econ 203 final exam review

Refer to Figure 4-1. The movement from point A to point B on the graph is caused by a. a decrease in the price of a substitute good. b. a decrease in price. c. an increase in income. d. an increase in price.

a decrease in price.

The law of supply states that, other things equal, when the price of a good a. falls, the quantity supplied of the good rises. b. rises, the supply of the good falls. c. rises, the quantity supplied of the good rises. d. falls, the supply of the good rises.

rises, the quantity supplied of the good rises.

A baker recently has come to expect higher prices for bread in the near future. We would expect a. the demand for bread to fall. b. no change in the baker's current supply of bread; instead, future supply will be affected. c. the baker to supply less bread now than she was supplying previously. d. the baker to supply more bread now than she was supplying previously.

the baker to supply less bread now than she was supplying previously.

In 1931, President Herbert Hoover was paid a salary of $75,000. Government statistics show a consumer price index of 15.2 for 1931 and 237 for 2015. President Hoover's 1931 salary was equivalent to a 2015 salary of about a. $1,057,894. b. $4,965. c. $16,080,001. d. $1,169,408.

$1,169,408.

If the reserve ratio is 5 percent, then $500 of additional reserves would ultimately generate a. $9,500 of money. b. $10,500 of money. c. $2,500 of money. d. $10,000 of money.

$10,000 of money.

You have the afternoon free. You have a choice between going to the movies with a friend or studying economics for three hours. If you go to the movies, you will spend $8.00 on a ticket and $4.50 on popcorn. If you choose to study economics for three hours, you will raise your exam grade by 10 points. Refer to Scenario 1-1. What is your opportunity cost of going to the movies?

$12.50

Based on the quantity equation, if Y = 3,000, P = 3, and V = 4, then M = a. $2,250. b. $250. c. $36,000. d. $4,000.

$2,250.

The following table pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. ​ Refer to Table 24-1. The cost of the basket in Year 1 was a. $200. b. $212.50. c. $235. d .$225.

$225

Figure 30-2 In the graph, MS represents the money supply and MD represents money demand. The vertical axis is the value of money measured as 1/P and the horizontal axis is the quantity of money. ​ Refer to Figure 30-2. Suppose the relevant money-demand curve is the one labeled MD1; also suppose the velocity of money is 4. If the money market is in equilibrium, then the economy's real GDP amounts to a. 2,500. b. 40,000. c. 10,000. d. 7,500.

10,000.

Table 24-2The following table pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. Refer to Table 24-2. If the base year is Year 1, then the CPI in Year 2 was a. 100. b. 90. c. 112.5 d. 88.9.

112.5

In 2011 a country had a real GDP of $13.89 trillion and GDP deflator of 110. In 2012 it had a nominal GDP of $17.8 trillion and real GDP of 14.24 trillion. What is the rate of inflation in 2012?

13.64%

Calculate GDP for an economy with exports of $5 trillion, investment of $1.5 trillion, consumption spending of $11 trillion, imports of $6 trillion, and government purchases of $3 trillion.

14.5 trillion

If the price level increased from 120 to 144, then what was the inflation rate? a. 24 percent b. 25 percent c. 20 percent d. 17 percent

20 percent

A bank has $8,000 in deposits and $6,000 in loans. It has loaned out all it can, given the reserve requirement. It follows that the reserve requirement is a. 75 percent. b. 2.5 percent. c. 25 percent. d. 33.3 percent.

25 percent.

The nominal interest rate is 5 percent and the inflation rate is 2 percent. What is the real interest rate? a. 2.5 percent b. 3 percent c. 7 percent d. 10 percent

3 percent

Suppose that the adult population in the country of Atlantis is 115 million. If 80 million people are employed and 5 million are unemployed, then a. 75 million are in the labor force. b. 35 million are in the labor force. c. 30 million are not in the labor force. d. 35 million are not in the labor force.

30 million are not in the labor force.

Calculate the inflation rate for a country where the GDP deflator rises from 120 to 165.

