ECONOMICS Final Exam, econ final pt2

all other things remain the same

A basic assumption used in most economic theories is that:

transactions demand for money

A consumer holds money to meet spending needs. This would be an example of the:

increases in the amount of money held as an asset

A decrease in the interest rate will cause a (n):

increases product supply

A government subsidy to the producers of a product

some firms leaving an industry

A leftward shift of a product supply curve might be caused by:

is an institution that brings together buyers and sellers

A market

the consumption of which varies directly with incomes.

A normal good is one:

is based on value judgments

A normative statement is one that

a decrease in the price of a product that is complementary to C.

A rightward shift in the demand curve for product C might be caused by:

rise, the supply of bread to decrease, and the demand for potatoes to increase.

Assume a drought in the Great Plains reduces the supply of wheat. Since wheat is a basic ingredient in the production of bread, and potatoes are consumer substitute for bread, we would expect the price of wheat to:

increase, quantity demanded will decrease, and quantity supplied will increase.

Assume, in a competitive market, price is intitally below the equilibrium level. We predict that price will:

An increase in demand with no change in supply will result in an increase in sales.

Assuming competitive markets with typical supply and demand curves, which of the following statements is correct?

the quantity that consumers want to purchase and the amount producers choose to sell are the same.

At the point where the demand and supply curves for a product intersect:

individuals may obtain resources, organize production, and sell the resulting output in any legal way they choose.

By free enterprise, we mean that:

Two lollipops and two candy bars

Camille is at the candy store with Grandma Mary, who offers to buy her $6 worth of candy. If lollipops are $1 each and candy bars are $2 each, what combination of candy can Camille's Grandma Mary buy her?

Machines

Capital is a factor of production. An example of capital as a factor of production is

inferior goods

College students living off-campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start careers, their consumption of both goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are

What goods and services will be produced?

Consumer sovereignty and "dollar votes" are most related to which fundamental question about a competitive market system?

Ownership of resources and methods of coordinating economic activity.

Economic systems differ according to what two main characteristics?

marginal cost of waiting is greater than the marginal benefit of eating in that restaurant.

From an economic perspective, when consumers leave a fast-food restaurant because the lines to be served are too long, they have concluded that the

the marginal benefit of the book is greater than its marginal cost

Henry wants to buy a book. The economic perspective suggests that Henry will buy the book if:

just the third hamburger

Huey has eaten two hamburgers and is considering the third. The marginal benefit in his decision is the pleasure from consuming

demand curve for Z to the left.

If Z is an inferior good, an increase in money income will shift the:

40

If a consumer has an income of $200, the price of X is $5, and the price of Y is $10, the maximum quantity of X the consumer is able to purchase is:

increase the required reserve of commercial banks and thus decrease the money supply

If the Board of Governors of the Federal Reserve System increases the legal reserve ratio, this change will:

sell government securities, raise reserve requirements, raise the discount rate, and increase the interest paid on reserves held at the Fed banks.

If the Federal Reserve authorities were attempting to reduce demand-pull inflation, the proper policies would be to

quantity supplied to increase.

If the price of a product increases, we would expect:

consumer sovereignty

In 2013, McDonald's introduced Fish McBites, which failed to catch on with the public and was subsequently dropped from the menu. This failure illustrates the idea of

the price of the product itself

In moving along a supply curve, which of the following is not held constant?

product; resource

In terms of the circular flow diagram, households make expenditures in the _____ market and receive income through the _____ market.

buy products and sell resources.

In the circular flow, households:

Change in buyer tastes

In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by:

The interest rate decreases and nominal GDP increases.

In which case would the quantity of money demanded by the public tend to increase by the greatest amount?

the entire economy

Macroeconomics approaches the study of economics from the viewpoint of:

product supply curve of X will shift to the right.

Other things equal, if the price of a key resource used to produce product X falls, the:

encourage cooperation by improving the chances of mutually agreeable transactions

Property rights are important because they

1 percent

Refer to the above graph, if the supply of money was $250 billion, the interest rate would be:

D (under curve)

Refer to the diagram, this economy will experience unemployment if it produces at point

shift from S2 to S1.

Refer to the diagram. A decrease in supply is depicted by a

move from point y to point x

Refer to the diagram. An increase in quantity supplied is depicted by a

land, labor, capital, entrepreneurial ability

Refer to the diagram. Flow 2 represents

$1.00 and 200

Refer to the diagram. The equilibrium price and quantity in this market will be

-allowing workers to develop skills by working on one, or a limited number, of tasks. -allowing workers to take advantage of existing differences in their abilities and skills. -avoiding the time loss involved in shifting from one production task to another.

Specialization -the division of labor—enhances productivity and efficiency by:

increase demand for soda, and reduce demand for tacos

Suppose that tacos and pizza are substitutes, and that soda and pizza are complements. We would expect a decrease in the price of pizza to:

Sell government securities in the open market and decrease government spending

Suppose the economy is at full employment with a high inflation rate. Which combination of government policies is most likely to reduce the inflation rate?

the desires of resource suppliers and producers to further their own self-interest will automatically further the public interest.

