. $99,000; $99,000

a. $90,000; $99,000

Ch. 11: 15. Which of the following is correct? a. A bank's deposits at the Federal Reserve count as part of the bank's reserves. The Federal Reserve now pays interest on these deposits. b. A bank's deposits at the Federal Reserve count as part of the bank's reserves. The Federal Reserve does not pay interest on these deposits. c. A bank's deposits at the Federal Reserve do not count as part of the bank's reserves. The Federal Reserve pays interest on these deposits. d. A bank's deposits at the Federal Reserve do not count as part of the bank's reserves. The Federal Reserve does not pay interest on these deposits.

a. A bank's deposits at the Federal Reserve count as part of the bank's reserves. The Federal Reserve now pays interest on these deposits.

15. Suppose that demand for a good decreases and, at the same time, supply of the good decreases. What would happen in the market for the good? a. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. b. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous. c. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous. d. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.

a. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.

36. GDP is not a perfect measure of well-being; for example, a. GDP fails to account for the quality of the environment. b. GDP places too much emphasis on the value of leisure. c. GDP incorporates a large number of non-market goods and services that are of little value to society. d. All of the above are correct.

a. GDP fails to account for the quality of the environment.

30. Which is the best example of a macroeconomics question? a. How does government deficit spending affect the rate of inflation? b. How would an increase in the minimum wage affect the price of fast food hamburgers? c. How would a severe freeze in Florida affect the price of orange juice? d. How would a limit on imports of automobiles affect the price of American cars?

a. How does government deficit spending affect the rate of inflation?

mid 2: 49. The level of real GDP person a. and the growth rate of real GDP per person vary widely across countries. b. differs widely across countries, but the growth rate of real GDP per person has been similar across countries. c. is very similar across countries, but the growth rate of real GDP per person has differed widely across countries. d. and the growth rate of real GDP per person are similar across countries

a. and the growth rate of real GDP per person vary widely across countries.

mid 2: 18. Which of the following is an example of physical capital? a. bulldozers, backhoes and other construction equipment b. a taxi-cab driver's knowledge of the fastest routes to take c. the available knowledge on how to make semiconductors d. All of the above are correct.

a. bulldozers, backhoes and other construction equipment

50. According to the circular-flow diagram, GDP a. can be computed as either the revenue firms receive from the sales of goods and services or as the amount that is spent on goods and services. b. can be computed as the revenue firms receive from the sales of goods and services minus the payments they make to factors of production. c. can be computed as the payments firms make to factors of production, but not as revenues they receive from the sales of goods and services. d. can be computed as payments firms make to factors of production plus revenues they receive from the sales of goods and services.

a. can be computed as either the revenue firms receive from the sales of goods and services or as the amount that is spent on goods and services

mid 2: 27. In 2010, Acme Foods produced 300,000 bags of pretzels, employing 12,000 hours of labor. In 2011, it produced 322,000 bags of pretzels, employing 14,000 hours of labor. Acme Foods productivity a. decreased by 8%. b. was unchanged. c. increased by 6.8%. d. increased by 7.3%.

a. decreased by 8%.

mid 2: 5. Suppose that efficiency wages become more common in the economy. Imposing efficiency wages a. decreases the quantity demanded and increases the quantity supplied of labor. b. increases the quantity demanded and decreases the quantity supplied of labor. c. decreases the quantity demanded and increases the quantity supplied of labor. d. increases the quantity demanded and decreases the quantity supplied of labor.

a. decreases the quantity demanded and increases the quantity supplied of labor.

mid 2: 25. Unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills is called a. frictional unemployment. b. the natural rate of unemployment. c. cyclical unemployment. d. structural unemployment.

a. frictional unemployment.

mid 2: 24. When the quality of a good improves while its price remains the same, the purchasing power of the dollar a. increases, so the CPI overstates the change in the cost of living if the quality change is not accounted for. b. decreases, so the CPI understates the change in the cost of living if the quality change is not accounted for. c. increases, so the CPI understates the change in the cost of living if the quality change is not accounted for. d. decreases, so the CPI overstates the change in the cost of living if the quality change is not accounted for.

a. increases, so the CPI overstates the change in the cost of living if the quality change is not accounted for.

mid 2: 36. Crowding out occurs when a. investment declines because a budget deficit makes interest rates rise. b. investment increases because a budget surplus makes interest rates rise. c. investment increases because a budget surplus makes interest rates fall. d. investment declines because a budget deficit makes interest rates fall.

a. investment declines because a budget deficit makes interest rates rise.

