Econ 351 test 1

According to most market economists, there is no such thing as "over consumption" by consumers (assuming no externalities.) True False

True

According to the expenditure approach to GDP, investment expenditures include purchases of residential housing. True False

True

According to your instructor, using marginal cost pricing (with excess capacity), the Western Undergraduate Exchange (WUE) tuition rates likely cover all of their marginal costs at the UI. True False

True

Say's Law: Supply creates its own demand; implies there cannot be insufficient aggregate demand or demand caused recessions (Lesson 2). True False

True

When calculating the real GDP using the Paasche index, we use the final period's prices. True False

True

f the FED increases the money supply, interest rates will usually fall (ceteris paribus). True False

True

Suppose that you are willing to pay $500 for a seat belt and it reduces your chance in death in 1 in 10,000. Following the value of statistical life analysis, your life is worth is: a.)$5 million b.)infinite c.)$15 million d.)$10 million

a.)$5 million

A study conducted by JP Morgan in 2019 concluded that the trade war with China had cost the average U.S. household (Lesson 5): a.)$600 per year. b.)$100 per year. c.)$50 per year. d.)$5,000 per year.

a.)$600 per year.

The country with the highest "effective" health care costs in the world is: a.)Russia b.)China c.)U.S. d.)France

c.)U.S.

The majority of economists in the U.S. support which of the following (Lesson 5)? a.)dropping most if not all trade barriers b.)greater immigration to the U.S. c.)reducing or eliminating most agricultural subsidies d.)all of the answers. e.)none of the answers

c.)all of the answers.

Nominal gross domestic product is defined as the value of all goods: a.)and services produced by an economy, within its borders, over a period of time, at base-year prices. b.)produced by an economy, within its borders, over a period of time, at current prices. c.)and services produced by an economy, within its borders, over a period of time, at current prices. d.)and services produced by an economy's citizens, regardless of where they live, over a period of time, at current prices. e.)and services produced by an economy's citizens, regardless of where they live, over a period of time, at base-year prices.

c.)and services produced by an economy, within its borders, over a period of time, at current prices.

According to the income approach to GDP, the largest percentage of GDP comes from: a.)indirect business taxes. b.)firm profits. c.)compensation to employees. d.)depreciation of fixed capital. e.)None of these answers is correct.

c.)compensation to employees.

Factors of production are grouped into four categories (Lesson 3): a.)land, labor, capital, money b.)labor, capital, money, entrepreneurship c.)land, labor, capital, entrepreneurship d.)land, capital, money, entrepreneurship

c.)land, labor, capital, entrepreneurship

The birth of economics as an intellectual discipline can be dated fairly precisely in the eighteenth century with (Lesson 2) a.)the introduction of paper currency. b.)the development of the factory system. c.)the publication of the book, The Wealth of Nations. d.)the opening of the London stock exchange.

c.)the publication of the book, The Wealth of Nations.

GDP often is used as a "measure" of economic welfare; it includes all factors that contribute to economic well-being. True False

False

The Keynesian school focuses on monetary policy and does not believe that fiscal policy is effective. True False

False

The Keynesian school works off the hypothesis that the economy is stable at full employment and the government should stay out of the economy and not engage in activist policy. True False

False

The largest GDP expenditure share historically has been government expenditure. True False

False

When calculating the real GDP using the Laspeyres index, we use the final period's prices. True False

False

According to the Debt Clock 9/22, the U.S. National Debt is approximately: a.)$30.9 Trillion b.)$20.2 Trillion c.)$47.9 Trillion d.)$128 Trillion

a.)$30.9 Trillion

According to the Economic Impact of Vandal Athletics, presented in class,, each permanently filled seat at the UI, creates: a.)0.70 jobs and $50,000 in output. b.)10 jobs and $300,000 in output. c.)0.10 jobs and $10,000 in output. d.)No jobs as they are unrelated.

a.)0.70 jobs and $50,000 in output.

As of July of 2022, the U.S. inflation rate annualized is ___________, down from ___________ a month ago. a.)8.5%, 9.0% b.)2.1%, 1.5% c.)19.5%, 21.2% d.)7.2%, 6.3%

a.)8.5%, 9.0%

In the Inside Job video, Frederic Mishkin wrote a paper promoting the stability of the financial system of: a.)Iceland. b.)Norway. c.)France. d.)Greece.

a.)Iceland.

In the Inside Job video, the collapse of which financial firm triggered the financial crisis? a.)Lehman Brothers. b.)Bear Stearns. c.)Washington Mutual. d.)Enron

a.)Lehman Brothers.

Former California Governor Grey Davis was defeated in a recall election by: a.)The Terminator, Arnold Schwarzenegger. b.)Hilary Clinton. c.)Ronald Reagan. d.)Hayden Christensen.

a.)The Terminator, Arnold Schwarzenegger.

The term ceteris paribus means (Lesson 2) a.)all other things remaining equal. b.)value free and testable. c.)the study of scarcity and choice. d.)the greatest good for all.

a.)all other things remaining equal.

Paul Krugman (per assigned article) believes that cryptocurrencies: a.)are a financial fraud. b.)are an innovation in the future that will revolutionize the financial markets. c.)will become the world's main fiat currencies in 20 years. d.0should be largely regulation free.

a.)are a financial fraud.

Milton Friedman': a.)believed that illegal immigration from Mexico was actually more valuable to the U.S. than legal immigration. b.)opposed illegal immigration (to the U.S.) but supported legal immigration. c.)opposed legal and illegal immigration. d.)had no opinion on immigration.

a.)believed that illegal immigration from Mexico was actually more valuable to the U.S. than legal immigration.

If a university has excess capacity, the marginal (additional) cost of adding a student: a.)can be substantially less than average cost or even zero if there are empty seats in every class. b.)higher than average cost in almost all cases. c.)cannot be calculated due to the complexity. d.)will be about double the cost of an existing student cost.

a.)can be substantially less than average cost or even zero if there are empty seats in every class.

The Smoot-Hawley Act (Lesson 5): a.)enacted prohibitive tariffs that worsened the Great Depression. b.)was favorable to the U.S. economy, according to most economists. c.)was enacted during President Carter's term in 1978. d.)was a free trade bill that was passed and signed by President Reagan in 1987.

a.)enacted prohibitive tariffs that worsened the Great Depression.

The California Energy Crisis was most likely caused by: a.)energy speculators and Enron. b.)federal government intervention. c.)the normal forces of demand and supply. d.)problems with several nuclear power plants.

a.)energy speculators and Enron.

According to Nerdwallet, the capitalization of the top 100 cryptocurrencies has ________________ from November 7, 2021, to July 24, 2022. a.)fallen 62% b.)fallen 10% c.)increased 62% d.)stayed about the same.

a.)fallen 62%

During the 1940s, ________ increased sharply as a percentage of U.S. GDP because of ________. a.)government expenditure; World War II b.)residential investment; the war on poverty c.)nonresidential investment; the space program d.)durable consumption expenditures; rationing of nondurable goods e.)transfer payments; the New Deal

a.)government expenditure; World War II

According to Adam Smith (Lesson 3) a.)government intervention in markets is not desirable because an invisible hand leads decisions made in pursuit of self-interest to unintentionally promote the social interest. b.)in a market transaction buyers can either get what they want for less than they would be willing to pay or sellers can earn a profit, but both buyers and sellers can't gain simultaneously. c.)when big corporations pursue their self-interest of maximum profit, they will inevitably conflict with social interest. d.)politicians are well-equipped to regulate corporations and intervene in markets to improve market outcomes.

a.)government intervention in markets is not desirable because an invisible hand leads decisions made in pursuit of self-interest to unintentionally promote the social interest.

Employing a peak versus off-peak pricing system,the peak price (ceteris paribus) should be: a.)higher than the off-peak price. b.)equal to the off-peak price. c.)lower than the off-peak price. d.)zero.

a.)higher than the off-peak price.

The video on Brexit presented in class concludes that the European Union (EU): a.)increased economic growth among its member nations. b.)slowed economic growth among its member nations. c.)was a disaster for its member nations. d.)recommended dissolving the EU.

a.)increased economic growth among its member nations.

Federal funds are a.)loans made by banks to each other. (Interbank loan market). b.)loans made by banks to the Federal Reserve System. c.)funds raised by the federal government in the bond market. d.)loans made by the Federal Reserve System to banks.

a.)loans made by banks to each other. (Interbank loan market).