37.5%

The price index was 120 in Year 1 and 126 in Year 2. What was the inflation rate? a. 6.0 percent b. 7.2 percent c. 5.0 percent d. 105 percent

5.0 percent

Table 23-3 The following table reports nominal and real GDP for the U.S. from 1929 to 1932. Refer to Table 23-3. What are the GDP deflator and the inflation rate for 1931? a. 1091.37, 10.3 b. 9.16, −10.3 c. 9.16, −11.5 d. 1091.37, 11.5

9.16, −10.3

For which of the following individuals would the opportunity cost of going to college be highest? a. A student with average grades who has never held a job b. A famous, highly paid actor who wants to take time away from show business to finish college and earn a degree c. A student who is the best player on his college basketball team, but who lacks the skills necessary to play professional basketball d. A promising young mathematician who will command a high salary once she earns her college degree

A famous, highly paid actor who wants to take time away from show business to finish college and earn a degree

Which of the following is an example of menu costs? a. Decreased savings b. Reduced money holdings c. Advertising new prices d. Wrong consumption decisions

Advertising new prices

Esmerelda worked part-time for her mother's business without pay. Tabitha was absent from work because she had strep throat. Who is counted as "employed" by the Bureau of Labor Statistics? a. Both Esmerelda and Tabitha b. Esmerelda but not Tabitha c. Neither Esmerelda nor Tabitha d. Tabitha but not Esmerelda

Both Esmerelda and Tabitha

Refer to Figure 4-28. Using the points on the figure, describe the change that would occur if consumer incomes increase and this is an inferior good.

C to A

Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market? Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous. a. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous. b. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. c. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous. d. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.

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

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. a. Fran and Miller are both investing. b. Fran is saving; Miller is investing. c. Fran is investing; Miller is saving. d. Fran and Miller are both saving.

Fran is saving; Miller is investing.

Which of the following statements about the term of a bond is correct? a. Interest rates on long-term bonds are usually higher than interest rates on short-term bonds. b. The term of a bond is determined entirely by how much sales commission the buyer of the bond pays when he or she purchases the bond. c. The term of a bond is determined entirely by its credit risk. d. Term refers to the various characteristics of a bond, including its interest rate and tax treatment.

Interest rates on long-term bonds are usually higher than interest rates on short-term bonds.

Meredith is looking for work as a computer programmer. Her prospects are good but so far she has not taken a job. Julie is looking for work in a steel mill. Every time Julie shows up for an interview, there are more people looking for work than there are openings. She realizes that it has been that way for a long time. a. Meredith and Julie are both structurally unemployed. b. Meredith is structurally unemployed, and Julie is frictionally unemployed. c. Meredith is frictionally unemployed, and Julie is structurally unemployed. d. Meredith and Julie are both frictionally unemployed.

Meredith is frictionally unemployed, and Julie is structurally unemployed.

Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time. Which of the following explanations would be most consistent with this observation? a. Consumers have experienced an increase in income, and beef-production technology has improved. b. The demand curve for beef must be positively sloped. c. New medical evidence has been released that indicates a negative correlation between a person's beef consumption and life expectancy. d. The price of chicken has risen, and the price of steak sauce has fallen.

New medical evidence has been released that indicates a negative correlation between a person's beef consumption and life expectancy

Joe and Jim purchase vegetables at a grocery store, but Jim also grows vegetables in his backyard. Regarding these two practices, which of the following statements is correct? a. Only Joe's grocery store purchases are included in GDP. b. Only Joe's and Jim's grocery store purchases are included in GDP. c. Joe's and Jim's grocery store purchases are included in GDP. The vegetables from Jim's backyard garden are included at their market value. d. Joe's and Jim's grocery store purchases are included in GDP. The vegetables from Jim's backyard garden are included at their market value, if Jim provides this information

Only Joe's and Jim's grocery store purchases are included in GDP

Suppose the demand schedule in a market can be represented by the equation QD = 500 - 10P, where QD is the quantity demanded and P is the price. Also, suppose the supply schedule can be represented by the equation QS = 200 + 10P, where QS is the quantity supplied. Refer to Scenario 4-1. What is the equilibrium price in this market?

P=15

Consider the expressions T − G and Y − T − C. Which of the following statements is correct? a. The first of these is public saving; the second one is private saving. b. The first of these is private saving; the second one is public saving. c. Each one of these is equal to public saving. d. Each one of these is equal to national saving.

The first of these is public saving; the second one is private saving.

