ECON 2105 FINAL
What is the present value of $250, three years in the future if the interest rate is 1 percent?
242.65
If the nominal interest rate is 8 percent and inflation is 3 percent, what is the real interest rate?
5 percent
If this year's price level is 126 and last year's price level was 120, the inflation rate is ________.
5 percent a year
Which of the following is a positive statement?
A 5 percent increase in income leads to a 3 percent increase in the consumption of orange juice.
When firms in an economy start producing more computers and fewer televisions, they are answering the ________ question.
A. "what"
Suppose that the natural unemployment rate is 4.5 percent and the actual unemployment rate is 3.5 percent. Then cyclical unemployment is
A. -1 percent.
______ has a comparative advantage in producing caps. If Sue and Tessa each specialize in producing the good in which they have a comparative advantage and trade 1 jacket for 7 caps, ______.
A. Tessa; both Sue and Tessa gain
Which of the following questions is a macroeconomic issue?
A. What is the future growth prospect for an economy?
The law of demand states that other things remaining the same, the _______ the price of a good, the _______. A. higher; smaller is the quantity demanded Your answer is correct. B. lower; greater is demand C. lower; smaller is the quantity demanded D. higher; greater is the quantity demanded A demand curve that illustrates the law of demand ______. A. shows that the quantity demanded decreases as the price rises B. shows that the quantity demanded remains the same when the price falls C. shows that the quantity demanded decreases as the price falls D. has a positive slope
A. higher; smaller is the quantity demanded A. shows that the quantity demanded decreases as the price rises
Suppose a country is producing $20 million of real GDP. If the economy grows at 10 percent per year, approximately how many years will to take for real GDP to grow to $80 million?
A.14
Which of the following is correct?
Aggregate income, aggregate expenditure and GDP are all equal.
In one hour, Sue can produce 50 caps or 10 jackets and Tessa can produce 70 caps or 7 jackets. Sue's opportunity cost of producing a cap is ______ jackets and Tessa's opportunity cost of producing a cap is ______ jackets.
B. 0.2; 0.10
Producers of pianos expect the price of a factor of production used to produce a piano to rise and the number of firms producing and selling pianos to decrease. You predict that the price of a piano will ______ and the quantity of pianos bought will ______.
B. rise; decrease
If the price is $ 6 a milkshake, there is a ______ of milkshakes, so the price of a milkshake ______. As the market moves toward the equilibrium price, the quantity demanded _______ and the quantity supplied _______.
B. shortage; rises C. decreases; increases
If the US interest rate is 1.5 per cent, Canada's interest rate is 1 per cent, the US inflation rate is 1.2 per cent and Canada's inflation rate is 0.70 per cent, then calculate the US interest rate differential
0.5 per cent
Population increases are the limiting factor in the growth process in
classical growth theory.
Goods that are produced this year, stored in inventories, and then sold to consumers next year
count in this year's GDP.
The monetary base consists of
currency and reserves of depository institution
The CPI basket contains 400 oranges and 800 pens. In the base year, the price of an orange is $1.00 and the price of a pen is $0.75. This year, urban consumers each buy 300 oranges at $2.00 each and 850 pens at $1.00 each. The CPI this year is ________.
C. 160
Which of the following is a liability of the Federal Reserve?
Federal Reserve notes
The best example of a frictionally unemployed individual is
Mary who quit her job to find work closer to her home.
________ predicts that real GDP per person can grow indefinitely.
New growth theory
A macroeconomic equilibrium in which real GDP is less than potential GDP is ________ equilibrium And one in which real GDP equals potential GDP is _______ equilibrium
a below full-employment; a recessionary
Which of the following does NOT shift the SAS curve?
a change in the price level
It is expected that the price of a bushel of wheat will increase in one month. This belief will result in
a decrease in current supply of wheat.
An economy is at full employment when ______.
all unemployment is frictional and structural
The fed in the U.S.
allows a flexible exchange rate, though their actions can impact the exchange rate.
Changes in which of the following items will shift the supply curve of hamburgers?
an increase in the price of meat used to produce hamburgers
Economic growth is shown on the production possibilities frontier as
an outward shift in the PPF.
Structural unemployment is
associated with the general decline of specific industries.
