Econ 1000 Exam 2 Questions Review

8) Which is the Following is NOT a tool used by the Federal Reserve to manage the money supply: A) Tax on Deposits B) Open Market Operations C) Reserve Requirements D) Discount Rate

A

Between August 2014 and August 2016 there was an increase in both price and quantity traded of corn. This change in market equilibrium outcome would result from A. an increase in Demand. B. a decrease in Demand. C. an increase in Supply. D. a decrease in Supply.

A

Consider the market for oranges. If there is "excess demand" at a price of $2.35, then the equilibrium price must be: A. above $2.35. B. exactly equal to $2.35. C. below $2.35. D. None of the above answers are correct (since more information is needed to answer this question).

A

If a Retiree is living on a Fixed Income consisting of a pension and Social Security, if the economy experienced Deflation, with regard to their purchasing power, that person would be: A) Better Off B) Worse Off C) No Change in purchasing power D) Cannot tell from information given

A

If a group of people were shipwrecked on an island and they only produced 200 bananas, 500 coconuts and 180 Mangos and right before they left for their boat trip, they went to the supermarket and determined that the prices for these items respectively were Bananas - $1.75 each, Coconuts - $1.45 each and Mangos - $4.25 each, excluding any other items the total GDP for this three product economy right now would be: A) $1,840 B) $1,336 C) $1,780 D) $1,990

A

In a free market, the equilibrium quantity of trade and equilibrium price of a good are determined by A. the interaction of both self-interested buyers and self-interested sellers in the marketplace. B. only the buyers in the market. C. only the sellers in the market. D. neither buyers nor sellers, but rather by a government bureaucrat.

A

Supply A. refers to the entire relationship between the price of a good and the number of units that firms are willing and able to sell, all other factors fixed. B. refers to the amount of a good that firms are willing to sell at the equilibrium price. C. provides a summary of the behavior of buyers in a market. D. More than one (perhaps all) of the above answers is correct.

A

The Basic Circular Flow Diagram builds upon the Preliminary Circular Flow Diagram by A. adding an illustration of the movement of money between households and firms, which facilitates the voluntary transfer of economic resources. B. adding an illustration of how equilibrium price and quantity are each determined in a market. C. adding an illustration of the role of government in collecting taxes from firms and households. D. deleting the illustration of the role played by firms in the economy.

A

The vicious-cycle-of-poverty A. suggests that poverty is self-perpetuating, because poor countries do not have sufficient resources available to make the investments in capital which are necessary for economic growth. B. is apparently true, since every country that was poor a century ago is still poor today. C. has no merit whatsoever, since even poor societies typically have an overabundance of financial capital. D. More than one (perhaps all) of the above answers is correct.

A

_______________ refers to the tendency for wealthy people in poor countries to invest their financial resources abroad instead of at home A. Capital flight B. The brain drain C. The vicious-cycle-of-poverty D. Crony Capitalism

A

A "seller's reservation price" A. refers to the maximum dollar amount a buyer is willing to pay for an item. B. refers to the minimum dollar amount a seller is willing to accept in exchange for an item. C. is visually illustrated by the vertical distance between the demand curve and the supply curve. D. More than one (perhaps all) of the above answers is correct.

B

An increase in income will result in a decrease in demand for _______________. A. a normal good B. an inferior good C. a substitute good D. a complementary good

B

Based on the information in the previous question, regarding her purchasing power in 2016 vs 2010, is Susan: A) Better Off B) Worse Off C) The Same D) Cannot tell from the information provided.

B

Economic Growth is A. simply a result of whether or not a country has access to natural resources (and is therefore simply determined by "chance" or "nature"). B. defined as a sustained increases over time in a society's value of real GDP. C. visually illustrated by an inward shift of the Production Possibilities Frontier. D. More than one (perhaps all) of the above answers is correct.

B

If a Retiree is living on a Fixed Income consisting of a pension and Social Security, if the economy experienced inflation, with regard to their purchasing power, that person would be: A) Better Off B) Worse Off C) No Change in purchasing power D) Cannot tell from information given

B

If the economy is experiencing inflation, over the long term it is in your best interest to hold onto: A) Hard currency under your mattress B) Gold or Real Estate C) Long term loans to other people D) None of the above

B

In a "free market economy" profits A. refer to the "gain" that a buyer gets from purchasing a good/service. B. serve as a "signaling device," directing resources to their most valued uses. C. are only earned by firms who exploit workers. D. More than one (perhaps all) of the above answers is correct.

