Econ Exam

Suppose a bank has $100 million in checking account deposits with no excess reserves and the required reserve ratio is 10 percent. If the Federal Reserve reduces the required reserve ration to 8 percent, then the bank can make a maximum loan of

$2 million

When Sophie, a French citizen, purchases a Dell computer in Paris that was produced in Texas, the purchase is...

A U.S. Export and an French Import

Which is the most likely effect upon the market for cotton of an increase in production costs due to higher oil prices?

A decrease in the supply and hence increase in the price of cotton and a decrease in the quantity exchanged

Suppose a successful advertising campaign increases the demand for Nike shoes. Which would tend to occur?

All of the above (The demand curve for nikes would shift to the right the price of nikes would rise, the quantity supplied of Nikes would increase)

Assume foreign beer is a normal good. If the incomes of demanders increase,

All of the above will occur (the quantity supplied of foreign beer will increase, demand for foreign beer will increase, the price of foreign beer will increase)

Farmers can raise either goats or ostriches on their land. Which of the following would cause the supply of goats to decrease?

An increase in the price of ostriches

Workers laid off as a result of a recession suffer

Cyclical Unemployment

A decrease in the reserve requirement _____ bank excess reserves and _______ the money supply.

Increases; Increases

During a business cycle expansion, total production ______ and total employment _______

Increases; Increases

Which is one of the criteria necessary for commodity to make a suitable medium of exchange?

It should have intrinsic value

A tariff

Makes domestic producers better off

Between 2013 and 2014, if an economy's exports rise by $8 billion and its imports fall by $8 billion, by how much would GDP change between the two years, all else equal?

Net Exports will increase GDP by $16 billion

Someone who is available for work but has not actively looked for work in the previous four weeks would be classified as?

Not in the labor force

The Bureau of Labor Statistics would categorize a retiree who is not working as?

Out of the labor force

The Federal Reserve System's four monetary policy goals are

Price stability, high employment, economic growth, and stability of financial markets and institutions

Economists find the notion of people "needing" things to be

Seriously misleading because they ignore substitutes

If whole tomatoes were money, which of the following functions of money would be the hardest for tomatoes to satisfy?

Store of value

Suppose the average person needs 8 glasses of water each day to maintain optimal health. What would an economist conclude?

The amount the average person drinks will depend upon the opportunity cost of acquiring water

Why are suburban stores more likely than downtown stores to provide free parking for their customers?

The cost of using land is higher in the downtown area

Suppose we observe people buying more of a good even though its price has risen. WHat would an economist conclude?

The demand curve shifted to the right

During the 1990s positive technological change in the production of chicken caused the price of chicken to fall. Holding everything else constant, how would this affect the market for pork (a substitute for chicken)?

The demand for pork would decrease and the equilibrium price of pork would decrease.

A decrease in the supply of a good will cause a larger increase in its price

The more inelastic the demand for the good

Suppose your college sharply raises tuition rates next year. Other things constant, what is the least likely to occur?

The overall demand for courses at your college will fall

The average price of goods and services in the economy is also known as

The price level

Assume that there is a surplus in the market for hybrid automobiles. Which of the following statements correctly describes this situation?

The price of hybrid automobiles will fall in response to the surplus; as the price falls the quantity demanded will increase and the quantity supplied will decrease.

Why does short-run aggregate supply curve shift to the right in the long run, following a decrease in aggregate demand?

Workers and firms adjust their expectations of wages and prices downward and they accept lower wages and prices.

An increase in the price of MP3 players will result in

a larger quantity of MP3 players supplied

If an increase in income leads to an increase in the demand for sushi, then sushi is

a normal good

Structural unemployment is the result of

a persistent mismatch between the skills and the characteristics of workers and the requirements of the jobs

"Price gouging" or significant price spikes, are typically caused by

a significant increase in supplier greed

A decrease in the price of pork will result in

a smaller quantity of pork supplied

The statement "My iPhone is worth $300" represents money's function as

a unit of account

Long-run macroeconomic equilibrium occurs when

aggregate demand equal short-term aggregate supply and they intersect at a point on the long-run supply curve

If, in response to a decrease in the price of coffee, the quantity demanded of coffee increases, economists would describe this as

an increase in quantity demanded

Which of the following would cause an increase in the supply of cheese?

an increase in the number of firms that produce cheese

Holding everything else constant, a decrease in the price of GPS systems will result in

an increase in the quantity of GPS systems demanded

Which of the following would cause a decrease in the supply of peanut butter

an increase the price of peanuts

If a decrease in income leads to an increase in the demand for macaroni, then macaroni is

an inferior good

The M1 measure of the money supply equals

currency plus checking account balances plus traveler's checks

In 1986, an Apple IIe computer with 65 kilobytes of memory cost around $1,500. Today, a $1,500 iMac computer (also made by Apple) comes with 8 gigabytes of memory. This illustrates the potential for what kind of bias in CPI calculations?

