Macro Final
real output and the price level both rose.
A country reported nominal GDP of $100 billion in 2010 and $75 billion in 2009. It also reported a GDP deflator of 125 in 2010 and 120 in 2009. Between 2009 and 2010,
The first but not the second
A country with a relatively low level of real GDP per person is considering adopting two policies to promote economic growth. The first is to decrease barriers to trade. The second is to restrict foreign portfolio investment. Which of these policies do most economists say promote growth?
intermediate goods.
A farmer produces oranges and sells them to Fresh Juice, which makes orange juice. The oranges produced by the farmer are called
Option C
A firm has three different investment options. Option A will give the firm $10 million at the end of one year, $10 million at the end of two years, and $10 million at the end of three years. Option B will give the firm $15 million at the end of one year, $10 million at the end of two years, and $5 million at the end of three years. Option C will give the firm $30 million at the end of one year, and nothing thereafter. Which of these options has the highest present value?
is an institution that sells shares to the public and uses the proceeds to buy a selection of various types of both stocks and bonds.
A mutual fund
$250 to GDP.
A steel company sells some steel to a bicycle company for $150. The bicycle company uses the steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute
The nominal wage
According to the classical dichotomy, which of the following increases when the money supply increases?
lower the price of the stock.
According to the efficient markets hypothesis, worse-than-expected news about a corporation will
the quantity of goods and services the government, households, firms, and customers abroad want to buy.
Aggregate demand includes
private goods and proprietary knowledge.
Apple founder Steve Jobs received patents on many of his ideas. While the patents existed, his ideas were
7
At an annual interest rate of 10 percent, about how many years will it take $100 to double in value?
He should complete the additional work and sell the cabinet for $360.
Cole is refinishing an antique china cabinet and has already spent $180 on the restoration. He expects to be able to sell the cabinet for $360. Cole discovers that he needs to do an additional $200 worth of work to make the cabinet worth $360 to potential buyers. He could also sell the cabinet now, without completing the additional work, for $100. What should Cole do?
Country A has lower productivity and lower real GDP per person than country B.
Country A has a population of 1,000, of whom 800 work 8 hours a day to make 128,000 final goods. Country B has a population of 2,000, of whom 1,800 work 6 hours a day to make 270,000 final goods.
usually composed of diagrams and equations.
Economic models are
unlimited wants and limited resources
Economics is the study of how society manages its
In response to tax reform, households are encouraged to save more than they previously saved.
Figure 26-1. The figure depicts a demand-for-loanable-funds curve and two supply-of-loanable-funds curves. Which of the following events would shift the supply curve from S1 to S2?
Britney is risk averse.
Figure 27-1. The following figure shows a utility function for Britney. From the appearance of the utility function, we know that
Britney's subjective measure of her well-being would increase by less than 5 units.
Figure 27-1. The following figure shows a utility function for Britney. Suppose the vertical distance between the points (0, A) and (0, B) is 5. If her wealth increased from $1,050 to $1,350, then
financial institutions through which savers can indirectly provide funds to borrowers.
Financial intermediaries are
federal, state, and local governments.
Government purchases include spending on goods and services by
6.75
If M = 2,000, P = 2.25, and Y = 6,000, what is velocity?
True
If the current year CPI is 90, then the price level has decreased 10 percent since the base year.
and quantity of loanable funds rise.
If the demand for loanable funds shifts to the right, then the equilibrium interest rate
the stock market is informationally efficient.
If the efficient markets hypothesis is correct, then
$2,591.85
If the interest rate is 7.5 percent, then what is the present value of $4,000 to be received in 6 years?
11.1 percent inflation between Years 1 and 2, and 5 percent deflation between Years 2 and 3.
If the price index was 90 in Year 1, 100 in Year 2, and 95 in Year 3, then the economy experienced
surplus and the interest rate is above the equilibrium level.
If the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, there is a
32,000
If velocity = 4, the quantity of money = 20,000, and the price level = 2.5, then the real value of output is
65.3% and 3.2%
In 2018 the Bureau of Labor Statistics reported that there were 57.4 million people over age 25 whose highest level of education was some college or an associate degree. Of these, 36.3 million were employed and 1.2 million were unemployed. What were the labor-force participation rate and the unemployment rate for this group?