What basket of goods and services is used to construct the CPI? a. The goods and services that are typically bought by consumers as determined by government surveys b. Only food, clothing, transportation, entertainment, and education c. A random sample of all goods and services produced in the economy d. The least expensive and the most expensive goods and services in each major category of consumer expenditures

The goods and services that are typically bought by consumers as determined by government surveys

Figure 26-1 The figure depicts a demand-for-loanable-funds curve and two supply-of-loanable-funds curves. Refer to Figure 26-1. What is measured along the vertical axis of the graph? a. The interest rate b. The tax rate c. The quantity of investment d. The quantity of saving

The interest rate

After much consideration, you have chosen Ireland over Spain for your Study Abroad program next year. However, the deadline for your final decision is still months away and you may reverse this decision. Which of the following events could prompt you to reverse this decision? a. The marginal cost of going to Ireland decreases. b. The marginal benefit of going to Ireland increases. c. The marginal cost of going to Spain increases. d. The marginal benefit of going to Spain increases.

The marginal benefit of going to Spain increases.

When conducting an open-market purchase, the Fed a. The supply of loanable funds shifted rightward. b. The demand for loanable funds shifted leftward. c. The demand for loanable funds shifted rightward. d. The supply of loanable funds shifted leftward.

The supply of loanable funds shifted rightward.

Janet is a farmer. Which of the following are included in her human capital? a. Her tractor and what she's learned from experience b. Her tractor but not what she's learned from experience c. What she's learned from experience but not her tractor d. Neither her tractor nor what she's learned from experience

What she's learned from experience but not her tractor

Which of the following is not a cause of the decline in the U.S. men's labor-force participation rate over the past several decades? a. Young men now stay in school longer than their fathers and grandfathers did. b. More fathers now stay at home to raise their children. c. Older men now retire earlier and live longer. d. With more women employed, there are fewer jobs now available to men.

With more women employed, there are fewer jobs now available to men.

Jay and Joyce meet George, the banker, to work out the details of a mortgage. They all expect that inflation will be 2 percent over the term of the loan, and they agree on a nominal interest rate of 6 percent. As it turns out, the inflation rate is 5 percent over the term of the loan. a. What was the expected real interest rate? b. What was the actual real interest rate? c. Who benefited and who lost because of the unexpected inflation?

a. The expected real interest rate was 4 percent (6-2). b. The actual real interest rate was 1 percent (6-5). c. George, the banker, lost because he received less real interest income than he expected. Jay and Joyce gained because they paid less real interest income than they expected.

If a surplus exists in a market, then we know that the actual price is a. below the equilibrium price, and quantity supplied is greater than quantity demanded. b. below the equilibrium price, and quantity demanded is greater than quantity supplied. c. above the equilibrium price, and quantity demanded is greater than quantity supplied. d. above the equilibrium price, and quantity supplied is greater than quantity demanded.

above the equilibrium price, and quantity supplied is greater than quantity demanded

If muffins and bagels are substitutes, a higher price for bagels would result in a. a decrease in the demand for muffins. b. a decrease in the demand for bagels. c. an increase in the demand for muffins. d. an increase in the demand for bagels.

an increase in the demand for muffins.

If the government were to intervene in a market economy and fix the price of visiting a health care provider below the market price, then we would expect, relative to the market outcome, a. an increase in the number of visits people want to make and an increase in the number of visits health care providers want to provide. b. a decrease in the number of visits people want to make and an increase in the number of visits health care providers want to provide. c. a decrease in the number of visits people want to make and a decrease in the number of visits health care providers want to provide. d. an increase in the number of visits people want to make and a decrease in the number of visits health care providers want to provide.

an increase in the number of visits people want to make and a decrease in the number of visits health care providers want to provide

GDP per person tells us the income and expenditure of the a. poorest person in the economy. b. richest person in the economy. c. entire economy. d. average person in the economy.

average person in the economy.

Dale is a guitar teacher and Terrence is a tile layer. If Dale teaches Terrence's daughter to play the guitar in exchange for Terrence tiling Dale's kitchen floor, a. both Dale and Terrence are made better off by trade. b. neither Dale nor Terrence are made better off by trade. c. only Dale is made better off by trade. d. only Terrence is made better off by trade.

both Dale and Terrence are made better off by trade.

