Macro Econ Final

If a country has a population of 1,000 people, an area of 100 square miles, and a GDP of $5 million, then its GDP per capita is: a. $500. b. $5,000. c. $50,000. d. $5 million.

b. $5,000.

(Ref 15-1 Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. Assuming 2013 was the base year, the growth rate of real GDP from 2013 to 2014 was _____%. a. 5 b. 10 c. 11.25 d. 20

a. 5

(Ref 21-3 Figure: Technological Progress and Productivity Growth) Use Figure: Technological Progress and Productivity Growth. If there is an increase in physical capital per worker (all other factors remaining unchanged), it is BEST indicated by a move from: a. A to B. b. B to A. c. C to B. d. B to C.

a. A to B.

Figure: AD-AS Model II. Refer to Figure: AD-AS Model II. As the size of the labor force increases over time, the _____ curve will shift to the _____. a. LRAS; right b. LRAS; left c. AD; left d. AD; right

a. LRAS; right

(Figure: Inflationary and Recessionary Gaps) Look at the figure Inflationary and Recessionary Gaps. The intersection of AD with SRAS in panel (b) indicates: a. a short-run equilibrium.

a. a short-run equilibrium.

Diminishing returns to physical capital implies that, when the human capital per worker and the state of technology remain fixed, each successive increase in physical capital leads to _____ productivity. a. a smaller increase in b. a larger increase in c. a decrease in d. negative

a. a smaller increase in

Raising taxes shifts the _____ curve to the _____. a. aggregate demand; left b. long-run aggregate supply; left c. aggregate demand; right d. short-run aggregate supply; left

a. aggregate demand; left

(Ref 3-4 Table: Comparative Advantage I) Use Table: Comparative Advantage I. Finland has a comparative advantage in producing: a. cell phones only. b. herring only. c. both cell phones and herring. d. neither cell phones nor herring.

a. cell phones only.

(Ref 3-3 Table: Coffee and Salmon Production Possibilities II) Use Table: Coffee and Salmon Production Possibilities II. This table shows the maximum amounts of coffee and salmon, both measured in pounds, that Brazil and Alaska can produce if they just produce one good. Brazil has an absolute advantage in producing: a. coffee only. b. salmon only. c. both coffee and salmon. d. neither coffee nor salmon.

a. coffee only.

Suppose the economy is operating in long-run equilibrium and a positive demand shock hits. We expect a short-run increase in real GDP and the price level and a long-run _____ in real GDP and _____ the price level. a. decrease; increase b. increase; increase c. decrease; decrease d. increase; decrease

a. decrease; increase

A decrease in demand and a decrease in supply will lead to a(n) _____ in equilibrium quantity and a(n) _____ in equilibrium price. a. decrease; indeterminate change b. indeterminate change; increase c. indeterminate change; decrease d. increase; indeterminate change

a. decrease; indeterminate change

Other things equal, rising interest rates lead to a _____ in investment spending and a _____ in _____ spending. a. fall; fall; consumer b. rise; rise; consumer c. fall; rise; consumer d. fall; rise; investment

a. fall; fall; consumer

A positive demand shock leads to: a. higher prices and higher employment. b. higher prices and higher unemployment. c. higher prices and lower output. d. lower prices and lower output.

a. higher prices and higher employment.

Scenario: Exchange RatesThe value of a euro goes from US$1.25 to US$1.50. In the United States, exports will _____ and imports will _____. a. increase; decrease b. increase; increase c. decrease; increase d. decrease; decrease

a. increase; decrease

If supply is upward sloping, an increase in demand, all other things unchanged, will result in a(n) _____ in equilibrium price and a(n) _____ in equilibrium quantity. a. increase; increase b. decrease; decrease c. decrease; increase d. increase; decrease

a. increase; increase

Investment spending is spending on: a. productive physical capital. b. bonds. c. shares of stock. d. productive physical capital, bonds, and shares of stock.

a. productive physical capital.

Productivity is equal to: a. real GDP divided by the number of workers. b. real GDP divided by the population. c. the number of workers per machine. d. the total output produced

a. real GDP divided by the number of workers.

Real per capita GDP is: a. real GDP divided by the population. b. real GDP divided by the amount of capital available in the economy. c. not a useful measure of human welfare. d. rarely used as a tool to compare countries' possible resources.

a. real GDP divided by the population.