B

In the US, if the Federal Reserve increases the supply of money then it is most likely that (hint: on a separate piece of paper draw a diagram of a Demand and Supply Curve for Money): A) The Demand Curve for money will shift to the Right and Interest Rates will rise to higher equilibrium point B) The Supply Curve for money will shift to the Right and Interest Rates will fall to a lower equilibrium point C) The Loanable Funds market will shrink D) The Economy will contract

B

Last weekend Brenda won $1,500 at a casino in Biloxi, Mississippi. She decided to use the money to purchase a new TV from Walmart. She was able to use the money to acquire the new TV since money serves as a A. contract. B. medium of exchange. C. store of value. D. unit of account.

B

Privately owned enterprises in a free market economy have a primary goal of A. exploiting workers. B. earning as large of a profit as possible. C. tricking consumers into thinking that they are "environmentally conscious." D. More than one (perhaps all) of the above answers is correct.

B

Suppose that "County Z" were to realize a constant GDP Growth Rate of 4% per year. Using the Rule of 72, it follows that Real GDP would double in roughly ________ years. A. 4 B. 18 C. 25 D. 72

B

The "Catch-up effect" suggests that, all other factors fixed, A. the global economy is "rigged against new entrants," in that there is no way for poor countries to catch-up with rich countries. B. growth rates of less developed countries typically exceed growth rates of developed countries, implying that the gap in GDP between less developed and developed countries will decrease over time. C. whenever a countries experiences rapid growth in GDP, they must also experience an increase in income inequality. D. the only way for firms in high tech industries to catch-up to their competitors is to invest large amounts of resources in research and development.

B

The height of the demand curve at a particular quantity illustrates A. seller's reservation price for that unit. B. buyer's reservation price for that unit. C. magnitude of excess demand at the market equilibrium. D. spontaneous order.

B

The inflation adjusted purchasing power as expressed in the amount of goods that you can purchase is referred to as: A) Nominal Wealth B) Real Wealth C) Consumer Price Index D) Deflation

B

Which markets are represented in the Basic Circular Flow Diagram? A. Markets for "Imports and Exports" and markets for "Factors of Production." B. Markets for "Goods and Services" and markets for "Factors of Production." C. Markets for "Financial Assets" and markets for "Imports and Exports." D. Markets for "Goods and Services" and markets for "Financial Assets."

B

________________ broadly refers to the knowledge, education, skills, experience, work ethic, inter-personal skills, and other attributes which determine worker productivity. A. Physical Capital B. Human Capital C. Worker Mortality D. Technology

B

________________ refers to an environment in which well-connected unscrupulous business people use corrupt political systems to their advantage in order to obtain preferential treatment from government. A. Rule-of-Law B. Crony Capitalism C. Economic Development D. The Catch-Up Effect

B

__________________ refers to someone who organizes, manages, and assumes the risks of a firm, taking a new idea or a new product and turning it into a successful business. A. An Invisible Hand B. An Entrepreneur C. A Central Planner D. A Social Surplus

B

If in an economy, the money supply is $4 Billion and total GDP for one year is $28 Billion, then the Velocity of money in that economy for that one year must be: A) 12 B) 24 C) 7 D) 10

C

Ilan Moschidae owns Nikola Motors, a company that produces electric cars. He has exploited his political connections in order to get legislators in his state to give Nikola Motors an interest free loan to build a new factory. This appears to be an example of A. economic growth. B. rule-of-law. C. crony capitalism. D. the Rule of 72.

C

One of the principle functions of money is that it serves as a "unit of account." This role could be described by recognizing that money A. is an asset used as payment when purchasing goods and services. B. is an asset that can be used as a means to hold wealth. C. is used as a basic unit of measuring economic activity. D. None of the above answers are correct.

C

Susan earns $40,000 per year in 2010 and she earns $90,000 per year in 2016 and the price index in 2010 is 100 and the Price Index in 2016 is 300. Assuming that every penny of her income in salary is spent on goods that she consumes (ignore taxes obviously), what is the value of goods that she can purchase in 2010 inflation adjusted dollars? A) $90,000 B) $40,000 C) $30,000 D) $120,000

C

The Basic Circular Flow Diagram A. summarizes the different combinations of output that a society could produce, given their currently available productive resources. B. illustrates how Supply and Demand interact to determine the unique equilibrium price and equilibrium quantity in a market. C. illustrates the interaction between households and firms in a simplified free market economy. D. None of the above answers are correct.