40. An increase in quantity demanded a. is a movement downward and to the right along a demand curve. b. shifts the demand curve to the right. c. shifts the demand curve to the left. d. is a movement upward and to the left along a demand curve.

a. is a movement downward and to the right along a demand curve.

Ch. 11: 14. When the Fed purchases $1000 worth of government bonds from the public, the U.S. money supply eventually increases by a. more than $1000. b. exactly $1000. c. less than $1000. d. None of the above are correct.

a. more than $1000.

mid 2: 29. Christopher is an unpaid, stay-at-home father who works as a volunteer at the local Habitat for Humanity chapter. Currently, Christopher is not looking for a paid job. The Bureau of Labor Statistics counts Christopher as a. neither in the labor force nor unemployed. b. unemployed and in the labor force. c. unemployed but not in the labor force. d. in the labor force but not unemployed.

a. neither in the labor force nor unemployed.

28. The GDP deflator is the a. ratio of nominal GDP to real GDP multiplied by 100 b. difference between real GDP and nominal GDP multiplied by 100 c. difference between nominal GDP and real GDP multiplied by 100 d. ratio of real GDP to nominal GDP multiplied by 100

a. ratio of nominal GDP to real GDP multiplied by 100

24. In a production possibilities frontier diagram, points inside the frontier a. represent inefficient or wasteful allocations of resources b. have no meaningful interpretation c. represent combinations of goods that cannot be attained with current resources d. represent possible efficient allocations of resources

a. represent inefficient or wasteful allocations of resources

mid 2: 32. Suppose a government that taxed all interest income changed its tax law so that the first $5,000 of a taxpayer's interest income was tax free. This would shift the a. supply of loanable funds to the right, causing interest rates to fall. b. supply of loanable funds to the left, causing interest rates to rise. c. demand for loanable funds to the right, causing interest rates to rise. d. demand for loanable funds to the left, causing interest rates to fall.

a. supply of loanable funds to the right, causing interest rates to fall.

mid 2: 33. The CPI is more commonly used as a gauge of inflation than the GDP deflator is because a. the CPI better reflects the goods and services bought by consumers. b. the GDP deflator cannot be used to gauge inflation. c. the CPI is calculated more often than the GDP deflator is. d. the CPI is easier to measure

a. the CPI better reflects the goods and services bought by consumers.

34. Opportunity cost is defined as a. the highest valued alternative that must be given up to engage in an activity b. the total value of all alternatives that must be given up to engage in an activity c. the benefit of an activity d. the monetary expense associated with an activity

a. the highest valued alternative that must be given up to engage in an activity

13. A steel company sells some steel to a bicycle company for $150. The bicycle company uses the steel to produce a bicycle, which it sells for $250. Both companies operate in the US. Taken together, these two transactions contribute a. between $250 and $400 to GDP, depending on the profit earned by the bicycle company when it sold the bicycle. b. $250 to GDP. c. $400 to GDP. d. $150 to GDP.

b. $250 to GDP.

Ch. 11: 9. A bank has $500,000 in deposits and $475,000 in loans. It has loaned out all it can. This implies that it has a required reserve ratio of a. 2.5 percent. b. 5 percent. c. 9.5 percent. d. 25 percent.

b. 5 percent.

mid 2: 39. Which of the following can explain why some countries have not experienced relatively high growth rates in real GDP per capita despite relatively low initial levels of real GDP per capita? a. Countries that are relatively poor are more likely to experience wars and revolutions. b. All of the above c. Countries that are relatively poor have a difficult time generating savings, and many have not welcomed foreign investment. d. Many of these developing countries do not have a functioning court system that can effectively enforce laws.

b. All of the above

37. If General Motors, a U.S. corporation, produces automobiles in China and sells them in South Korea, the value of the automobile output is included in a. South Korea GDP b. China GDP c. China GNP d. Both U.S. and China GDP

b. China GDP

33. Which of the following is not true about most economic models? a. They involve mathematical or graphical representations of economic relationships b. Economists always prefer more complex models to simpler ones c. They are often used to predict the effects of policy changes d. They are built on the assumption that people behave rationally

b. Economists always prefer more complex models to simpler ones

mid 2: 19. Fran buys 1,000 shares of stock issued by Miller Brewing. In turn, Miller uses the funds to buy new machinery for one of its breweries. In the terminology of macroeconomics a. Fran is investing; Miller is saving. b. Fran is saving; Miller is investing. c. Fran and Miller are both saving. d. Fran and Miller are both investing.

b. Fran is saving; Miller is investing.