In an economy whose aggregate real output is growing faster than the total population: a. real GDP per capita is rising. b. standard of living is declining. c. national income is falling. d. nominal GDP per capita is decreasing.

a. real GDP per capita is rising.

There are two types of stabilization policy, fiscal policy and monetary policy. Which of the following is a monetary policy tool? A) Tax rates B) Government spending C) Open-market operations D) Tariffs E) None of the above

C) Open-market operations

Suppose you buy a Big Mac in El Paso this morning for $4.00 and that the same Big Mac across the border in Juarez, Mexico costs 40 pesos. What is the relative cost of a Big Mac between the countries if the nominal exchange rate is $1 = 10 pesos? A. Big Macs cost 5% more in Mexico than they do in the U.S. B. Big Macs cost 5% more in the U.S. than they do in Mexico. C. Big Macs cost the same in Mexico as they do in the U.S. D. Big Macs cost 10% more in Mexico than they do in the U.S. E. Big Macs cost 10% more in the U.S. than they do in Mexico.

C. Big Macs cost the same in Mexico as they do in the U.S.

Two important factors that determine a nation's standard of living are: 1) the proportion of the population that works, and 2) its output per worker. Mexico has a relatively young population and, thus, the proportion of its population that works is expected to increase in the future. Given these circumstances, which of the following statements about its standard of living is TRUE: A. Mexico can increase its standard of living only by increasing its output per worker. B. Mexico can increase its standard of living only by increasing the proportion of the population that works. C. Mexico can increase its standard of living by either increasing its output per worker or by increasing the proportion of the population that works. D. Mexico can increase its standard of living only by increasing both its output per worker and the proportion of the population that works. E. Mexico cannot increase its standard of living.

C. Mexico can increase its standard of living by either increasing its output per worker or by increasing the proportion of the population that works.

Assume the United States imposes a new tariff on wines imported from France. Who benefits from this action? A. French winemakers B. American consumers C. U. S. winemakers D. All of the above E. None of the above

C. U. S. winemakers

A survey reveals that, on a small island, 40 people have jobs, 10 people are not working but are looking for jobs, and 30 people are neither working nor looking for work. The unemployment rate on the island is _____%. A)12.5 B)20 C)25 D)50

B)20

Concept: Nominal versus real value. If the inflation rate is higher than a borrower expects it to be during the duration of a loan, which of the following is true? A. The borrower will pay a higher real interest rate on the loan than expected. B. The borrower will pay a lower real interest rate on the loan than expected. C. The borrower will pay the expected real interest rate on the loan. D. The real interest rate and nominal interest rate on the loan will be the same. E. Inflation does not affect the real interest rate paid on a loan.

B. The borrower will pay a lower real interest rate on the loan than expected.

Concept: Equation of Exchange7. The quantity equation, M•V = P•Y, where M is the quantity of money, V is the velocity of money, P is the price of output, and Y is the amount of output. If we assume that the velocity of money and output are relatively stable (unchanged) in the long run, then we can expect that an increase in the money supply (M) by the Federal Reserve Bank will result in ____ A. a decline in the price level in the long-run. B. an increase in the price level in the long-run. C. an increase in the velocity of money in the long-run. D. a decrease in the amount of output in the long-run. E. a decline in the velocity of money in the long-run.

B. an increase in the price level in the long-run.

Based on their comparative advantages, Matt should specialize in _______ while Amyshould specialize in _______ A. oil changes, rotating tires B. rotating tires, oil changes C. neither, both D. both, neither E. rotating tires, rotating tires

B. rotating tires, oil changes

(Ref 15-2 Table: Peanut Butter and Jelly Economy) Use Table: Peanut Butter and Jelly Economy. Between 2010 and 2011, nominal GDP _____ by _____%. A)increased; 12.5 B)decreased; 12.5 C)increased; 16.67 D)increased; 31.25

D)increased; 31.25

survey reveals that, on a small island, 40 people have jobs, 10 people are not working but are looking for jobs, and 30 people are neither working nor looking for work. The unemployment rate on the island is _____%. a. 12.5 b. 20 c. 25 d. 50

b. 20

Suppose that a panel of economists predicts that a nation's real GDP per capita will double in approximately 20 years. According to the rule of 70, what must be the predicted annual growth rate of real GDP per capita? a. 140% b. 3.5% c. 2.85% d. 14%

b. 3.5%

Suppose that supply increases and demand decreases. What is the most likely effect on price and quantity? a. The price will increase, but quantity may increase, decrease, or stay the same. b. The price will decrease, but quantity may increase, decrease, or stay the same. c. The price will decrease and quantity will decrease. d. The price will increase and quantity will increase.

b. The price will decrease, but quantity may increase, decrease, or stay the same.