Per the Brexit Video and class discussion, Brexit will likely be: a.)mildly harmful the United Kingdom economy slowing future growth. b.)very harmful and cause a depression to the United Kingdom economy. c.)slightly beneficial to the United Kingdom economy. d.)very beneficial to the United Kingdom economy.

a.)mildly harmful the United Kingdom economy slowing future growth.

English philosopher Thomas Hobbes is notable for observing that life was ________ for thousands of years. a.)nasty, brutish, and short b.)just like the legend of King Arthur c.)great, if you were a king d.)halcyon, fulsome, but short e.)comfortable and prosperous

a.)nasty, brutish, and short

Which of the following government programs existed before the start of the Great Depression? (Lesson 6) a.)none of these b.)Medicare c.)Social Security d.)unemployment insurance e.)federal welfare payments

a.)none of these

The difference between economic profits and normal profits is that: a.)normal profits are earnings based on the normal competitive payments to the factors used in production; economic profits are the above-normal returns associated with prices that exceed competitive prices. b.)economic profits are earnings based on the normal competitive payments to the factors used in production; normal profits are the above-normal returns associated with prices that exceed competitive prices. c.)normal profits are earnings based on the normal competitive payments to the factors used in production; economic profits are the above-normal returns associated with prices that exceed monopolistic prices. d.)economic profits are earnings based on the noncompetitive payments to the factors used in production; normal profits are the above-normal returns associated with prices that exceed competitive prices. e.)None of these answers is correct.

a.)normal profits are earnings based on the normal competitive payments to the factors used in production; economic profits are the above-normal returns associated with prices that exceed competitive prices.

According to the Planet Money podcast and the NYT article (both posted on BB Learn), a government's decision to shut down an economy due to COVID-19 (likely): a.)passed a benefit -cost analysis by a wide margin. b.)failed a benefit-cost analysis by a narrow margin. c.)failed a benefit-cost analysis by a wide margin. d.)passed a benefit-cost analysis by a narrow margin.

a.)passed a benefit -cost analysis by a wide margin.

The percent change in the nominal GDP is given as: a.)percent change in the price level + percent change in real GDP. b.)percent change in the price level − percent change in real GDP. c.)percent change in the price level × percent change in real GDP. d.)percent change in the price level ÷ percent change in real GDP. e.)price level × percent change in real GDP.

a.)percent change in the price level + percent change in real GDP.

Professor Wenders believed that hunting licenses should be allocated by (Lesson 5): a.)price... through auction markets. b.)a sliding scale according to a hunters ability to pay. c.)lotteries as a fairer approach. d.)first come, first serve.

a.)price... through auction markets.

Most economists believe that: (Lesson 2) a.)prices are the best way to ration goods and services b.)prices are an unfair way to ration goods and services especially to the poor c.)markets are often unfair to the poor d.)necessities should not be rationed. e.)none of the above

a.)prices are the best way to ration goods and services

Financial markets promote greater economic efficiency by channeling funds from ________ to ________. a.)savers; borrowers b.)savers; lenders c.)borrowers; savers d.)investors; savers

a.)savers; borrowers

On the issue of agriculture price supports and subsidies, economists (on average):(Lesson 5) a.)strongly oppose. b.)have no opinion. c.)are very divided. d.)strongly support.

a.)strongly oppose.

On the issue of immigration, economists (on average): (Lesson 5) a.)strongly support. b.)strongly oppose. c.)are very divided. d.)have no opinion.

a.)strongly support.

The benefit that arises from an increase in an activity is called (Lesson 3) a.)the marginal benefit. b.)the marginal cost. c.)an incentive. d.)opportunity cost.

a.)the marginal benefit.

According to the article: Governors' shutdowns did not cause the pandemic jobs crisisin the Washington Post (Week Three): a.)there was virtually no economic difference between Red and Blue States. b.)there was greater economic damage in Red States as compared to Blue States. c.)there was greater economic damage in Blue States as compared to Red States. d.)Blue states were found to have twice the economic damage as Red States.

a.)there was virtually no economic difference between Red and Blue States.