Which of the following statements are TRUE regarding the demand for labor? I. The quantity of labor demanded depends on the real wage rate. II. If the money wage rate increases and the price level remains the same, the quantity of labor demanded decreases.
both I and II
An increase in the quantity of capital increases _______ and increase in the full-employment quantity of labor increases
both the SAS and the LAS; both the SAS and the LAS
An increase in potential GDP increases ________
both the long-run aggregate supply and short-run aggregate supply
Suppose the exchange rate is 90 yen per U.S. dollar and the U.S. wants to keep the exchange rate at a target rate of 90 yen per U.S. dollar. If the demand for U.S. dollar decreases, the Fed
buys dollars to raise the exchange rate
A decrease in government transfer payments
decreases aggregate demand
Aggregate demand _______ when a decrease in foreign income occurs Aggregate demand _______ when an increase in government expenditure occurs
decreases; increases
Suppose real GDP for a country is $13 trillion in 2010, $14 trillion in 2011, $15 trillion in 2012, and $16 trillion in 2013. Over this time period, the real GDP growth rate is
decreasing.
A flexible exchange rate is an exchange rate that is determined by ________ in the foreign exchange market with no direct intervention by the ________
demand and supply; central bank
Which of the following is NOT a monetary policy tool of the Federal Reserve?
deposit insurance
The required reserve ratio is the minimum percentage of ________ that _______ are required to hold as reserves
deposits; depository institutions
The decreasing slope of a production function reflects
diminishing returns.
"As more people buy computers, the demand for Internet service will increase and the price of Internet service will decrease. The fall in the price of Internet service will decrease the supply of Internet service." This statement is ______ because ______.
false; an increase in demand for Internet service does not decrease the price of Internet service and a decrease in the price of Internet service does not decrease the supply of Internet service
Cyclical unemployment
fluctuates over the business cycle.
The RicardominusBarro effect holds that
government budget deficits have no effect on the real interest rate.
The _______ the exchange rate, the _______ are foreign- produced goods and hence the greater the quantity of dollars supplied
higher; cheaper
The law of supply states that other things remaining the same, the _______ the price of a good, the _______.
higher; greater is the quantity supplied
Suppose that the money multiplier is 3. If the monetary base increases by $1 million, the quantity of money will
increase by $3 million
If the exchange rate falls, then the expected profit from holding the domestic currency
increases
Suppose that the exchange rate rises from 80 yen per U.S. dollar to 90 yen per U.S. dollar. The quantity of U.S. dollars that people plan to sell in the foreign exchange market________
increases and a movement up along the supply curve of U.S. dollar occurs
The PPF bows outward because as we move from point A to point B to point C, the opportunity cost of producing a blanket ________
increases. Resources are not equally productive in all activities
An increase in bank's reserves with no change in deposits _______ the banks' reserve ration and _____ the money multiplier
increases; decreases
As the value of U.S. exports ________, the quantity of ________ demanded increases
increases; dollars
The events are A.The number of people writing and producing XBox One games increases. B. The price of an Xbox One falls. C. Programmers who write code for XBox One games become more costly to hire. D. The prices of a PlayStation 4 and a Wii Upper U fall. Event A ______ the ______ XBox One games. Event B ______ the ______ XBox One games. Event C ______ the ______ XBox One games. Event D ______ the ______ XBox One games.
increases; quantity demanded of increases; demand for decreases; quantity demanded of decreases; demand for
The short-run aggregate supply curve is upward sloping because
money wage rates do not immediately change when the price level changes.
After the Fed decreases the quanity of money, at an interest rate of 7 percent a year, people want to hold _______ money than the quantity supplied, so they _______ bonds The price of a bond _______ and the interest rate _______.
more;sell falls; rises
The bias in the CPI typically
overstates inflation.
One reason that the aggregate demand curve has a negative sloe is that when the domestic price level rises,
people substitute toward more imported goods and services
If the price of renting a DVD rises, a ______ the demand curve occurs. If any factor that influences buying plans other than the price changes, then a ______ the demand curve occurs.
movement up along; shift of
The currently used method for calculating the CPI
probably overstates inflation.
A virus that destroys potato crops and decreases the quantity of potato chips produced by 40 million bags a week at each price. The virus decreases the _______.
supply of potato chips and decreases the quantity of potato chips demanded
If the price is above the equilibrium price, then there is a
surplus, and market forces will operate to lower price.
An assumption of neoclassical growth theory is that
technological change is random.
If you have $5,000 in wealth and the price level decreases by 20 percent, then
the $5,000 will buy more goods and services
Short run equilibrium occurs at the intersect of
the SAS and AD curves
The U.S. interest rate differential rises when
the U.S. interest rate rises and the foreign interest rate falls
For a commercial bank, the term "reserves" refers to
the cash in its value and its deposits at the Federal Reserve
A country that is borrowing more from the rest of the world then it is lending to the rest of the world is a _______, and a country that during its entire history has borrowed more from the rest of the world then it has lent to it is a _______ Currently, the United States is a __________
net borrower, debtor nation debtor nation and net borrower
In calculating GDP, household production is
not included because there is no market transaction.
