ECON 210 Final Exam Sample

According to the Solow model, a higher saving- and investment rate leads to:A) less capital and more output.B) less capital and less output.C) more capital and less output.D) more capital and more output

D

As a city rebuilds after a hurricane destroys most of its physical capital, the So low model would predict growth in this region to be: A) lower than average in the short run, but eventually rise above average in the long run. B) higher than average in both the short run and long run. C) lower than average in both the short run and long run. D) higher than average in the short run, but return to normal levels in the long run

D

Assume that a country's production function changes from Y=2^K to Y= 3^K.Which of the following events could explain the change in this production function? A) less depreciation due to better capital stock maintenance. B) greater capital accumulation C) the disappearance of diminishing returns from the production function D) the development of new technology in production

D

Capital growth is the difference between: A) depreciation and economic growth. B) investment and economic growth. C) investment and saving. D) investment and depreciation

D

Commercial banks make profits primarily through: A) interest paid on required reserves. B) bailouts by the Fed. C) interest paid on deposits. D) the interest differential between deposits and loans.

D

Creative destruction is similar to openness to foreign imports in all of the following ways except. A) Both involve substituting lower cost goods in place of higher cost goods. B) Both face resistance from incumbent domestic producers. C) Both conspicuously benefit the consumers of the goods and services created or imported. D) Both tend to decrease aggregate employment.

D

If the supply of loanable funds increases, ceteris paribus, interest rates will: A) remain the same. B) increase. C) change indeterminately. D) decrease

D

If the world price of cotton is less than the price that would occur domestically without trade, then a country will A) export cotton. B) decrease its demand for cotton, and increase its demand for cotton substitutes. C) increase its demand for cotton, and decrease its demand for cotton substitutes. D) import cotton

D

If two countries have the same steady-state levels of output, the country that is _____today will _____ in per capita output. A) richer; eventually fall behind B) poorer; always lag behind C) richer; become even further ahead D) poorer; catch up

D

In 1950, GDP per capita in South Korea was ______ GDP per capita in North Korea. A) two times greater than B) 10 times less than C) two times less than D) roughly equal to

D

What has happened to the worldwide income distribution during the last 40 years or so? A) It has shifted to the left ("poorer") and become more equal. B) It has shifted to the left ("poorer") and become more unequal. C) It has shifted to the right ("richer") and become more unequal. D) It has shifted to the right ("richer") and become more equal.

D

A sound system produced by a supplier to Ford Motor Company, who installs it in one of its trucks, is an example of: A) an intermediate good. B) an inferior good. C) a final good. D) a non-tangible service

A

Consumption smoothing means: A) borrowing to consume more than one's income in low-income years and consuming less than one's income in high-income years. B) never borrowing. C) borrowing every year to consume more than one earns. D) borrowing to consume more than one's income in high-income years and consuming less than one's income in low-income years.

A

For most of recorded human history, long-run economic growth was: A) almost nonexistent.B) much higher than it has been in recent decades.C) the same as it is today.D) the highest during the Dark Ages

A

Inflation typically arises from: A) a sufficiently rapid increase in the money supply. B) a sufficiently rapid contraction of the money supply. C) an increase in the price level. D) a constant money supply.

A

Programmers produce a large amount of software on an unpaid, open-source basis. As a result: A) GDP undercounts some software production. B) GDP is a good measure of software productivity. C) GDP double-counts some software production. D) no software should be counted in GDP

A

Relative to Japan, Argentina was _____ in 1950 and _____ in 2000. A) rich; poor B) poor; rich C) poor; poor D) rich; rich

A

The Fed loaned money to (investment bank) J.P. Morgan and (insurance company) AIGin 2008 because it was concerned about: A) systemic risk, should these banks fail. B) the liquidity of these banks. C) the market demands being placed on these banks. D) moral hazard on the part of these banks.

A

The decisions made by the Federal Reserve Bank sometimes result in negative effectson the economy because: A) too much money or too little money might induce inflation or unemployment dueto bad timing of decisions. B) the Fed finds that forecasting economic conditions is easy but controlling themoney supply is difficult. C) the economy is weakened when the Fed uses monetary policy. D) the government uses money inefficiently when it comes to fiscal policy.

A

The measure of GDP that has been adjusted for changes in prices is called: A) real GDP. B) annual GDP C) aggregate GDP D) nominal GDP

A

The monetary base (MB) refers to: A) currency plus total reserves held at the Fed. B) currency, savings deposits, money market mutual funds, and small time deposits. C) currency. D) currency plus checkable deposits

A

When a person's income is greater than her spending on consumption goods, then she is: A) saving. B) disinvesting. C) dissaving. D) investing

A

Which of the following functions is NOT performed by commercial banks? A) They organize initial public offerings for firms. B) They help form the bridge between savers and investors. C) They provide a safe opportunity for savers to earn interest on their savings. D) They direct loans to the highest valued uses, e.g., business plans.