Suppose that your salary in 2010 was $40,000 and $43,000 in 2018. If the CPI index was 218.1 in 2010 and 250.5 in 2018, what is the cumulative percent change in your real salary from 2010 in 2018? a.)10% b.)-6.4% c.)-2.3% d.)14.9% e.)none of the answers are correct.

b.)-6.4%

The Consumer Price Index base year index value is always: a.)0 b.)100 c.)1000 d.)50

b.)100

Which legislation made it the official position of the U.S. government to promote a full-employment economy? a.)Federal Reserve Act of 1913. b.)Employment Act of 1946 c.)Jobs Act of 1878 d.)Cochrane Act of 1970

b.)Employment Act of 1946

Which measure of overall economic activity was NOT available in the 1930s? a.)stock prices b.)GDP c.)industrial production d.)steel production e.)gold prices

b.)GDP

Paul Krugman is considered to be a _______________ economist (Lesson 2). a.)classical b.)Keynesian c.)monetarist d.)supply-side

b.)Keynesian

The "legs" of the Keynesian social safety net in the U.S. include (Notes 3): a.)Great Society (1930s), New Deal (1960s), and Great Regulation (1990s). b.)New Deal (1930s), Great Society (1960s), and Great Regulation (1970s). c.)tax cuts, government spending cuts, government regulation cuts. d.)none of the above.

b.)New Deal (1930s), Great Society (1960s), and Great Regulation (1970s).

Which trade legislation likely worsened the Great Depression (Lesson 2)? a.)Dodd-Frank Bill of 2010 b.)Smoot-Hawley Tariff Act of 1930 c.)Glass-Steagall Act of 1933 d.)Federal Reserve Act of 1913

b.)Smoot-Hawley Tariff Act of 1930

Which trade legislation likely worsened the Great Depression? a.)Glass-Steagall Act of 1933 b.)Smoot-Hawley Tariff Act of 1930 c.)Federal Reserve Act of 1913 d.)Dodd-Frank Bill of 2010

b.)Smoot-Hawley Tariff Act of 1930

According to your instructor , the "bounce" theory of economics is supported by (Lesson 2): a.)both classical economists or Keynesians b.)classical economists and many Republicans c.)Keynesian economists and many Democrats d.)neither classical economists or Keynesians

b.)classical economists and many Republicans

When a bank failed in the Great Depression (Class discussion) a.)depositors were protected by deposit insurance. b.)depositors usually lost all of their money. c.)depositors were protected from the liquidation of bank assets. d.)depositors were refunded their money by the states.

b.)depositors usually lost all of their money.

A system of property rights (Lesson 3) a.)reduces the efficiency of government, which reduces the growth rate of the economy over time. b.)encourages economic growth by creating incentives to invest in capital and to be innovative. c.)discourages economic growth by discouraging the development of new ideas and ways of doing things. d.)encourages investment but discourages entrepreneurial activity, so the effect on economic growth is uncertain.

b.)encourages economic growth by creating incentives to invest in capital and to be innovative.

If the percent change in the price level is ________ than the percent change in ________ GDP, ________. a.)smaller; nominal; real GDP shrinks b.)greater; nominal; real GDP shrinks c.)greater; real; nominal GDP shrinks d.)greater; real; nominal GDP always stays the same e.)Not enough information is given.

b.)greater; nominal; real GDP shrinks

conomics is best defined as (Lesson 3) a.)making choices from an unlimited supply of goods and services. b.)making choices with unlimited wants but facing a scarcity of resources. c.)controlling a budget for a household. d.)how people make money and profits in the stock market.

b.)making choices with unlimited wants but facing a scarcity of resources.

The Keynesian school believes the most economic problems are caused by (Lesson 2): a.)liberals. b.)market failure. c.)globalization. d.)government failure.

b.)market failure.

Pure public goods are: a.)excludable, divisible, and non-rival. b.)non-excludable, indivisible, and non-rival. c.)non-rival but exclude. d.)rival but non-excludable.

b.)non-excludable, indivisible, and non-rival.

The loss of the highest-valued alternative defines the concept of (Lesson 3) a.)entrepreneurship. b.)opportunity cost. c.)marginal benefit. d.)scarcity.

b.)opportunity cost.