Ch. 11: 3. Which of the following functions of money is also a common function of most other financial assets? a. a unit of account b. a store of value c. medium of exchange d. None of the above is correct.

b. a store of value

12. In a simple circular-flow diagram, total income and total expenditure are a. equal only when the government purchases no goods or services. b. always equal because every transaction has a buyer and a seller. c. seldom equal because of the ongoing changes in an economy's unemployment rate. d. never equal because total income always exceeds total expenditure.

b. always equal because every transaction has a buyer and a seller.

25. Supply curves usually slope upward because a. an increase in input prices increases supply b. an increase in price gives producers incentive to supply a larger quantity c. a decrease in input prices decreases supply d. as more is produced, per unit costs of production fall

b. an increase in price gives producers incentive to supply a larger quantity

Ch. 11: 6. In a system of 100-percent-reserve banking, a. banks do not accept deposits. b. banks do not influence the supply of money. c. loans are the only asset item for banks. d. All of the above are correct.

b. banks do not influence the supply of money.

mid 2: 17. President Bigego is running for re-election against Senator Pander. Bigego proclaims that more people are working now than when he took office. Pander says that the unemployment rate is higher now than when Bigego took office. You conclude that a. both of them could be telling the truth if the labor force grew slower than employment. b. both of them could be telling the truth if the labor force grew faster than employment. c. one of them must be lying. d. both of them could be telling the truth if the labor force, and employment grew at the exact same rate.

b. both of them could be telling the truth if the labor force grew faster than employment.

mid 2: 38. Some persons are counted as out of the labor force because they have made no serious or recent effort to look for work. However, some of these individuals may want to work even though they are too discouraged to make a serious effort to look for work. If these individuals were counted as unemployed instead of out of the labor force, then a. both the unemployment rate and labor-force participation rate would be lower. b. both the unemployment rate and labor-force participation rate would be higher. c. the unemployment rate would be lower, and the labor-force participation rate would be higher. d. the unemployment rate would be higher ,and the labor-force participation rate would be lower.

b. both the unemployment rate and labor-force participation rate would be higher.

mid 2: 7. Suppose that an increase in capital per hour worked from $15,000 to $20,000 increases real GDP per hour worked by $500. If capital per hour worked increases further to $25,000, by how much would you expect real GDP per hour worked to increase if there are diminishing returns? a. by exactly $500 b. by less than $500 c. by more than $500 but less than $5,000 d. by more than $5,000 but less than $20,000

b. by less than $500

Ch. 11: 8. Which of the following is a liability of a bank and an asset of its customers? a. deposits of its customers and loans to its customers b. deposits of its customers but not loans to its customers c. loans of its customers but not the deposits of its customers d. neither the deposits of its customers nor the loans to its customers

b. deposits of its customers but not loans to its customers

mid 2: 51. Financial intermediaries are a. a more general name for financial assets such as stocks, bonds, and checking accounts. b. financial institutions through which savers can indirectly provide funds to borrowers. c. the same as financial markets. d. individuals who make profits by buying a stock low and selling it high.

b. financial institutions through which savers can indirectly provide funds to borrowers.

Ch. 11: 5. An open-market purchase a. increases the number of dollars and the number of bonds in the hands of the public. b. increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public. c. decreases the number of dollars and the number of bonds in the hands of the public. d. decreases the number of dollars in the hands of the public and increases the number of bonds in the hands of the public.

b. increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public.

mid 2: 21. The slope of the demand for loanable funds curve represents the a. positive relation between the real interest rate and saving. b. negative relation between the real interest rate and investment. c. negative relation between the real interest rate and saving. d. positive relation between the real interest rate and investment.

b. negative relation between the real interest rate and investment.

mid 2: 50. The logic behind the catch-up effect is that a. the capital stock in rich countries deteriorates at a higher rate because it already has a lot of capital. b. new capital adds more to production in a country that doesn't have much capital than in a country that already has much capital. c. workers in countries with low incomes will work more hours than workers in countries with high incomes. d. None of the above is correct.

b. new capital adds more to production in a country that doesn't have much capital than in a country that already has much capital.

42. Transfer payments are a. included in GDP because they represent income to individuals. b. not included in GDP because they are not payments for currently produced goods or services. c. included in GDP because they eventually will be spent on consumption. d. not included in GDP because taxes will have to be raised to pay for them.

b. not included in GDP because they are not payments for currently produced goods or services.