We distinguish btw the long-run aggregate supply curve and the short-run aggregate supply curve. In the long-run
the real GDP equals potential GDP
As we move along the long-run aggregate supply curve, ___________
the real wage rate remains constant
Human capital is
the skill and knowledge of workers.
A major characteristic of structural unemployment that differentiates it from frictional unemployment is that structural unemployment
usually lasts longer than frictional unemployment.
When a textile company keeps track of its inventory using a computer and its competitor uses a pad of paper and a pencil, they are both answering the ________ part of one of the two big economic questions.
"how"
A south sea island produces only coconuts. In 2014, the price of a coconut is $1.50 and the quantity produced is 400. In 2017, the price of a coconut is $2.50 and the quantity produced is 350. 2014 is the reference base year. What is real GDP in 2017 in terms of base-year prices? Real GDP in 2017 in terms of base-year prices is ______.
$525
An increase in labor productivity shifts the labor ________ curve ________.
demand; rightward
Suppose the market for loanable funds is in equilibrium. If the expected profit falls, the equilibrium real interest rate ________ and the quantity of loanable funds ________.
falls; decreases
If the population increases, then potential GDP ________ and employment ________.
increases; increases
In the absence of a RicardominusBarro effect, a government budget deficit ________ the demand for loanable funds, ________ the real interest rate, and ________ investment.
increases; increases; crowds out
If saving is $800 billion, investment is $500 billion, government expenditure on goods and services is $700 billion, net export is $50 billion, and net taxes is $800 billion, then calculate government sector balance
$100 (net taxes-gov. expd.)
Complete the following sentence. A firm is ______.
D. an economic unit that hires factors of production and organizes those factors to produce and sell goods and services
Sports cars and gasoline are complements. If the price of a sports car increases, how does the demand for gasoline change?
D. decrease, and the demand curve for gasoline will shift leftward
In goods markets ________ and in factor markets ________. A. households sell to firms; households sell to firms B. firms sell to households; firms sell to households C. households sell to firms; firms sell to households D. firms sell to households; households sell to firms
D. firms sell to households; households sell to firms
___________ economists believe that active help from the fiscal and monetary policy is needed to insure that the economy is operating at full employment
Keynesian
Macroeconomics is concerned with
economy- wide variables.
An increase in labor productivity increases potential GDP because ______.
employment increases and a given amount of employment produces more real GDP
When economists speak of full employment, they refer to the case in which the sum of frictional and structural unemployment is
equal to the actual amount of unemployment.
The equilibrium quantity of a good will increase and its equilibrium price might rise, fall, or stay the same when
its demand and supply both increase.
The income earned by the people who sell the services of the factor of production _______ is called _______.
labor; wages
The resources that are used to produce goods and services - _____ are factors of production.
land, labor, capital, and entrepreneurship
Other things remaining the same, the _____
larger the value of U.S. imports, the greater is the quantity of U.S. dollars supplied to the foreign exchange market
Leather belts and leather shoes are substitutes in production. If style changes increase the demand for leather belts, the supply curve of leather shoes will shift
leftward and the equilibrium price of leather shoes will rise.
In any year, the real GDP of an economy
may be greater or less than potential GDP.
If the economy is in short run equilibrium then
real GDP can be greater than, less than, or equal to potential GDP
The demand for money curve shift rightward if...
real GDP increases
An increase in the demand for burgers brings a ______ in the price of a burger and ______ in the quantity of burgers supplied.
rise; an increase
A change in the capital stock ________ the short-run aggregate supply curve and _______ the long-run aggregate supply
shifts; shifts
A supply curve that illustrates the law of supply _______.
shows that the quantity supplied decreases as the price falls
The larger the public's currency drain from the banking system, the
smaller is the money multiplier
When an event occurs that changes the demand for coffee makers, _______ if demand increases and ______ if demand decreases.
the demand curve shifts rightward; the demand curve shifts leftward
Suppose that yesterday, the U.S. dollar was trading on the foreign exchange market at 100 yen per U.S. dollar and today the U.S. Which has appreciated and which one has depreciated?
the dollar appreciated and the yen depreciated
The opportunity cost of something you decide to get is
the highest valued alternative you give up to get it.
When cyclical unemployment increases and other things remain the same, ______.
the natural unemployment rate does not change
According to the quantity theory of money, a 10 percent increase in the quantity of money ultimately leads to a 10 percent increase in
the price level
For movements along the long-run aggregate supply curve
the price level and the money wage rate change by the same percentage
A change in _______ creates a movement along the aggregate demand curve, while a change in _______ shifts the aggregate demand curve
the price level; government expenditures
Other things constant, the economy's aggregate demand curve shows that
the quantity of real GDP demanded decreases when the price level rises