Real GDP is nominal GDP adjusted for: a. double counting. b. changes in prices. c. population. d. imports.

b. changes in prices.

When a currency depreciates, the prices of its exports to other countries will: a. increase. b. decrease. c. remain constant. d. fluctuate randomly.

b. decrease.

The economy is in a recession. The desired FISCAL policy is a(n): a. decrease in government transfer payments. b. increase in government purchases of goods and services. c. increase in tax rates. d. decrease in interest rates.

b. increase in government purchases of goods and services.

When actual output is above potential output, over time: a. nominal wages will increase, and the short-run supply curve will shift to the right. b. nominal wages will increase, and the short-run supply curve will shift to the left. c. the aggregate demand curve will shift to the right. d. the short-run aggregate supply curve will shift to the right.

b. nominal wages will increase, and the short-run supply curve will shift to the left.

Examples of fiscal policy do NOT include: a. government spending on infrastructure to stimulate aggregate demand. b. reducing the interest rate by increasing the money supply. c. an economic stimulus package. d. a $1,500 per family tax rebate.

b. reducing the interest rate by increasing the money supply.

An example of an intermediate good is: a. wages paid to an employee. b. steel purchased by aircraft manufacturers. c. vegetables purchased for your dinner. d. electric bills for your house.

b. steel purchased by aircraft manufacturers.

If the exchange rate is ¥200 per U.S. dollar, the U.S. price level is 120, and the Japanese price level is 600, then the real exchange rate is: a. ¥1. b. ¥40. c. ¥1,000. d. ¥2,400.

b. ¥40.

If the labor force totals 100 million workers and 90 million are working, then the unemployment rate is _____%. a. 1 b. 5 c. 10 d. 90

c. 10

(Ref 21-2 Figure: Productivity) Use Figure: Productivity. An improvement in technology with everything else remaining unchanged is shown on the diagram as a movement from: a. B to A. b. A to B. c. B to C. d. A to C.

c. B to C.

Consider the market for iPads. What happens if a fantastic new alternative tablet is developed by Samsung and, at the same time, a boat carrying a large shipment of iPads is attacked by pirates and sunk? a. Price decreases and quantity increases. b. Price increases and quantity increases. c. The change in price is indeterminate and quantity decreases. d. Price increases and the change in quantity is indeterminate.

c. The change in price is indeterminate and quantity decreases.

Consider the market for corn. What happens if there is an increased demand for corn tortillas and, at the same time, a new corn seed becomes available that dramatically increases the yield per acre? a. Price and quantity decrease. b. The change in price is indeterminate; quantity decreases. c. The change in price is indeterminate; quantity increases. d. Price increases; the change in quantity is indeterminate

c. The change in price is indeterminate; quantity increases.

(Ref 42-1 Figure: Monetary Policy and the AD-SRAS Model) Refer to Figure: Monetary Policy and the AD-SRAS Model. If the economy is in an inflationary gap at point h, it can move to point i as a result of: a. an increase in the money supply. b. a reduction in the discount rate. c. a decrease in the money supply. d. purchases of government securities in the open market.

c. a decrease in the money supply.

Investment in human capital causes _____________the aggregate production function. a. a downward shift of b. a leftward movement along c. an upward shift of d. a rightward movement along

c. an upward shift of

If the economy is at potential output and the Fed decreases the money supply so that actual output is less than potential output, eventually nominal wages will_____ and short-run aggregate supply will _____. a. increase; increase b. increase; decrease c. decrease; increase d. decrease; decrease

c. decrease; increase

Long-run economic growth will be sustainable: a. because pollution and urban sprawl are not real problems. b. because there are plenty of natural resources left to be consumed in the future. c. if it can continue in spite of the limited supply of natural resources and the impact of growth on environment. d. because the natural resource scarcity and other environmental issues are not really as serious as they seem.

c. if it can continue in spite of the limited supply of natural resources and the impact of growth on environment.