A

Why is the demand for loanable funds downward sloping? A) More people borrow money when interest rates are low than when they are high. B) Fewer investment projects have returns that can beat higher interest rates, so people are more willing to invest at higher interest rates. C) People save more when the interest rate is high. D) People save less when the interest rate is low

A

(Figure: A Tariff on Imports) Refer to the figure. Suppose the government enacts a $2tariff; the total deadweight loss, from distortions of consumption and production that result from the tariff, is: A) $550 million. B) $350 million. C) $150 million. D) $200 million.

B

(Figure: Loanable Funds Market) Refer to the figure of the loanable funds market. At an interest rate of 6% in this market, there is a _____ of loanable funds of _____. A) shortage; $250 B) surplus; $320 C) surplus; $250 D) shortage; $320

B

59. (Figure: Foreign Trade) Refer to the figure. What quantity would be imported? A) 1,000 B) 600 C) 800 D) 1,400

B

Crowding out occurs because the government increases the demand for loanable funds, drives up interest rates, and causes: A) consumption and investment to rise. B) consumption and investment to fall. C) saving to fall. D) saving to rise

B

If the Fed wants to increase the money supply, it will typically: A) increase the money multiplier. B) purchase additional government bonds. C) raise interest rates. D) extend new loans.

B

In a steady state, the capital stock: A) equals zero. B) neither increases nor decreases. C) increases. D) decreases

B

Institutions and incentives are _____ causes, and factors of productions are _____ causes of the wealth of nations. A) ultimate; indirect B) ultimate; immediate C) immediate; direct D) immediate; ultimate

B

Lobbyists for many industries argue each of the following, EXCEPT A) their industry needs protection and subsidization. B) their industry should face more foreign competition. C) competing workers in foreign countries are oppressed. D) their industry is important for national security.

B

Recent research (Fajgelbaum, et al. "The Return to Protectionism") on the 2018 U.S.import tariffs estimated, ". . . complete pass-through of tariffs to duty- (tariff-)inclusive prices." This finding is: A) A contrast against the model studied in class, in which exporters pay the full burden of tariffs. B) Consistent with the model studied in class, in which consumers bear the burden when import supply is perfectly elastic. C) Consistent with the model studied in class, suggesting that domestic buyers and foreign sellers share the burden of tariffs. D) A contrast against the model studied in class, in which protectionism decreases prices in the domestic market

B

Trade: A) increases the number of jobs. B) moves jobs from import-competing industries to export industries. C) decreases the number of jobs. D) moves jobs from export industries to import-competing industries.

B

Why are transfer payments not counted as part of GDP? A) Spending by the unemployed and senior citizens is not included in GDP. B) Transfer payments do not involve the purchase of a final good or service. C) Transfer payments are not counted because they must ultimately be paid back. D) Transfer payments are not spent within the United States.

B

(Figure: Costs of Tariffs) Refer to the figure. In the figure representing the market for leather, domestic suppliers are the high-cost producers of leather. However, import restrictions push domestic prices up to $100. Which area represents the value of wasted resources in production? A) A B) B C) C D) D

C

(Figure: Loanable Funds Market) Refer to the figure of the loanable funds market. The equilibrium interest rate in this market is: A) 6%. B) above 6%. C) 4.5%. D) 3%

C

(Table: Small-Town GDP) Which of the four towns in this table has the lowest standard of living? A) Town A B) Town B C) Town C D) Town D

C

(Table: Three-Good Economy I) Suppose an economy produces only the three final goods shown in the table. The table gives information on the quantities produced and price of goods sold in 2008 and 2009. What is the nominal GDP in 2009? A) $21,134 B) $26,260 C) $31,400 D) $20,134

C

A car produced by the American company GM in a plant located in Canada would be included in: A) neither U.S. GDP nor U.S. GNP. B) U.S. GDP, but not U.S. GNP. C) U.S. GNP, but not U.S. GDP. D) both U.S. GDP and U.S. GNP

C

A tractor built in 2001 and still in operation today is: A) part of today's GDP but not part of today's national wealth. B) not part of today's national wealth nor today's GDP. C) part of today's national wealth but not part of today's GDP. D) part of today's national wealth and GDP

C

Economic growth and improved standards of living are best measured by the growth rate of: A) nominal GDP per capita. B) nominal GDP. C) real GDP per capita. D) real GDP

C

Economists advocate focusing subsidies on "basic science" because__________________ is their primary criterion for subsidizing research and development of new technologies. A) the intrinsic importance of STEM B) universities' unique scale advantage at doing r&d C) the size of positive spillovers D) the number of economists that work in universities

C

Financial intermediaries: A) have liabilities that exceed their assets. B) profit by keeping resources in their least valuable uses. C) reduce the costs of moving savings from savers to borrowers and investors. D) are inefficient middlemen, raising the cost of economic activity.

