Econ Final Exam Review

GDP in the United States in 2012 was about __________. $162 billion $1.62 trillion $16.2 trillion $162 trillion

$16.2 trillion

Alex wants to measure the nominal 1998 GDP of $993 billion in 2008 dollars. From the data he gathered, he knows the deflator for 1998 is 30 and for 2008, it is 74, and that real interest in those years was 6.23% and 3.21% respectively. If he avoids making a misleading calculation, what will the value be? $430 billion $835 billion $2,063 billion $2,449 billion

$2,449 billion

India has a GDP of 23,000 billion Indian rupees, and a population of 1.1 billion. The exchange rate is 50 rupees per U.S. dollar. Calculate the GDP per capita of India as measured in U.S. dollars. $20.90 $20,909 $418 $4.18

$418

The Czech Republic has a GDP of 2,000 billion koruny. The exchange rate is 20 koruny per U.S. dollar. The Czech population is 20 million. Calculate the per capita GDP of the Czech Republic in U.S. dollars. $5 $100,000 $500 $5000

$5000

5. Suppose that Mimi plays golf 5 times per month when the price is $40 and 4 times per month when the price is $50. What is the price elasticity of Mimi's demand curve? 0.1 0.8 1.0 10.0

1.0

During the deep recessions of the early 1980s and of 2007-2009, unemployment reached roughly __________. 10% 20% 30% 40%

10%

Through good economic years and bad, many European economies had unemployment rates hovering near _________ since the 1970s. 1% 5% 10% 20%

10%

In 1980 Denmark had a GDP of $70 billion (measured in U.S. dollars) and a population of 5.1 million. In 2000, Denmark had a GDP of $160 billion (measured in U.S. dollars) s and a population of 5.3 million. By what percentage did Denmark's GDP per capita rise between 1980 and 2000? 45.4% 219% 128% 120%

120%

When Anders took out his first two-year membership with Maxima Gym in 2004, the fee was $540.00. He renewed his membership three times; in 2006 for $580.00, in 2008, for $600.00, and again in 2010, for $630.00. What is the overall rate of inflation for Anders' gym membership? 8.6% 5.4% 7.87% 16.66%

16.66%

Women composed __________ of the paid workforce in 1900 and 50% of the paid workforce in 2010. 2% 18% 33% 60%

18%

An analyst needs to adjust the nominal GDP for the years 2000 and 2010 into real terms to conclude his comparison analysis. The nominal GDP in 2000 was $672 billion and $1,690 billion for 2010; the real interest rate was 6.79% in 2000 and 3.71% in 2010; the 2000 deflator was 24 and 51 in 2010. What is the real gain? 18.34% 38.58% 151.48% 70.61%

18.34%

During the Great Depression of the 1930s, the unemployment rate reached more than _________ of the labor force. 25% 45% 65% 85%

25%

If the number of employed persons in a country equals 24 million, the number of unemployed persons equals 8 million, and the number of persons over age 16 in the population equals 40 million, the unemployment rate equals: 32%. 25%. 20%. 8%.

25%.

5. Billy Bob's Barber Shop knows that a 5 percent increase in the price of their haircuts results in a 15 percent decrease in the number of haircuts purchased. What is the elasticity of demand facing Billy Bob's Barber Shop? 0.15 3.0 0.10 0.05

3.0

In 1990, the GDP of Canada was $680 billion as measured in Canadian dollars, and the exchange rate was that $1 Canadian was worth 85 U.S. cents. In 2000, the GDP of Canada was $1000 billion as measured in Canadian dollars, and the exchange rate was that $1 Canadian was worth 69 U.S. cents. By what percentage did the GDP of Canada increase from 1990 to 2000 in Canadian dollars? 19.4% 47% 68% 147%

47%

5. The demand for a product is unit elastic. At a price of $20, 10 units of a product are sold. If the price is increased to $40, then one would expect sales to equal: 20 units. 10 units. 5 units. 0 units.

5 units.

Each month the Census Bureau carries out the Current Population Survey (CPS) (which has been carried out every month since 1940). A total of __________ households are contacted every month. 600 6000 60,000 600,000

60,000

Which of the following is included in the calculated Gross Domestic Product? Farmer Freddie sells his second tractor to his son. Suzanne buys a love seat and chair for $85 at the yard sale on the corner. A local ice cream store sells $17,000 worth of cones and sundaes on July 1. Mr. Farkle buys a used lawn mower from his neighbor, Mr. Sparkle.