If the money multiplier is 3 and the Fed wants to increase the money supply by $900,000, it could a. buy $300,000 worth of bonds. b. sell $225,000 worth of bonds. c. buy $225,000 worth of bonds. d. sell $300,000 worth of bonds.

buy $300,000 worth of bonds.

in the United States, if the price of imported oil rises so that the prices of gasoline and heating oil rise, then the a. GDP deflator and the consumer price index rise by about the same amount. b. consumer price index rises much more than does the GDP deflator. c. consumer price index rises slightly more than does the GDP deflator. d. GDP deflator rises much more than does the consumer price index.

consumer price index rises much more than does the GDP deflator.

In an economy where net exports are zero, if saving rises in some period, then in that period a. consumption and investment fall. b. consumption rises and investment falls. c. consumption rises and investment falls. d. consumption falls and investment rises.

consumption falls and investment rises.

List the four components of GDP.

consumption, investment, government spending, and exports

Scenario 26-1. Assume the following information for an imaginary, closed economy. ​ GDP - $100,000 Taxes - $22,000 Government Purchases - $25,000 National Saving - $15,000 ​ Refer to Scenario 26-1. This economy's government is running a budget a. surplus of $3,000. b. deficit of $12,000. c. deficit of $3,000. d. surplus of $12,000.

deficit of $3,000.

Refer to Figure 25-1. The curve becomes flatter as the amount of capital per worker increases because of a. diminishing returns to labor. b. increasing returns to labor. c. diminishing returns to capital. d. increasing returns to capital.

diminishing returns to capital

The property of society getting the most it can from its scarce resources is called a. equality. b. productivity. c. externality. d. efficiency.

efficiency.

The dictator of Turan has recently begun to arbitrarily seize farms belonging to his political opponents, and he has given the farms to his friends. His friends don't know much about farming. The courts in Turan have ruled that the seizures are illegal, but the dictator has ignored the rulings. Other things equal, we would expect that the growth rate in Turan will a. fall and remain lower for a long time. b. increase because the total amount of human capital in the country will increase as the new owners learn how to farm. c. fall temporarily, but will return to where it was when the new owners learn how to farm. d. not be affected unless widespread civil disorder or civil war results.

fall and remain lower for a long time

the law of demand states that, other things equal, when the price of a good a. rises, the demand for the good falls. b. rises, the quantity demanded of the good rises. c. falls, the quantity demanded of the good rises. d. falls, the demand for the good rises.

falls, the quantity demanded of the good rises.

The "invisible hands" ability to coordinate the decisions of the firms and households in the economy can be hindered by a. increased competition in markets. b. enforcement of property rights. c. government actions that distort prices. d. too much attention paid to efficiency.

government actions that distort prices.

If M = 2,000, P = 2.25, and Y = 6,000, what is velocity? a. hold less money. b. spend more time looking for bargains. c. hold more money. d. spend less time looking for bargain

hold less money.

By far the largest category of goods and services in the CPI basket is a. food & beverages. b. housing. c. transportation. d. education & communication.

housing

The "invisible hand" refers to a. how the decisions of households and firms lead to desirable market outcomes. b. how central planners made economic decisions. c. government regulations without which the economy would be less efficient. d. the control that large firms have over the economy.

how the decisions of households and firms lead to desirable market outcomes.

A policy that increases saving will a. improve economic growth but worsen health outcomes. b. worsen economic growth and health outcomes. c. improve economic growth and health outcomes. d. worsen economic growth, but improve health outcomes.

improve economic growth and health outcomes.

For an economy as a whole, a. consumption must equal income. b. income must equal expenditure. c. consumption must equal saving. d. wages must equal profit.

income must equal expenditure.

Trade between countries tends to a. increase competition and reduce specialization. b. reduce competition and increase specialization. c. reduce both competition and specialization. d. increase both competition and specialization.

increase competition and reduce specialization.

A Texas household receives a Social Security check for $1500, which it uses to purchase a $40 pair of shoes made in Thailand by a Thai firm, a $1240 television made by a Korean firm in Korea, and $220 on groceries from a local store. As a result, U.S. GDP a. increases by $280. b. increases by $220. c. increases by $40. d. increases by $1500.

increases by $220

An increase in the overall level of prices in an economy is referred to as a. the income effect. b. inflation. c. the substitution effect. d. deflation.

inflation.

Which component of GDP includes spending on new structures and equipment?

investment

In a closed economy, what remains after paying for consumption and government purchases is a. public saving. b. national saving. c. private saving. d. national disposable income

national saving.