Private saving
In a closed economy, what does (Y − T − C) represent?
households provide firms with labor, land, and capital.
In the markets for factors of production in the circular-flow diagram,
Quantity of human capital
In the production function Y=AF(L,K,H,N), what does H represent?
wages, rent, and profit
In the simple-circular flow diagram, the flow of money from the firms to the markets for factors of production is called
False
Inflation increases the value of money.
compare the marginal costs and marginal benefits of each decision.
Making rational decisions at the margin means that people
Mexican GDP, but it is not included in U.S. GDP.
Martin, a U.S. citizen, travels to Mexico and buys a newly manufactured motorcycle made there. His purchase is included in
the enjoyment she would have received had she gone to the park.
Mina decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is
teenagers.
Minimum-wage laws are most likely to affect the wages paid to
The $800 is a nominal variable. The quantity of shoes is a real variable.
On a given morning, Franco sold 40 pairs of shoes for a total of $800 at his shoe store.
higher future capital and higher future real GDP per person.
Other things the same, a country that increases its savings rate will have
the dollar depreciates.
Other things the same, as the price level falls,
continued increases in the price level but not continued increases in real GDP.
Other things the same, continued increases in the money supply lead to
on the production possibilities frontier.
Production is efficient if the economy is producing at a point
produced for each hour of a worker's time. It is linked to a nation's economic policies.
Productivity is the amount of goods and services
economic growth
Refer to Figure 2-12. The shift of the production possibilities frontier from A to B can best be described as
the economy cannot move from point C to point D.
Refer to Figure 2-16. The opportunity cost of obtaining 20 additional widgets by moving from point C to point D is
oval A
Refer to Figure 2-3. Which shape refers to the markets for goods and services?
T
Refer to Figure 2-4. Unemployment could cause this economy to produce at which point(s)?
unemployment
Refer to Figure 2-9, Panel (a). The movement from point M to point K could be caused by
2 donuts
Refer to Figure 2-9, Panel (a). The opportunity cost of moving from point M to point L is
4,000
Refer to Figure 28-1. If the government imposes a minimum wage of $8, then how many workers will be unemployed?
6.0
Refer to Figure 30-3. Suppose the relevant money-supply curve is the one labeled MS1 ; also suppose the economy's real GDP is 30,000 for the year. If the market for money is in equilibrium, then the velocity of money is approximately
$7,253
Refer to Table 23-2. What was country A's GDP in 2019?
11.97%
Refer to Table 23-3. If prices had remained constant between 1929 and 1930, Nominal GDP would have decreased
9.16, −10.3
Refer to Table 23-3. What are the GDP deflator and the inflation rate for 1931?
0
Refer to Table 28-4. If the local government imposed a minimum wage of $4 in Productionville, how many people would be unemployed?
300 socks
Refer to Table. What is the opportunity cost to Footville of increasing the production of shoes from 400 to 600?
$15,000
Scenario 26-1. Assume the following information for an imaginary, closed economy. For this economy, investment amounts to
increase unemployment due to job search.
Sectoral shifts in demand for output
unemployed and in the labor force.
Sheila is on a temporary layoff from her automobile factory job but has not looked for work in the last four weeks. The Bureau of Labor Statistics counts Sheila as
The government budget deficit must equal $2b.
Suppose private saving in a closed economy is $12b and investment is $10b.
28.5 million
Suppose that some country had an adult population of about 50 million, a labor-force participation rate of 60 percent, and an unemployment rate of 5 percent. How many people were employed?
$315
Suppose that you have received $300 as a birthday gift. You can spend it today or you can put the money in a bank account for a year and earn 5 percent interest. The opportunity cost of spending the money today, in terms of what you could have after one year, is
more than $40, as the marginal benefit will exceed the marginal cost.
Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $40, the hotel manager should rent one of the empty rooms only if a customer is willing to pay
more milk and more T-shirts.