C

Higher interest rates typically _____ borrowing, ceteris paribus. A) maintain B) indeterminately change C) decrease D) increase

C

If a government wants to encourage its population to increase investment and entrepreneurship, it should do all of the following except: A) Remove regulations and red tape involved in starting a business. B) Establish a banking system that makes loans meritocratically, based on borrowers' credit worthiness. C) Tax the returns on investment. D) Establish courts to settle contractual disputes quickly and fairly

C

In economics, investment refers to: A) the purchase of consumption goods. B) saving. C) the purchase of capital goods. D) dissaving.

C

Refer to the Figure above. Which panel shows the changes in output, consumption, and investment that would result from a one-time technological innovation without subsequent innovations?A) Panel A.B) Panel B.C) Panel C.D) Panel D

C

Services involve production that provides: A) no benefit to the consumer. B) a benefit along with the production of a tangible physical product. C) a benefit without the production of a tangible physical product. D) no benefit to the producer

C

Suppose the reserve ratio is 20% for all banks. If the Fed increases bank reserves by$200, then the money supply will: A) increase by $400. B) decrease by $1,000. C) increase by $1,000. D) decrease by $400

C

The OECD's "Better Life Index," a social welfare measure studied in class, weight is put on all the following factors EXCEPT, A) Work-life balance. B) Environmental quality. C) Income equality. D) Income per capita

C

The level of capital stock increases when investment in physical capital is: A) greater than investment in human capital. B) greater than personal consumption. C) greater than depreciation. D) less than depreciation

C

The primary reason that children are employed as labor worldwide is: A) trade restrictions such as tariffs and quotas. B) absence of schools in developing nations. C) poverty in the child's family. D) producing exports for international trade.

C

What is meant by a nonrivalrous good? A) There exists a perfectly competitive market for the good. B) There is only a single producer of the good. C) Additional people can consume a good without diminishing another's consumption. D) There is only a single consumer of the good.

C

Which is NOT a function of the Federal Reserve? A) regulating the U.S. money supply B) serving as the lender of last resort C) providing loans to small businesses D) regulating the U.S. financial system

C

(Figure: Bananas) If there is a $3 tariff on bananas, what is the total tariff revenue? A) $360,000 B) $135,000 C) $180,000 D) $270,000

D

(Figure: Costs of Tariffs) Refer to the figure. In the figure representing the market for leather, domestic suppliers are the high-cost producers of leather. However, import restrictions push the domestic price up to $100. Which area represents the dead-weight loss of consumption that results? A) A B) B C) C D) D

D

A bank is considered illiquid if: A) the value of its outstanding loans is greater than the value of its deposits. B) it has lost its FDIC coverage. C) it has liabilities greater than the value of its assets. D) it has short-term liabilities greater than its short-term assets, but overall assets greater than liabilities.

D

A real dollar value, e.g., in GDP calculations, is one that corrects for: A) unemployment. B) population growth. C) sales outside of a country's borders. D) inflation.

D

Refer to the Figure above. The economy was in a steady state prior to period 7. What could have happened at that time to produce the changes shown in output, consumption and investment after period 7? A) The savings rate decreased. B) Technological innovation occurred. C) The depreciation rate increased. D) A natural disaster destroyed part of the capital stock.

D

The ______ has the power to regulate the money supply in the United States. A) Senate B) House of Representatives C) President D) Federal Reserve

D

The theory of comparative advantage, recommending specialization in goods at which you have lower opportunity cost, applies to gains from trade: A) among international traders but not among individuals at the local level. B) among individuals at the local level but not among international traders. C) neither at the international or local level. D) at both the international level and the local level.

D

The value of a car produced and sold in 2000 and sold again to a second owner in 2008would be included in GDP for: A) 2008 only. B) both 2000 and 2008. C) either 2000 or 2008, but not both. D) 2000 only

D

When individuals become more willing to save, the: A) demand for loanable funds inward. B) supply of loanable funds shifts inward. C) demand for loanable funds shifts outward. D) supply of loanable funds shifts outward.

D