C

The entity in a country that has the ability to alter the money supply of an economy is called the: A) Consolidated Banking Regulator B) Comptroller of the Currency C) Central Bank D) Federal Deposit Insurance Corp

C

Which of the following could NOT result in a "Change in Supply" for "MP3 Players"? A. An improvement in the technology used to produce MP3 Players. B. A decrease in the price of plastic (an input used in the production of MP3 Players). C. An increase in the market price of MP3 Players. D. A decrease in the number of sellers of MP3 Players.

C

Which of the following is NOT a requirement of a country utilizing the Gold Standard: A) No Paper Money will be printed without a specific amount of Gold in its vault as security B) Anyone holding paper money has the right to redeem it for a fixed quantity of Gold from the issuing Government C) A country is required to have its own Gold mines D) All of the above are required for a country that is on the Gold Standard

C

_________________ refers to the natural and undirected emergence of order out of chaos. A. Command Planning B. Excess Demand C. Spontaneous Order D. An increase in Demand

C

A society can achieve economic growth by A. making deliberate investments in human capital and physical capital. B. making deliberate investments in overhead capital. C. realizing an improvement in technology. D. More than one (perhaps all) of the above answers is correct.

D

Consider two countries that each have a Per Capita GDP of $10,000 in 2016. Country A realizes a constant 3% increase of Per Capita GDP, while Country B realizes a constant 12% increase of Per Capita GDP. Given these constant rates of increase, in 2040 (i.e., 24 years in the future), Per Capita GDP in Country B will be closest to ________________ Per Capita GDP in Country A. (This one is tricky - Just give it a try) A. exactly equal to B. 2 times greater than C. 4 times greater than D. 8 times greater than

D

During the last several decades, health officials in the United States have argued that eating too much beef might be harmful to humans. As a result, there has been a significant decrease in the amount of beef produced. Which of the following best explains this decrease in production? A. Government officials ordered beef producers to produce relatively less beef (out of concern for consumer health). B. Animal Rights Activists have made it difficult for both buyers and sellers of beef to freely trade the good in free markets. C. Beef producers (whose primary concern is the health of their customers) decided to produce relatively less beef. D. Individual consumers (concerned about their own health) decreased their demand for beef (resulting in a decrease in both the equilibrium price and equilibrium quantity of beef).

D

In an environment where the economy is very strong with high inflation and fears of hyperinflation are rampant, the central bank is most likely to engage in: A) Bank Legislation B) Increased Lending C) Expansionary Monetary Policy D) Contractionary Monetary Policy

D

Qihong was born in China. Throughout his entire life he has excelled academically. After earning a Master's degree from the China University of Mining and Technology in Beijing, he came to the United States to pursue a PhD. Upon completion of his PhD he was hired by a prestigious research university in Oklahoma, where he works to this day. This story provides an illustration of the A. Rule of 72. B. vicious-cycle-of-poverty. C. catch-up effect. D. brain drain.

D

The "Law of Demand" implies that A. if the price of a good increases, then the quantity demanded of the good will decrease. B. demand curves should be "downward sloping." C. demand for a good will increase if consumers realize an increase in income. D. More than one (perhaps all) of the above answers is correct.

D

The term Dual Coincidence of Wants refers to: A) The price of a unit in terms of the value of another unit B) A transaction above a Buyers Reservation price but favorable to a seller C) A transaction below a Sellers Reservation price but favorable to a buyer D) When a barter trade takes place, one side of the transaction has to want what the other side has and vice versa.

D

Which of the following demonstrates the "Law of Demand"? A. After Clarissa got a raise at work, she bought more donuts at $6 per dozen than she did before her raise. B. After the price of flour increased by 12%, Sabrina chose to sell fewer donuts. C. Melissa chooses to sell more donuts at $7.25 per dozen than she chooses to sell at $6.75 per dozen. D. Joan chooses to buy fewer donuts at $9.00 per dozen than she chooses to buy at $7.75 per dozen.

D