Macroeconomics (Final Exam)

What happens to the equilibrium price and quantity when demand increases and simultaneously supply decreases, and the relative size of the shifts is not known? a. The equilibrium price rises, and the change in the equilibrium quantity is ambiguous. b. The equilibrium price falls, and the change in the equilibrium quantity is ambiguous. c. The equilibrium quantity rises, and the change in the equilibrium price is ambiguous. d. The equilibrium quantity falls, and the change in the equilibrium price is ambiguous.

a. The equilibrium price rises, and the change in the equilibrium quantity is ambiguous.

A market is a: a. setting that brings together potential buyers and sellers. b. set of demand curves for a product. c. a place where governments decide what is sold. d. set of supply curves for a product.

a. setting that brings together potential buyers and sellers.

Intergenerational mobility is the extent to which: a. the economic status of children is independent of the economic status of their parents. b. the geographic dispersion of families occurs as children pursue economic opportunities. c.children own more personal transportation vehicles (such as cars and motorcycles) than their parents did. d. the income of children in a given family varies across the children.

a. the economic status of children is independent of the economic status of their parents.

The law of demand refers to: a. the inverse relationship between price and quantity demanded. b. the positive relationship between price and quantity demanded. c. the inverse relationship between price and quantity supplied. d. the positive relationship between price and quantity supplied.

a. the inverse relationship between price and quantity demanded.

The law of supply refers to: a. the positive relationship between price and quantity supplied. b. the inverse relationship between price and quantity supplied. c. the positive relationship between price and quantity demanded. d. the inverse relationship between price and quantity demanded.

a. the positive relationship between price and quantity supplied.

An underemployed person is one who is: a. working but whose skills are not fully utilized. b. cyclically unemployed. c. employed in the underground economy. d. retired or outside of the labor force.

a. working but whose skills are not fully utilized.

What is social insurance? a.It is government-provided financial funding to households to compensate for bad outcomes such as unemployment, illness, disability, or outliving their savings. b.It is a system where those with more income tend to pay a higher share of their income in taxes than those with lower incomes. c.It is the government assignment of jobs to individuals based on household need and employee education and skills. d.It is the cash-assistance, goods, and services provided by the government to better the lives of those at the bottom of the income distribution.

a.It is government-provided financial funding to households to compensate for bad outcomes such as unemployment, illness, disability, or outliving their savings.

Hand-to-mouth consumers: a. engage in a significant amount of spending. b. spend more on luxuries than on necessities. c. have very high levels of consumption. d. live paycheck to paycheck.

d. live paycheck to paycheck.

How is monetary policy different from fiscal policy? a.Monetary policy is determined by the president, whereas fiscal policy is determined by the chair of the Federal Reserve. b. Monetary policy adjusts interest rates, whereas fiscal policy adjusts government spending and taxes. c. Monetary policy focuses on correcting inflation, whereas fiscal policy focuses on unemployment. d. There is no difference between the two policies.

b. Monetary policy adjusts interest rates, whereas fiscal policy adjusts government spending and taxes.

In a market graph, consumer surplus is the area: a. between the demand curve and the supply curve. b. above the price and below the demand curve. c. above the price. d. below the demand curve.

b. above the price and below the demand curve.

On a market graph, producer surplus is the area that is: a. below the demand curve. b. above the supply curve and below the price. c. above the demand curve. d. above the demand curve and below the supply curve.

b. above the supply curve and below the price.

Credit constraints limit the: a. amount of money that banks can accept as deposits. b. amount of money that people can borrow. c. amount of saving that people can make. d. interest rates that banks can charge.

b. amount of money that people can borrow.

A mutual fund is a fund that: a. is owned by the government. b. buys a portfolio of stocks and bonds on your behalf. c. consists of only international assets. d. buys a variety of assets, including land and precious metals, for companies.

b. buys a portfolio of stocks and bonds on your behalf.

A "final" good or service is one that is: a. not being produced for the market. b. finished and ready for the final user. c. intermediate and ready to be used as an input. d. not for sale.

b. finished and ready for the final user.

Government social insurance programs are funded by: a. progressive taxes on income. b. taxes and fees that are assessed on workers and employers specifically for each program. c. a premium paid by those who choose to participate in the insurance programs. d. a pay-back system where beneficiaries repay benefits over a 10-year period.

b. taxes and fees that are assessed on workers and employers specifically for each program.

Human capital refers to: a. work done by machinery. b. worker skills and knowledge. c. machines that have artificial intelligence. d. money earned by workers in businesses.

b. worker skills and knowledge.

The standard deduction for a single person is $12,200. Based on this table, if your total income is $47,000, what is the amount of tax you will pay on your taxable income? a. $10,340 b. $3,012 c. $3,982 d. $4,176

c. $3,982

(Table: Cooking time) The table provides data on how long it takes Marla and Jason to cook lasagna or chicken curry. Which statement explains who has a comparative advantage in cooking lasagna? a. Jason because he has a lower opportunity cost than Marla. b. Marla because she can cook lasagna faster than Jason. c. Marla because she has a lower opportunity cost than Jason. d. Jason because he can cook lasagna faster than Marla.

c. Marla because she has a lower opportunity cost than Jason.