8. What would happen to the equilibrium price and quantity in the market for oak tables if the price of maple tables rises and the price of oak wood rises? a. price will fall, and the effect on quantity is ambiguous b. price will rise, and the effect on quantity is ambiguous c. quantity will rise, and the effect on price is ambiguous d. quantity will fall, and the effect on prices is ambiguous

b. price will rise, and the effect on quantity is ambiguous

27. The principle of opportunity cost says that a. every costly activity also represents an opportunity for profit. b. the cost of doing anything is the value of what must be foregone c. the cost of production varies depending on the opportunity for technological application. d. taking advantage of investment opportunities involves costs.

b. the cost of doing anything is the value of what must be foregone

Ch. 11: 2. Economists use the word "money" to refer to a. income generated by the production of goods and services. b. those assets regularly used to buy goods and services. c. financial assets such as stocks and bonds. d. any type of wealth.

b. those assets regularly used to buy goods and services.

Ch. 11: 12. Suppose a bank is operating with a leverage rate of 10. A 6 percent increase in the value of its assets a. will reduce liabilities by 6 percent. b. will result in a 60 percent increase in owner's equity. c. will result in a 60 percent decrease in owner's equity. d. will reduce liabilities by 10 percent.

b. will result in a 60 percent increase in owner's equity.

Ch. 11: 7. If a bank that desires to hold no excess reserves and has just enough reserves to meet the required reserve ratio of 15 percent receives a deposit of $600, it has a a. $600 increase in excess reserves and no increase in required reserves. b. $600 increase in required reserves and no increase in excess reserves. c. $510 increase in excess reserves and a $90 increase in required reserves. d. $90 increase in excess reserves and a $510 increase in required reserves.

c. $510 increase in excess reserves and a $90 increase in required reserves.

mid 2: 15. Over the last century, U.S. real GDP per person grew at a rate of about a. 2 percent per year, so that it is now 2 times as high as it was a century ago. b. 4 percent per year, so that it is now 8 times as high as it was a century ago. c. 2 percent per year, so that it is now 8 times as high as it was a century ago. d. 4 percent per year, so that it is now 2 times as high as it was a century ago.

c. 2 percent per year, so that it is now 8 times as high as it was a century ago.

mid 2: 20. If the inflation rate is 5 percent and a $1000 bank deposit increases in one year to $1120, then the real interest rate for that deposit is a. 12 percent b. 12.5 percent c. 7 percent d. 7.2 percent

c. 7 percent

11. A common challenge to economists is to determine whether an association between two variables reflects a causal relationship between them. Why is this such a difficult problem? a. Economists rarely have the opportunity to run controlled experiments in realistic situations b. Sometimes causal relationships run in both directions (such as between frequency of exercise and good health), making is difficult to measure either relationship individually c. All of the above d. Two variables might move together over time because some omitted variable is causing both to change

c. All of the above

39. A barber currently cuts hair for 50 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand? a. It depends on the average cost of serving more clients and the average revenue he will earn from serving more clients. b. Yes, because cutting hair is profitable. c. It depends on the marginal cost of serving more clients and the marginal revenue he will earn from serving more clients. d. No, because he may not be able to sell more services.

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

38. Economists face an obstacle that many other scientists do not face. What is that obstacle? a. The scientific method cannot be applied to the study of economics. b. Economics cannot be addressed objectively; it must be addressed subjectively. c. It is often impractical to perform experiments in economics. d. It is often difficult to formulate theories in economics.

c. It is often impractical to perform experiments in economics.

Ch. 11: 16. The banking system currently has $100 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 10 percent. If the Fed lowers the reserve requirement to 5 percent and at the same time buys $10 billion worth of bonds, then by how much does the money supply change? a. It rises by $200 billion. b. It rises by $800 billion. c. It rises by $1,200 billion. d. None of the above is correct.

c. It rises by $1,200 billion.

Mid 2: 8. Which of the following is true about the U.S. labor force participation rate since 1950? a. Since about 1990, females have participated at the same rates as males. b. Female participation rates have risen steadily throughout the entire period. c. Male participation rates have been falling throughout the period d. Prior to the Great Recession, overall participation had been constant throughout the period

c. Male participation rates have been falling throughout the period

mid 2: 52. You observe a closed economy that has a government deficit and positive investment. Which of the following is correct? a. Both private saving and public saving are negative. b. Private saving is negative; public saving is positive. c. Private saving is positive; public saving is negative. d. Private and public saving are both positive.

c. Private saving is positive; public saving is negative.