A local ice cream store sells $17,000 worth of cones and sundaes on July 1.

1. In the circular flow diagram model: households receive income from businesses in exchange for providing inputs and use that income to buy goods and services from businesses. businesses receive revenues from households in exchange for providing goods and services and use those revenues to buy inputs from households. households receive revenue for selling goods and services to businesses, and use that revenue to buy inputs from businesses. Both (a) and (b) are correct.

Both (a) and (b) are correct.

1. Which of the following best characterizes the circular flow of income? Businesses buy resources from the government, and households buy goods and services from businesses. Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses. The government purchases resources from businesses and households and then sells goods and services to businesses and households. Households buy factors of production from businesses, and businesses buy goods and services from households.

Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses.

Nancy's union has negotiated a three-year wage contract that provides for a 2.4% increase indexed to inflation. The rates of inflation are forecast to be 1.62%, 1.93% and 2.21% respectively. How will Nancy's wage increase be expressed in the new contract? COLA plus 1.6% COLA plus 1.9% COLA plus 2.4% COLA plus 2.2%

COLA plus 2.4%

___________ is about two-thirds of the demand side of GDP, but it moves relatively little over time. Government Consumption Investment Services

Consumption

1. In countries like _____________ the command economy predominates. China and Vietnam Cuba and North Korea South Africa and Kenya Germany and France

Cuba and North Korea

_______________, which can be approximated by the growth of gross domestic product, ultimately determines the prevailing standard of living in a country. Trade balance Inflation Education Economic growth

Economic growth

Which of the following statements is incorrect? Employment insurance compensation encourages longer job searches, which may lead to a better match between jobs and employees. Employment insurance compensation increases the opportunity cost of being unemployed. The typical employment insurance compensation is roughly one third of one's latest salary for up to 26 weeks. Demand and supply curves for labor are constantly shifting.

Employment insurance compensation increases the opportunity cost of being unemployed.

Which of the following statements is true? GDP includes spending on recreation and travel, but it does not cover leisure time. GDP does not include production that is exchanged in the market, but it does cover production that is not exchanged in the market. GDP does not include newly produced goods and services, but counts the buying and selling of previously existing assets GDP includes production that is not exchanged in the market

GDP includes spending on recreation and travel, but it does not cover leisure time.

What name is given to the index based on the prices of exported or imported merchandise? U.S. Producer Trade Index International Trade Index International Price Index U.S. Producer Price Index

International Price Index

Suppose that everyone who has looked for a job for more than six months gave up in despair and stopped looking. What would happen to the unemployment rate? It would increase. It would fall. It would not change. It would change, but the effect cannot be predicted.

It would fall.

Which of the following is true? A depression is a recession that is mild and relatively brief. The expansions and contractions of real world business cycles last varying lengths of time and often differ in magnitude. The timing of business fluctuations is regular and therefore easily predictable. During the contractionary phase of the business cycle, the rate of unemployment is generally quite low.

The expansions and contractions of real world business cycles last varying lengths of time and often differ in magnitude.

1. Which of the following best denotes the reason for the existence of substantial black markets? a market-oriented economy a command economy government laws and rules the microeconomy

a command economy

If imports exceed exports, as in recent years, then __________ exists. a trade surplus a trade deficit a trade imbalance trade disequilibrium

a trade deficit

Frictional unemployment occurs when: there is friction between an employer and employee. a worker decides to quit one job to seek a different job. a large corporation transfers a worker to another city. college students go back to school at the end of the summer.

a worker decides to quit one job to seek a different job.

What distinguishes the real value of a statistic from the nominal value of a statistic? timing of announcement adjusting for inflation adjusting for GDP deflator real interest rate

adjusting for inflation

To compare the GDP of two different countries with different currencies, it is necessary to use _________________________. an exchange rate foreign currency currency rates per capita GDP

an exchange rate

Cyclical unemployment arises when: the agriculture sector completes the cycle of planting, cultivating, and harvesting the nation's food supply. labor unions strike for higher wages. the business cycle enters an expansionary phase. business activity in the macroeconomy declines.

business activity in the macroeconomy declines.

1. In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of: all consumers. buyers and sellers. producers and input suppliers. producers and government planning committees.

buyers and sellers

In the 1970s and 1980s, labor unions commonly negotiated wage contracts that had _______________________ which guaranteed that their wages would keep up with inflation. cost of living adjustments inflation protection plans inflation ceiling guarantees wage protection clauses

cost of living adjustments

5. A 10 percent increase in the price of soda leads to a 20 percent increase in the quantity of iced tea demanded. It appears that: elasticity of demand for soda 0.5 and is inelastic. elasticity of demand for iced tea is 2 and is elastic. cross-price elasticity of demand for soda is -0.5. cross-price elasticity of demand for iced tea is +2.

cross-price elasticity of demand for iced tea is +2.

The type of unemployment that occurs because of a recession is called: cyclical unemployment. the natural rate of unemployment. seasonal unemployment. frictional unemployment.

cyclical unemployment.

Another term used to describe negative inflation is: counter inflation deflation hyperinflation GDP deflator

deflation

With regard to the economy, the term negative inflation is synonymous with which of the following? recession depression deflation hyperinflation

deflation

1. Regardless of whether you are looking through the microeconomics microscope or the macroeconomics telescope, the fundamental subject material of the interconnected __________ doesn't change. market economy production firm

economy

The unemployment rate may overestimate the true extent of unemployment if: many part-time employees would like to work fulltime, but are unable to get the additional work. many people who claim to be unemployed actually work in the underground economy. people falsely claim that they are actively seeking work in order to receive unemployment benefits. either B) or C) occurs.

either B) or C) occurs.

5. Demand is said to be ___________ when the quantity demanded is very responsive to changes in price. elastic unit elastic inelastic independent

elastic

5. Youth smoking seems to be more __________ than adult smoking—that is, the quantity of youth smoking will fall by a greater percentage than the quantity of adult smoking in response to a given percentage increase in price. unitary elastic inelastic elastic cross-price elastic

elastic

5. A price cut will increase the total revenue a firm receives if the demand for its product is: unit inelastic. unit elastic. inelastic. elastic.

elastic.

1. Which of the following is generally accepted as a valid criticism of the production of useful goods and services? government involvement the black market environmental pollution economic freedom

environmental pollution

5. If the supply curve for a product is horizontal, then the elasticity of supply is: equal to infinity. greater than 1 but less than infinity. equal to 1. equal to zero.

equal to infinity.

5. If the supply curve for a product is vertical, then the elasticity of supply is: equal to zero. equal to 1. greater than 1 but less than infinity. equal to infinity.

equal to zero.

The definition of market equilibrium states that at the _______________, the quantity of labor demanded by employers will equal the quantity supplied. efficiency wage equilibrium wage sticky wage natural rate of unemployment

equilibrium wage

A business cycle reflects changes in economic activity, particularly real GDP. The stages of a business cycle are: trough, expansion, recession, peak contraction, recession, expansion, boom expansion, trough, recession, peak expansion, peak, recession, trough

expansion, peak, recession, trough

5. If the supply curve for housing is perfectly inelastic, then a reduction in demand will cause the equilibrium price to: rise and the equilibrium quantity to fall. rise and the equilibrium quantity to stay the same. fall and the equilibrium quantity to fall. fall and the equilibrium quantity to stay the same.

fall and the equilibrium quantity to stay the same.

1. The circular flow diagram of economic activity is a model of the: flow of goods, services, and payments between households and firms. influence of government on business behaviour. role of unions and government in the economy. interaction among taxes, prices, and profits.

flow of goods, services, and payments between households and firms

The extent of _______________________ will depend on how easy it is for workers to learn about alternative jobs, which may reflect the ease of communications about job prospects in the economy. frictional unemployment cyclical unemployment seasonal unemployment cyclical employment

frictional unemployment

The development of a nationwide computerized job bank listing of all job openings would be most likely to reduce: natural unemployment. frictional unemployment. seasonal unemployment. cyclical unemployment.

frictional unemployment.

1. In the ______________, households receive goods and services and pay firms for them. labor market financial capital market goods and services market savings market

goods and services market

The effects of inflation are seen in: goods and services only wages and income levels only services and wages only goods, services, wages and income levels

goods, services, wages and income levels

1. In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made. government market firm business sector

government

1. The two main tools of macroeconomic policy include monetary policy, and fiscal policy, which involves __________ spending. business government household capital market

government

1. Which of the following best describes a fiscal policy tool? government spending bank lending financial capital markets household spending

government spending

For most high-income countries of the world, GDP _________________ over time. has proven to be stable has risen gradually has declined slightly has sharply risen

has risen gradually

5. A perfectly elastic supply curve is: upward sloping to the right. downward sloping to the left. horizontal. vertical.

horizontal

On the demand side of GDP, consumption by _____________ is the largest component of GDP, accounting for about two-thirds of the GDP in any year. services businesses households government

households

Consumption is the purchase of goods and services by: households. government. business firms. foreign buyers.

households.

In the early 1990's extremely high inflation rates of 2500% were common in Russia. During that time, we can say that as a result of those inflation rates, Russia was experiencing ___________________. perpetual inflation ultra inflation hypo inflation hyperinflation

hyperinflation

5. The longer the time period considered, the more the elasticity of supply tends to: decrease remain constant increase converge to zero

increase

Inflation implies that the level of all prices _____________________. decrease stay the same increase none of the above

increase

5. The price elasticity of demand for tickets to local baseball games is estimated to be equal to 0.89. In order to boost ticket revenues, an economist would advise: A. increasing the price of game tickets because demand is inelastic. B. not changing the price of game tickets because demand is unit elastic. C. increasing the price of game tickets because demand is elastic. D. decreasing the price of game tickets because demand is elastic.

increasing the price of game tickets because demand is inelastic.

A payment is said to be ________________ if it is automatically adjusted for inflation. cross referenced indexed matched maintained

indexed

When a price, wage, or interest rate is adjusted automatically with inflation, it is said to be __________. indexed COLAed nominally adjusted semi-indexed

indexed

5. When economists are sketching examples of demand and supply, it is common to sketch a demand or supply curve that is close to vertical, and then to refer to that curve as _________. inelastic elastic unitary elasticity income elasticity

inelastic

5. Taxes on goods with __________ demand curves will tend to raise more tax revenue for the government than taxes on goods with __________ demand curves. elastic; unit elastic elastic; inelastic inelastic; elastic unit elastic; inelastic

inelastic; elastic

A lender demands an interest rate in part to compensate for any expected ___________, so that the money that is repaid in the future will have at least as much buying power as the money that was originally loaned. risk premium inflation compound interest opportunity costs

inflation

__________ implies that pressure for price increases reaches across _______________markets, not just one. inflation; all deflation; most inflation; most deflation; all

inflation; most

1. Which of the following best describes a monetary policy tool? interest rates taxes household savings government spending

interest rates

1. Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization? division of labour international trade economies of scale command economy

international trade

1. Macroeconomics: is concerned with the expansion of a small business into a large corporation. is narrower in scope than microeconomics. analyzes mergers and acquisitions between firms. is concerned with the expansion and contraction of the overall economy.

is concerned with the expansion and contraction of the overall economy.

Karen chooses to go to university fulltime rather than to work. Karen: is not part of the labor force. is part of the labor force and what economists call a discouraged worker. is part of the labor force, but not actively seeking work. is considered employed.

is not part of the labor force.

1. In the ____________, households work and receive payment from firms. financial investment market financial capital market labor market savings market

labor market

1. When nations desire a healthy macroeconomy, they typically focus on three goals, one of these being: balanced budget prudent monetary policy low inflation assuring competition between firms

low inflation

5. A 10 percent increase in income leads to a 15% decrease in the quantity of macaroni and cheese demanded but no change in the price of macaroni and cheese. From this information, we can assume: macaroni is a normal good and price elasticity of demand is greater than 1. macaroni is an inferior good and price elasticity of supply is equal to zero. macaroni is an inferior good and price elasticity of supply is infinite. macaroni is an inferior good and price elasticity of demand is less than 1.

macaroni is an inferior good and price elasticity of supply is infinite.

1. In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers. market-oriented economy macroeconomy microeconomy command economy

market-oriented economy

1. The basic difference between macroeconomics and microeconomics is that: A. microeconomics looks at the forest (aggregate markets) while macroeconomics looks at the trees (individual markets). B. macroeconomics is concerned with groups of individuals while microeconomics is concerned with single countries. C. microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets). D. macroeconomics is concerned with generalization while microeconomics is concerned with specialization.

microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets).

While one occasionally sees references to inflation over short time periods, the term typically implies a(n)_____________ in prices. ongoing decrease ongoing rise short term rise short term decrease

ongoing rise

The effect of substitution bias is that the rise in the price of a fixed basket of goods over time tends to ___________________ the rise in a consumer's true cost of living, because it doesn't take into account that the person can substitute between goods according to changes in their relative prices. stabilize understate overstate reduce

overstate

The difference between nominal GDP and real GDP is: nominal GDP measures actual productivity nominal GDP adjusts for inflation real GDP adjusts for inflation real GDP excludes imports and exports

real GDP adjusts for inflation

The __________________ is the nominal interest rate minus the rate of inflation. real GDP real interest rate nominally adjusted annualized interest rate

real interest rate

The nominal value of any economic statistic refers to the number that is actually announced at that time, while the ________________ refers to the statistic after it has been adjusted for inflation. empirical value adjusted value real value net value

real value

5. The price elasticity of demand measures the: responsiveness of quantity demanded to a change in quantity supplied. responsiveness of price to a change in quantity demanded. responsiveness of quantity demanded to a change in price. responsiveness of quantity demanded to a change in income.

responsiveness of quantity demanded to a change in price.

5. If the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium price to: rise and the equilibrium quantity to fall. rise and the equilibrium quantity to stay the same. rise and the equilibrium quantity to rise. stay the same and the equilibrium quantity to fall.

rise and the equilibrium quantity to stay the same.

5. If the supply curve for aspirin is perfectly elastic, then a reduction in demand will cause the equilibrium price to: stay the same and the equilibrium quantity to fall. fall and the equilibrium quantity to fall. rise and the equilibrium quantity to stay the same. rise and the equilibrium quantity to fall.

stay the same and the equilibrium quantity to fall.

The most commonly cited measure of inflation in the United States is: the Consumer Price Index (CPI) the Deflationary Price Index (DPI) the Cumulative Price Index (CPI) the Inflationary Price Index (IPI)

the Consumer Price Index (CPI)

Which of the following is included in GDP? revenue from the sale of a three-year old car the fees charged for a stock broker's services the receipts from a sale of land the value of lawn care service provided by a sixteen-year-old as part of his weekly chores

the fees charged for a stock broker's services

The most significant real economic cost of high unemployment is: the potential goods and services that might have been produced but weren't. the money cost of retraining persons to obtain new jobs. the lost tax revenue that might have been paid by persons if they had worked. the money cost of unemployment insurance payments to the unemployed.

the potential goods and services that might have been produced but weren't.

Which of the following is included in GDP calculations? sales revenue received from a yard sale cash income received by a self-employed landscaper that is not reported to the IRS a crisp $50 bill received on your birthday the university tuition paid to enroll in a course

the university tuition paid to enroll in a course

5. If cola and iced tea are good substitutes for consumers, then it is likely that: their cross price elasticities are greater than zero. their price elasticities of demand are less than one. their income elasticities are less than zero. their price elasticities of supply are less than one .

their cross price elasticities are greater than zero.

Insofar as government public policy is concerned, the best way to battle unemployment would be __________________. to minimize recessions to maximize unemployment payments to maximize unemployment insurance duration to minimize labor unions

to minimize recessions

1. If macroeconomics looks at the economy as a whole, it focuses on which of the following? households business firms unemployed people the division of labor

unemployed people

Frictional unemployment is: unemployment that is due to the friction of competing ideological systems. unemployment caused by lack of training and education. unemployment caused by automation in the workplace. unemployment that is due to normal turnover in the labor market.

unemployment that is due to normal turnover in the labor market.

In November 2010 the labor force in Siouxtown, was 14,800. There were 14,483 persons employed. The local unemployment rate: was 1.2%. was 2.1%. was 5.6%. was 7.1%.

was 2.1%.