The GDP deflator is the ratio of a. real GDP to nominal GDP multiplied by 100. b. nominal GDP to the inflation rate multiplied by 100. c. nominal GDP to real GDP multiplied by 100. d. real GDP to the inflation rate multiplied by 100.

nominal GDP to real GDP multiplied by 100.

Most economists believe the principle of monetary neutrality is a. unemployed. b. marginally attached worker. c. employed. d. not in the labor force.

not in the labor force.

Candice is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that a. people face tradeoffs. b. people respond to incentives. c. rational people think at the margin. d. improvements in efficiency sometimes come at the expense of equality

people face tradeoffs.

Apple founder Steve Jobs received patents on many of his ideas. While the patents existed, his ideas were a. private goods but not proprietary knowledge. b. public goods but not proprietary knowledge. c. public goods and proprietary knowledge. d. private goods and proprietary knowledge.

private goods and proprietary knowledge

Ashley bakes bread that she sells at the local farmer's market. If she purchases a new convection oven that reduces the costs of baking bread, the a. supply of Ashley's bread will decrease. b. supply of Ashley's bread will increase. c. demand for Ashley's bread will increase. d. demand for Ashley's bread will decrease.

supply of Ashley's bread will increase.

In this market for iPhones, the technology improves while all other factors remain constant. Which curve(s) shift(s) and in which direction?

supply shifts to the right

Minimum wages create unemployment in markets where they create a a. shortage of labor. Unemployment of this type is called frictional. b. shortage of labor. Unemployment of this type is called structural. c. surplus of labor. Unemployment of this type is called frictional. d. surplus of labor. Unemployment of this type is called structural.

surplus of labor. Unemployment of this type is called structural.

A rational decisionmaker a. takes an action only if the marginal benefit of that action exceeds the marginal cost of that action. b. ignores marginal changes and focuses instead on "the big picture." c. takes an action only if the combined benefits of that action and previous actions exceed the combined costs of that action and previous actions. d. ignores the likely effects of government policies when he or she makes choices.

takes an action only if the marginal benefit of that action exceeds the marginal cost of that action.

An understanding of the best ways to produce goods and services is called a. technology. b. physical capital. c. human capital. d. productivity.

technology

Core CPI is a. the CPI excluding food and energy. b. the CPI including only food, clothing, and energy. c. the CPI excluding food, clothing, and energy. d. the CPI including only food and energy.

the CPI excluding food and energy.

The key determinant of the standard of living in a country is a. its growth rate of real GDP. b. the amount of goods and services produced from each hour of a worker's time. c. the total amount of its physical capital. d. the total amount of goods and services produced within the country.

the amount of goods and services produced from each hour of a worker's time.

Money is a. neither the most liquid asset and nor a perfect store of value. b. not the most liquid asset but a perfect store of value. c. the most liquid asset and a perfect store of value. d. the most liquid asset but an imperfect store of value.

the most liquid asset but an imperfect store of value.

Bank capital is a. the bank's total assets. b. the machinery, structures, and equipment of the bank. c. the reserves of the bank. d. the resources that owners have put into the bank.

the resources that owners have put into the bank.

The labor-force participation rate measures the percentage of the a. labor force that is either employed or unemployed. b. total adult population that is in the labor force. c. labor force that is employed. d. total adult population that is employed.

total adult population that is in the labor force.

Economics is the study of how society manages its a. limited wants and unlimited resources. b. unlimited wants and unlimited resources. c. unlimited wants and limited resources. d. limited wants and limited resources.

unlimited wants and limited resources

David and Asher buy the same pair of sneakers, but each in the wrong size. David proposes a size swap with Asher. This is an example of a. ​barter, since the sneakers in the correct size have intrinsic value to both David and Asher. b. ​barter, since the sneakers in the correct size represent a medium of exchange. c. ​money, since the sneakers in the correct size do not have any intrinsic value. d. money, since the sneakers in the correct size represent a medium of exchange.

​barter, since the sneakers in the correct size represent a medium of exchange.

If the nominal interest rate is 5 percent and the real interest rate is 7 percent, then the inflation rate is a. 12 percent. b. 0.4 percent. c. 2 percent. d. −2 percent.

−2 percent.