44. The local car dealership has an increase in inventory of 100 newly produced cars in 2015. In 2016, it sells all 100 cars. Which of the following statements is correct? a. The value of the cars in inventory will not affect 2015 GDP, and the value of the cars sold in 2016 will not increase 2016 GDP. b. The value of the cars in inventory will not affect 2015 GDP, and the value of the cars sold in 2016 will increase 2016 GDP. c. The value of the cars in inventory will be counted as part of 2015 GDP, and the value of the cars sold in 2016 will not increase 2016 GDP. d. The value of the cars in inventory will be counted as part of 2015 GDP, and the value of the cars sold in 2016 will increase 2016 GDP.

c. The value of the cars in inventory will be counted as part of 2015 GDP, and the value of the cars sold in 2016 will not increase 2016 GDP.

mid 2: 26. Matilda just graduated from college. In order to devote all her efforts to college, she didn't hold a job. She is going to tour around the country on her motorcycle for a month before she starts looking for work. Other things the same, the unemployment rate a. increases, and the labor-force participation rate is unaffected. b. and the labor-force participation rate both increase. c. and the labor-force participation rate are both unaffected. d. increases, and the labor-force participation rate decreases.

c. and the labor-force participation rate are both unaffected.

Ch. 11: 13. Traditionally, the Fed's primary tool to change the money supply is a. changing the interest rate on reserves. b. changing the reserve requirement. c. conducting open market operations. d. redeeming Federal Reserve notes.

c. conducting open market operations.

mid 2: 1. Northwest Wholesale Foods sells common stock. The company is using a. debt financing and the return shareholders earn depends on how profitable the company is. b. debt financing and the return shareholders earn is fixed. c. equity financing and the return shareholders earn depends on how profitable the company is. d. equity financing and the return shareholders earn is fixed.

c. equity financing and the return shareholders earn depends on how profitable the company is.

21. According to economic theory, the fact that the price of a diamond is far higher than the price of a bottle of water indicates that a. market prices frequently bear little relationship to underlying value. b. government regulation is keeping the price of water low because it is necessary for life. c. for people who buy both, the marginal value of a diamond is far higher than the marginal value of a bottle of water. d. producers of diamonds are exploiting market power to take advantage of consumers.

c. for people who buy both, the marginal value of a diamond is far higher than the marginal value of a bottle of water.

mid 2: 6. An increase in the price of imported coffee shows up a. in neither the consumer price index nor in the GDP deflator. b. in the GDP deflator, but not in the consumer price index. c. in the consumer price index, but not in the GDP deflator. d. in the consumer price index and in the GDP deflator.

c. in the consumer price index, but not in the GDP deflator.

mid 2: 42. On a production function, as capital per worker increases, output per worker a. decreases. This decrease is larger at larger value of capital per worker. b. increases. This increase is larger at larger values of capital per worker. c. increases. This increase is smaller at larger values of capital per worker. d. decreases. This decrease is smaller at larger value of capital per worker.

c. increases. This increase is smaller at larger values of capital per worker.

43. For economists, a positive statement a. provides a justification for an existing economic policy b. makes a claim about how the world ought to be c. makes a claim about how the world is d. puts the best possible interpretation on things

c. makes a claim about how the world is

Ch. 11: 1. As opposed to a payments system based on barter, a payments system based on money a. requires a double coincidence of wants. b. leads to less specialization. c. makes trades less costly. d. None of the above is correct.

c. makes trades less costly.

20. Pollution regulations may produce a cleaner environment and improved health, but they might also increase production costs leading to higher prices and lower profits for the regulated firms. This statement illustrates the principle that a. trade can make everyone better off. b. people respond to incentives. c. people face tradeoffs. d. rational people think at the margin.

c. people face tradeoffs.

49. The production possibilities frontier is a graph that shows the various combinations of output that an economy can possibly produce given the available factors of production and a. the available demand for the output. b. society's preferences. c. the available production technology. d. a fair distribution of the output.

c. the available production technology.

10. Hamid spends an hour studying instead of watching TV with his friends. The opportunity cost to him of studying is a. zero. Since Hamid chose to study rather than to watch TV, the value of studying must have been greater to him than the value of watching TV. b. the improvement in his grades from studying minus the enjoyment of watching TV. c. the enjoyment he would have received if he had watched TV with his friends. d. the improvement in his grades from studying for the hour.

c. the enjoyment he would have received if he had watched TV with his friends.

48. When computing the opportunity cost of attending a basketball game you should include a. the value of your time, but not the price you pay for the ticket. b. the price you pay for the ticket, but not the value of your time. c. the price you pay for the ticket and the value of your time. d. neither the price of the ticket nor the value of your time.

c. the price you pay for the ticket and the value of your time.

22. Value added for a firm equals its revenue from sales minus a. depreciation on plant and equipment. b. the price of all factors of production. c. what it pays for intermediate goods. d. wages and salaries.

c. what it pays for intermediate goods.

mid 2: 12. Other things the same, an increase in the interest rate a. would shift the demand for loanable funds to the right. b. would increase the quantity of loanable funds demanded. c. would decrease the quantity of loanable funds demanded. d. would shift the demand for loanable funds to the left.

c. would decrease the quantity of loanable funds demanded.

mid 2: 46. Which of the following is correct? a. Unpaid homemakers are counted as "employed" by the Bureau of Labor Statistics. b. The labor force includes all adults who are able to work. c. The Bureau of Labor Statistics uses data collected from those applying for unemployment insurance to compute the unemployment rate. d. People working part time are counted as "employed" by the Bureau of Labor Statistics.

d. People working part time are counted as "employed" by the Bureau of Labor Statistics.

mid 2: 14. Which of the following is true of discouraged workers, as defined by the Bureau of Labor Statistics? a. They are counted as part of the labor force b. They are dissatisfied with their current jobs and are considering quitting c. They are working part-time but would like full-time work d. They have not looked for work in the last 4 weeks, but would like a job and are available for work

d. They have not looked for work in the last 4 weeks, but would like a job and are available for work

32. In 2010, Hooverville consumed 205,000 tons of sugar. In 2011, sugar consumption rose to 245,000 tons. Which is the correct formula for the percentage change in sugar consumption? a. [(245,000-205,000)/(205,000+245,000)] x 100 b. [(205,000-245,000)/245,000] x 100 c. [(245,000-205,000)/245,000] x 100 d. [(245,000-205,000)/205,000] x 100

d. [(245,000-205,000)/205,000] x 100

14. If macaroni and cheese is an inferior good, then an increase in a. a consumer's income will cause the demand curve for macaroni and cheese to shift to the right. b. the price will cause the demand curve for macaroni and cheese to shift to the left. c. the price will cause the demand curve for macaroni and cheese to shift to the right. d. a consumer's income will cause the demand curve for macaroni and cheese to shift to the left.

d. a consumer's income will cause the demand curve for macaroni and cheese to shift to the left.

mid 2: 40. All of the following may create upward bias in the CPI for measuring changes in the price level, except a. consumers tend to substitute away from products whose prices are increasing relatively rapidly b. new products that appear over time are not immediately included in the CPI market basket c. the BLS may be slow to take account of consumers' shopping for many items online to get better prices d. food producers have been reducing the standard size of many products , such as cookies and potato chips, which the BLS has not taken into account

d. food producers have been reducing the standard size of many products , such as cookies and potato chips, which the BLS has not taken into account

mid 2: 44. Among the following, which is the best measure of how the level of well-being in a country has changed over time? a. growth rate of real GDP. b. growth rate of nominal GDP. c. level of nominal GDP per person. d. growth rate of real GDP per person.

d. growth rate of real GDP per person.

mid 2: 45. Because different countries use different currencies, comparisons of real GDP across countries usually use the concept of "purchasing power parity." This means a. using official poverty income levels in different countries to convert all currencies to dollars b. converting all other currencies to dollars using official exchange rates c. using the price of gold in different currencies to convert all to dollars d. pricing the same market basket in different countries to convert other currencies to dollars

d. pricing the same market basket in different countries to convert other currencies to dollars

9. When economists say demand is downward sloping, they mean that a. for most products, demand is smaller among those with lower incomes b. demand curves tend to shift outward over time in a predictable way c. demand for a product tends to fall over time as better substitutes become available d. quantity demanded is larger at lower prices, ceteris paribus

d. quantity demanded is larger at lower prices, ceteris paribus

mid 2: 10. Workers and management agree on a contract that gives a 5% wage increase for each of the next three years. Everyone expected 3% inflation but inflation turned out to be 5% per year. Then at the end of three years a. real wages will be higher than was expected. b. real wages will have fallen c. nominal and real wages will have changed by the same percentage. d. real wages will be lower than was expected.

d. real wages will be lower than was expected.

23. In economics, the cost of something is a. always measured in units of time given up to get it. b. the dollar amount necessary to obtain it. c. often impossible to quantify, even in principle. d. the value of what you give up to get it.

d. the value of what you give up to get it.