increase in quality bias

Lowering the discount rate will

increase reserves, encourage banks to make more loans, and increase the money supply

The law of demand implies, holding everything else constant, that as the price of yogurt

increases, the quantity of yogurt demanded will decrease

The opportunity cost to a cab driver of taking the day off increases when

it rains

Fiat money has

little to no intrinsic value and is authorized by the central bank or government body

To increase the money supply, the Federal Reserve could

lower the discount rate

The quantity equation states that the

money supply times the velocity of money equals the price level times real output

The three main monetary policy tools used by the Federal Reserve to manage the money supply are

open market operations, discount policy, and reserve requirements

Suppose a student is attending your college on an athletic scholarship, and doesn't pay a penny for tuition. According to the economic way of thinking, the student's cost of attending college is

positive, because the student sacrificed some other opportunity to attend your college

A maximum price set by law above the market-clearing price is called a

price ceiling

At market equilibrium,

quantity demanded equals quantity supplied

If the quantity demanded for a product exceeds the quantity supplied, the market price will rise until

quantity demanded equals quantity supplied. The market price will then equal the equilibrium price

Fill in the blank: if a rent control were set at $200 below the market clearing rent on apartments, a _____ would tend to occur

shortage

The supply curve for umbrellas

shows the relationship between the price of umbrellas and the quantity of umbrellas supplied

An example of an intermediate good would be

the bread that goes into a cub sandwich that is sold by Quiznos

Suppose the price of home heating oil is unchanged, yet we observe people purchasing 20% more than a year ago. Then

the demand for home heating oil has increased

Assume that the hourly price for the services of personal trainers has risen and sales of the services have also risen. One can conclude that

the demand for personal trainers has increased

If you are considering buying either an Apple iPhone or a Samsung Galaxy, and you choose the Samsung only because the price is lower, then you consider

the iPhone and the Galaxy to be substitutes

A demand curve shows the relationship between

the price of a product and the quantity of the product demanded

The major shortcoming of a barter economy is

the requirement of a double coincidence of wants

Hurricane Katrina damaged a large portion of oil refining and pipeline capacity in the Gulf coast states. In the market for gasoline,

the supply curve shifted to the left resulting in an increase in the equilibrium price.

Mike has been unemployed for over a year. He hasn't looked for a job in the last three months, but he's just started looking for work again. Because Mike started looking for a new job,

the unemployment rate increased

The opportunity cost of an action is

the value of the next-best alternative that must be sacrificed to take the action

Which of the following price indices comes closest to measuring the cost of living of the typical household?

Consumer price index

Which of the following equations correctly measures GDP in an economy?

GDP= C+I+G+NX C=consumption I=Investments G=Government Purchases NX=Net Exports

As a result of losing his job, Uncle Roy dropped his cable TV service and instead bought a new iPod. For Uncle Roy,

Cable is a normal good and the iPod is an inferior good

Suppose the market clearing price for apples rises from $2.00 to $3.00 per pound, and the overall market clearing output increases from 1 million to 2 million pounds. How can we explain the increase in price and the increase in market output?

Demand increased and supply remained unchanged

A fractional reserve banking system is one in which banks hold less than 100 percent of ____ in reserves

Deposits

Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to understate the true extent of joblessness?

Discouraged workers

An increase in aggregate demand results in a(n) _____ in the ______.

Expansion; Short run

A change in which variable will change the market demand for a product?

Expected future prices

Monetary policy refers to the actions the

Federal Reserve takes to manage the money supply and interest rates to pursue its macroeconomic policy objectives

Jack just told his boss that he thinks his boss is an idiot. It is likely that Jack will be experiencing ____ unemployment in the near future.

Frictional

The advice to "keep searching, there are plenty of jobs around here for which you are qualified," would be most appropriate for which of the following types of unemployment?

Frictional Unemployment

Suppose Bob works for Mary as a typist. Mary and Bob fall deeply in love, marry and have eight children. Bob stops working for Mary in order to care for the children. What will be the effect on GDP?

GDP will decrease

Which of the following accurately describes an effect on hurricane Katrina on GDP?

GDP would increase reflecting the costs of cleanup

If people speculate that a run on one bank will cause a run on all banks in the financial system, and this speculation proves accurate, then the financial system would experience what is known as a

bank panic

The sale of bonds by the Federal Reserve will, in general,

decrease the quantity of reserves held by banks

An increase in interest rates

decreases investment spendin gon machinery, equipment and factories, consumption spending on durable goods and net exports

Consider the market for consumer loans. A legal ceiling set below the market-clearing interest rate would tend to..

do all of the above (increase the quantity demanded for loans, create a shortage of loans, and decrease the quantity supplied of loans)