Figure: AD-AS. Refer to Figure: Policy Alternatives. If the economy is in equilibrium at Y1 in panel (a) and government spending increases, the result will likely be: a. an increase in unemployment. b. a decrease in interest rates. c. inflation. d. deflation.

c. inflation.

Money is neutral in _____ since it cannot alter _____. a. the short run; real aggregate output b. both the short and long run; price levels c. the long run; real aggregate output d. the short run; price levels

c. the long run; real aggregate output

If the pound sterling appreciates against the dollar: a. British imports and exports have become more expensive. b. U.S. imports and exports have become more expensive. c. British imports and exports have become less expensive. d. British exports have become more expensive but the price of U.S. exports to Britain has fallen.

d. British exports have become more expensive but the price of U.S. exports to Britain has fallen.

Which statement about GDP is false? a. GDP can be calculated by summing total market value of all final goods and services produced in a country in a given year. b. GDP can be calculated by summing all factor payments within a country's borders in a given year. c. GDP can be calculated by summing the value added for all goods and services. d. GDP can be calculated by summing government spending and tax revenues.

d. GDP can be calculated by summing government spending and tax revenues.

An economy is said to have a comparative advantage in the production of a good if it can produce that good: a. with more resources than another economy. b. at a higher opportunity cost than another economy. c. outside its production possibility frontier. d. at a lower opportunity cost than another economy.

d. at a lower opportunity cost than another economy.

An increase in capital stock would: a. shift the production function upward. b. cause a movement to the left along a stationary production function. c. shift the production function downward. d. cause a movement to the right along a stationary production function.

d. cause a movement to the right along a stationary production function.

Gross domestic product is defined as: a. consumer spending + government purchases of goods and services + financial spending + exports - imports. b. consumer spending + government transfers + investment spending + exports - imports. c. disposable income + taxes + investment spending + exports + imports. d. consumer spending + government purchases of goods and services + investment spending + exports - imports.

d. consumer spending + government purchases of goods and services + investment spending + exports - imports.

Discouraged workers: a. are getting paid too little. b. do not like their job. c. are working part-time but are looking for a full-time job. d. have given up looking for a job.

d. have given up looking for a job.

If the economy is at potential output and the Fed increases the money supply, in the short run real GDP will likely: a. fluctuate randomly. b. remain the same. c. decrease. d. increase.

d. increase.

If the U.S. dollar appreciates relative to currencies in other countries, then U.S. imports will _____ and exports will _____. a. increase; increase b. decrease; decrease c. decrease; increase d. increase; decrease

d. increase; decrease

Purchases of imported products are: a. subtracted from GDP. b. considered domestic spending, since the money is spent by a domestic consumer. c. double counting. d. not a part of the GDP calculation.

d. not a part of the GDP calculation.

A person who is NOT working or looking for work is: a. included in the unemployment rate. b. underemployed. c. a member of the labor force who is not working. d. not counted in the unemployment rate.

d. not counted in the unemployment rate.

The labor force is the total: a. number of people employed. b. population. c. number of people in the population of working age. d. number of people who are employed or unemployed.

d. number of people who are employed or unemployed.

Figure: AD-ASModel I Refer to Figure: AD-AS Model I. If the economy is at point X, there is a(n) _____ gap with _____ unemployment. a. inflationary; low b. inflationary; high c. recessionary; low d. recessionary; high

d. recessionary; high

The aggregate production function does NOT depend on: a. the quantity of physical capital per worker. b. human capital per worker. c. the state of technology. d. the amount of natural resources.

d. the amount of natural resources.

Which item would not be included in this year's GDP? a. the production of a television show b. the purchase of a new hybrid truck c. the hiring of a new schoolteacher d. the purchase of your neighbor's house, which was built in 1994

d. the purchase of your neighbor's house, which was built in 1994

If countries engage in international trade: a. they give up the ability to specialize in production. b. worldwide levels of production are lower. c. they can consume inside their production possibility frontiers. d. they can consume outside their production possibility frontiers.

d. they can consume outside their production possibility frontiers.

An inflationary gap will be eliminated because there is _____ pressure on wages, shifting the _____. a. downward; long-run aggregate supply curve to the right b. downward; long-run aggregate supply curve to the left c. downward; aggregate demand curve to the left d. upward; short-run aggregate supply curve to the left

d. upward; short-run aggregate supply curve to the left