The "invisible hand" refers to the:

"let it be."

The French term "laissez-faire" means

other things equal

The Latin term "ceteris paribus" means

all production involves the use of scarce resources and thus the sacrifice of alternative goods.

The assertion that "there is no free lunch" means that:

store of value

The asset demand for money is most closely related to money functioning as a

Federal Reserve

The conduct of monetary policy in the United States is the main responsibility of the:

command system

The economy of North Korea would best be classified as:

land, labor, capital, entrepreneurial ability

The four factors of production are

discount rate

The interest rate at which the Federal Reserve Banks lend to commercial banks is called the

Federal Funds Rate (FFR)

The interest rate that banks charge one another on overnight loans is called the:

quantity of money supplied exceeds the quantity of money demanded.

The interest rate will fall when the:

price and quantity demanded inversely related.

The law of demand states that:

bowed out (concave) from the origin of the graph

The law of increasing opportunity cost explains why the shape of the production possibilities curve is:

producers will offer more of a product at high prices than they will at low prices.

The law of supply indicates that:

increase the excess reserve of banks and allow banks to increase their lending

The major purpose of the Federal Reserve buying government securities in open-market operations is to:

"Through the guiding function of prices and the incentive function of profits."

The market system's answer to the fundamental question "How will the system accommodate change?" is essentially

"Those most willing and able to pay for them."

The market system's answer to the fundamental question "Who will get the goods and services?" is essentially

Wages plus rent plus interest plus profits

The money income of households consists of the sum of:

minimizes the cost per unit of output.

The most efficient combination of resources in producing a given output is the combination that

Open-Market Operations (OMOs)

The most frequently used monetary device for achieving price stability is:

direct, inverse

The relationship between quantity supplied and price is___, and the relationship between quantity demanded and price is__.

Utility

The satisfaction of pleasure one gets from consuming a good or service is called:

buyers determine what will be produced based on their "dollar votes" for the goods and services offered by sellers.

The term "consumer sovereignty" means that:

discount rate, reserve ratio, interest on reserves, and open market operations.

The tools of monetary policy for altering the reserves of commercial banks are the:

adding the transactions demand for money to the asset demand for money.

The total quantity of money demanded is determined by:

medium of exchange

The transactions demand for money is most closely related to money functioning as a

unlimited wants cannot be satisfied by the limited resources

To economists, scarcity means that

$200 billion

When nominal GDP is $800 billion, and, on average, each dollar is spent four times in the economy over a year, the quantity of money demanded for transactions purposes will be:

there is free entry into and exit out of industries.

Which condition will encourage competition:

What goods and services should be produced by government?

Which is NOT one of the five fundamental questions:

Increase the money supply to shift the aggregate demand curve rightward

Which is an expansionary money policy?

Government

Which is assumed to be most limited in scope under a market system?

Line 1

Which line in the above graph would best reflect the slope of the total demand for money curve?

Line 2

Which line in the above graph would best reflect the slope of the transactions demand for money curve?

An increase in the money supply will lower the interest rate, increase investment spending, and increase aggregate demand and GDP.

Which of the following best describes the cause-effect chain of an expansionary monetary policy?

minimal government intervention

Which of the following is a distinguishing feature of laissez-faire capitalism?

natural gas

Which of the following is a land resource?

The price of smartphones declined 2.8 percent last year.

Which of the following is a microeconomic statement?

an empirical investigation of the general price level and unemployment rates since 1990

Which of the following is associated with macroeconomics?

Technology

Which of the following is not considered one of the factors of production?

private ownership of property resources

Which of the following is unique to the market system?

A) we make choices in the face of scarcity.

Which of the following statements best describes the study of economics? Economics studies how

A reduction in the price of cattle feed.

Which of the following would NOT shift the demand curve for beef?

"There is no such thing as a free lunch"

Which one of the following expressions best states the idea of opportunity cost?

The production and allocation of goods and services is determined primarily through markets.

Which statement best describes a capitalist economy?

Freedom of choice and enterprise are essential elements of the market system

Which statement is correct?

The opportunity cost of holding money.

Which varies directly with the interest rate?

shifts the consumer's budget line to the right

An increase in money income

shift right

If the price of K declines, the demand curve for the complementary product J will:

coordination problem under central planning

"Under central planning, some group has to decide how to get the necessary inputs produced in the right amounts and delivered to the right places at the right time. This is a nearly impossible task without markets and profits." This quotation best identifies the

8 percent (Transactions Demand for Money+Asset Demand for Money)

Based on the given table, the equilibrium interest rate is

complementary goods

DVD players and DVDs are:

all final goods and services produced in an economy in a given year

GDP is the market value of:

Matt's statement is positive, while Jean's statement is normative.

Matt observes that "there is a high correlation between educational attainment and the level of income." Jean concurs and adds that "high school graduates should all proceed to college."

The value of the best forgone alternative

opportunity cost is best defined as: