Econ Test #1 Review Questions

If interest rates on bonds rise, holding other things constant, stock prices will:

Decrease

If the price level increases, real wages will:

Decrease

When interest rates increase, the demand for commercial and residential real estate will _____ and the price of real estate will _____.

Decrease; decrease

All of the following cause structural unemployment EXCEPT: a) Collective bargaining efforts that secure higher wages for unionized workers than for nonunionized workers. b) A government-mandated floor on the price of labor set above the equilibrium wage. c) Offering high wages to attract high-quality workers. d) Granting Social Security benefits to laid-off workers.

d) Granting Social Security benefits to laid-off worker

You have purchased a new mattress for $2,000, and the store has given you a "12 months, same as cash" deal. This means that you do not actually have to pay for the mattress for another year. One year from now you will have to give the store the full price of $2,000. If the annual interest rate is 10%, how much money do you need today to ensure that you will have $2,000 one year from today?

$1,818

Year: 2011 nGDP: 3,000 Price Level: 100 Population: 5 Year: 2014 nGDP: 8,000 Price Level: 200 Population: 10 (Table: Per Capita GDP) Look at the table Per Capita GDP. If 2011 is the base year, real GDP in 2014 was:

$4,000

(Table: Pizza Economy I) Look at the table Pizza Economy 1. GDP in this economy is:

$65,000

You have an opportunity to pay $1,000 today and receive $1,200 a year from now. If the annual interest rate is 20%, the difference between the present value of the benefit and your investment is:

0

(Table: Investment Spending, Private Spending, and Capital Inflows) What is the budget balance as a percentage of GDP in SOUTHLANDIA?

0%

If during 2011, the Republic of Sildavia recorded a GDP of $65 billion, interest payments of $15 billion, imports of $13 billion, profits of $7 billion, exports of $15 billion, and rent of $7 billion, wages during 2011 in Sildavia were:

36 billion

Suppose banks are issuing personal loans at 9%. If expected inflation is 3%, then the nominal interest rate is _____ and the real interest rate is _____.

9%; 6%

A newspaper story recently reported that the price of new cars, a normal good, has decreased and the quantity of new cars sold has dropped. The new price and quantity could have been caused by:

A decrease in buyers' incomes

When inflation rises quickly, borrowers will _____ and lenders will _____.

Be hurt; Benefit

The GDP deflator is:

Equal to 100 in the base year

Suppose the local real estate market is in equilibrium. A recession causes local household incomes to decline. At the same time, construction of a large subdivision of new homes has just been completed. Given these two changes and assuming that real estate is a normal good, we can predict that the price of real estate will _____ and the quantity of real estate bought and sold will _____.

Fall; rise or fall

Which of the following is an advantage to the recipient of foreign investment?

Foreign companies often bring new technology to the recipient country, and this increases productivity.

Last week Stephanie quit her job as a copywriter at an advertising agency. She has spent the past few days browsing the help wanted ads but hasn't found anything that matches her skills. Stephanie is best classified as:

Frictionally unemployed

If your professor wins the lottery:

GDP is NOT affected

In the United States:

GNP and GDP are about equal

Compared to bonds, stocks generally provide a _____ return and carry a _____ financial risk.

Higher; higher

In the factor markets:

Households supply resources

The money spent on domestically produced final goods and services:

Is equal to GDP

It is certain that the equilibrium price will fall when:

It is certain that the equilibrium price will fall when

Suppose that roughly 8 million people in the United States were actively seeking jobs but had not found them this month, the same number as last month. Suppose that 2 million of the people who were unemployed last month gave up their search this month and stopped looking for work. What will happen to the official unemployment rate this month, all other things unchanged?

It will fall, because 2 million people are not in the labor force this month and are not counted as unemployed.

Compared to individual loans, loan-backed securities provide _____diversification and _____ liquidity than individual loans.

More; more

In a closed economy, all investment spending must come from:

National Savings

Financial markets:

Provide liquidity

All other things unchanged, a general decrease in the amount of government borrowing will typically:

Shift the loanable funds demand curve to the left

In the market for wheat, if the price of ethanol (which is made from corn, a substitute in production) increased dramatically, the _____ wheat would _____.

Supply of; Decrease

If private savings increase, the _____ loanable funds will _____, interest rates will _____, and the amount of borrowing will _____.

Supply of; increase; decrease; increase

In the consumer price index of the United States:

The current cost of a basket of goods is compared to the base-period cost of the same basket of goods, the calculation of the base-period index is always equal to 100, and the base period is 1982-1984

The natural rate of employment is achieved when:

There is no cyclical unemployment

Chain linking is the method of calculating changes in real GDP using averages between an early base year and a late base year.

True

Flows of money, goods and services, and factors of production through the economy are all shown in the circular-flow diagram.

True