By how much does the current GDP rise in the following scenario? A real estate agent sells a house for $250,000 that the previous owners had purchased 10 years earlier for $90,000. The real estate agent earns a commission of $10,000. a.)$160,000 b.)$250,000 c.)$10,000 d.)$90,000 e.)$260,000

c.)$10,000

In the Great Depression, the official unemployment (U3) reached approximately _____ while the implied U6 (broader) measure of unemployment reached _______. (Lesson 6) a.)4%,12% b.)30%,70% c.)25%,50% d.)10%,20%

c.)25%,50%

The political party that emphasizes the role of market failure in today's economic problems is called the ___________ Party. a.)Federalist b.)Republican c.)Democratic d.)Conservative

c.)Democratic

According to your instructor (class discussion), the "splat" theory of economics is supported by: a.)both classical economists or Keynesians b.)neither classical economists or Keynesians c.)Keynesian economists and many Democrats d.)classical economists and many Republicans

c.)Keynesian economists and many Democrats

Which of the following counts toward changes in the current GDP? a.)You find $10 on the sidewalk. b.)You purchase a used stereo from a friend. c.)The government builds a new highway. d.)You fix your own sink. e.)None of these answers is correct.

c.)The government builds a new highway.

Excluding the COVID-19 recession, the 2007-2009 recession: (Class Discussion) a.)was not as severe as the 1980-82 recession. b.)was mild by historical standards. c.)was the worst recession since the Great Depression 1929-1933. d.)was a mild "job-less recession.

c.)was the worst recession since the Great Depression 1929-1933.

The fact that people with higher incomes get to consume more goods and services addresses the ________ question (Lesson 3). a.)"when" b.)"how" c.)"where" d.)"for whom"

d.)"for whom"

When a firm decides to produce more electric cars and fewer gas guzzlers, it is most directly answering the ________ question (Lesson 3). a.)"how" b.)"scarcity" c.)"for whom" d.)"what"

d.)"what"

In a liquidity trap (Lesson 2): a.)inflation is low. b.)interest rates are near zero. c.)expansionary monetary policy is ineffective. d.)all of the above is true.

d.)all of the above is true.

According to the article in the Argonaut on inflation (quoting your instructor), the recent causes of inflation in the U.S. are: a.)The FED (central bank) has created too much money and the monetary base is too high. b.)The FED (central bank) has kept interest rates too low. c.)The federal government has spent about $5.2 trillion in stimulus-related spending. d.)all of the answers are correct.

d.)all of the answers are correct.

Pareto optimality (Lesson 3) a.)a focus of economic analysis. b.)a condition in which you cannot make someone better off without making someone else worse off. c.)is a general measure of economic efficiency. d.)all of the answers are true.

d.)all of the answers are true.

If the nominal GDP rises by 3 percent and the price level rises by 5 percent, then the real GDP ________ by ________ percent. a.)rises; 8 b.)falls; 8 c.)rises; 2 d.)falls; 2 e.)None of these answers is correct.

d.)falls; 2

When an economist talks of scarcity, the economist is referring to the (Lesson 3) a.)ability of society to continually make technological breakthroughs and increase production. b.)ability of society to consume all that it produces. c.)ability of society to employ all of its resources. d.)inability of society to satisfy all human wants because of limited resources.

d.)inability of society to satisfy all human wants because of limited resources.

Adjusted for inflation, the price of gasoline today (Summer 2022) a.)is close to its historical average of about $225-$250 per gallon. b.)is substantially ... the highest in history. c.)is the lowest in history. d.)near the highest in history but still likely lower than its previous peak in 2008 (adjusted for inflation)..

d.)near the highest in history but still likely lower than its previous peak in 2008 (adjusted for inflation)..

On the issue of free trade, economists (on average): (Lesson 5) a.)have no opinion. b.)strongly oppose. c.)are very divided. d.)strongly support.

d.)strongly support.

According to the expenditure approach, if Y is GDP, C is consumption, I is investment, G is government purchases, and NX is net exports, the national income identity can be written as: a.)y = c + i +g b.) y = c + i + g - nx c.)y + c = i + g + nx d.)y = (c + i + g)nx e.)y = c + i + g + nx

e.)y = c + i + g + nx