Suppose the price of a quart of milk rises from $1.00 to $1.20 and the price of a T-shirt rises from $8.00 to $9.60. If the CPI rises from 150 to 195, then people likely will buy
5%
Suppose your uncle offers you $100 today or $150 in 10 years. You would prefer to take the $100 today if the interest rate is
increases in the prices of foreign produced goods that are sold to U.S. consumers show up in the CPI but not in the GDP deflator.
The CPI differs from the GDP deflator in that
CPI better reflects the goods and services bought by consumers.
The CPI is more commonly used as a gauge of inflation than the GDP deflator is because the
the price level on the vertical axis. The price level can be measured by the GDP deflator.
The aggregate demand and aggregate supply graph has
the bond market and the stock market.
The economy's two most important financial markets are
100.0
The following table pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. Refer to Table 24-1. If Year 1 is the base year, then the CPI for Year 1 was
4.4%
The following table pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. Refer to Table 24-1. If Year 1 is the base year, then the inflation rate in Year 2 was
$225
The following table pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. Refer to Table 24-1. The cost of the basket in Year 1 was
the longer a person waits to withdraw the funds.
The future value of a deposit in a savings account will be larger
the amount of goods and services produced from each hour of a worker's time.
The key determinant of the standard of living in a country is
number of people employed plus the number of people unemployed.
The labor force equals the
amount of unemployment that the economy normally experiences.
The natural rate of unemployment is the
3%
The nominal interest rate is 5 percent and the inflation rate is 2 percent. What is the real interest rate?
the available production technology
The production possibilities frontier is a graph that shows the various combinations of output that an economy can possibly produce given the available factors of production and
is saving and the source of demand for loanable funds is investment.
The source of the supply of loanable funds
the price level and real output.
The variables on the vertical and horizontal axes of the aggregate demand and supply graph are
the average number of times per year a dollar is spent.
The velocity of money is
GNP = GDP − Income earned by foreigners in the U.S. + Income earned by U.S. citizens abroad.
U.S. GDP and U.S. GNP are related as follows:
the nominal interest rate rises, but the real interest rate does not.
Under the assumptions of the Fisher effect and monetary neutrality, if the money supply growth rate rises, then
frictional unemployment.
Unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills is called
the natural rate of unemployment but not frictional unemployment.
Unions contribute to
$1,123.50
Veronica deposited $1,000 into an account two years ago. The first year she earned 7 percent interest; the second year she earned 5 percent. How much money does Veronica have in her account today?
Arnold but not Wanda
Wanda quit her job because she was unhappy at work. Arnold was laid off from his landscaping job because his company was downsizing. Who is eligible for unemployment insurance benefits?
increases as more of the good is produced
When a production possibilities frontier is bowed outward, the opportunity cost of producing an additional unit of a good
A person who has narrowly avoided many accidents applies for automobile insurance.
Which of the following actions best illustrates adverse selection?
A person purchases homeowners insurance and then checks his smoke detector batteries less frequently.
Which of the following actions best illustrates moral hazard?
The standard of living but not productivity
Which of the following can be measured by the level of real GDP per person?
The things you have learned this semester
Which of the following is an example of human capital?
Advertising new prices
Which of the following is an example of menu costs?
Both the market value of rental housing services and the market value of owner-occupied housing services
Which of the following is included in GDP?
News has no effect on stock prices.
Which of the following is not consistent with the efficient market hypothesis?
In one generation, China will be one of the richest countries in the world, if China's GDP per person continues to grow 9% per year.
Which of the following statements accurately describes catch-up growth?
Option 2; Option 3; Option 1
You have a choice among three options. Option 1: receive $900 immediately. Option 2: receive $1,200 one year from now. Option 3: receive $2,000 five years from now. The interest rate is 15 percent. Rank these three options from highest present value to lowest present value.
supplied is greater than the quantity demanded; the price level will rise.
Refer to Figure 30-1. If the money supply is MS2 and the value of money is 5, then the quantity of money
the equilibrium value of money decreases.
Refer to Figure 30-1. When the money supply curve shifts from MS1 to MS2,