What is a social safety net? a.It is government-provided financial funding to people to compensate for bad outcomes such as unemployment, illness, disability, or outliving their savings. b.It is the government assignment of jobs to individuals based on household need and employee education and skills. c.It is the cash-assistance, goods, and services provided by the government to better the lives of those at the bottom of the income distribution. d.It is a system where those with more income tend to pay a higher share of their income in taxes than those with lower incomes.

c.It is the cash-assistance, goods, and services provided by the government to better the lives of those at the bottom of the income distribution.

In your current job, you earn $55,000. You take the standard deduction of $12,200. You have an offer of a new job working for a different employer. Your salary would go up by $5,000. How much extra will you owe in federal income taxes if you take the new job? a. $500 b. $600 c. $2,200 d. $1,100

d. $1,100

Which of the following items is an inferior good? a. Airline tickets b. Car rentals c. Luxury SUVs d. Discount stores

d. Discount stores

What is quantity supplied? a. It is a graph that plots how much a seller produces at different points in time. b. It is the amount of an item that a buyer is willing to buy at a particular price. c. It is a graph that plots the quantities of an item that a seller plans to sell at different prices. d. It is the amount of an item that a seller is willing to sell at a particular price.

d. It is the amount of an item that a seller is willing to sell at a particular price.

Which principle tells you that the true cost of something is the next best alternative you have to give up to get it? a. The marginal principle. b. The interdependence principle. c. The cost-benefit principle. d. The opportunity cost principle.

d. The opportunity cost principle.

The aggregate production function is represented as: a. L = f(Y, H, K). b. H = f(L, Y, K). c. K = f(L, H, Y). d. Y = f(L, H, K).

d. Y = f(L, H, K).

(Figure: Graph) In the graph, the movement from point E to point F represents: a. an increase in quantity supplied. b. a decrease in supply. c. an increase in supply. d. a decrease in quantity supplied.

d. a decrease in quantity supplied.

An excise tax is a tax on: a. purchases that is typically a percentage of the purchase price of goods and services. b. imports. c. luxury goods and services. d. a specific product.

d. a specific product.

Which of the following is a source of comparative advantage? a. global supply chains b. low tariff rates c. low trade costs d. abundant inputs

d. abundant inputs

The labor force participation rate is the: a. percentage of the labor force that is unemployed. b. sum of the employed and the unemployed. c. number of unemployed divided by the number of employed. d. percentage of the working age population that is either employed or unemployed.

d. percentage of the working age population that is either employed or unemployed.

An equilibrium price is a price where the: a. quantity demanded no longer changes. b. amount that buyers are willing to buy is equal to the amount that buyers are able to buy. c. demand curve is identical to the supply curve. d. quantity supplied equals the quantity demanded.

d. quantity supplied equals the quantity demanded.

Investment refers to: a. spending on financial assets such as stocks. b. saving money in banks. c. depreciation of capital stocks. d. spending on physical capital.

d. spending on physical capital.

A government can promote the development of human capital by: a. providing savings tax credits. b. placing caps on salaries for teachers. c. promoting programs that encourage late retirement from work. d. subsidizing secondary school education.

d. subsidizing secondary school education.

Due to a decline in demand and popularity, Ford Motor Company is planning to phase out traditional sedans such as 'Fusion' and 'Taurus' to focus on SUVs and trucks. Ford's sedans and trucks/SUVs are: a. complements-in-production. b. products that do not follow the law of supply. c. inputs in production. d. substitutes-in-production.

d. substitutes-in-production.

Mandatory spending is spending that: a. is appropriated by Congress annually. b. includes all state and local government spending. c. includes all federal government spending. d. supports programs that do not get determined annually but instead are set in law.

d. supports programs that do not get determined annually but instead are set in law.

What is the difference between microeconomics and macroeconomics? a.Microeconomics is the study of the economy as a whole, whereas macroeconomics is the study of individual decisions in specific markets. b.Microeconomics focuses only on the forces of individual demand and individual supply, whereas macroeconomics focuses only on policy making for the economy. c.Microeconomics is the study of individual decisions in specific markets, whereas macroeconomics is the study of government policies. d.Microeconomics is the study of individual decisions in specific markets, whereas macroeconomics is the study of the economy as a whole.

d.Microeconomics is the study of individual decisions in specific markets, whereas macroeconomics is the study of the economy as a whole.

A production function is: a. a method through which inputs can be turned into outputs, given the available resources. b. a method by which outputs can be recycled to produce inputs. c. the sum of total production possibilities, if resources were unlimited. d. the amount of money generated from selling outputs.

a. a method through which inputs can be turned into outputs, given the available resources.

When quantity demanded exceeds quantity supplied, _____ exists. a. a shortage b. a surplus c. equilibrium d. fixed demand

a. a shortage

The liquidity of an asset is defined as the: a. ability to quickly and easily convert the asset to cash, with little or no loss in value. b. ability to index the asset's returns to the inflation rate. c. risk that if you need to sell the asset quickly, you may not be able to get a good price for it. d. ability to predict the future cash flow of the asset.

a. ability to quickly and easily convert the asset to cash, with little or no loss in value.

Future value is the: a. amount that your money will grow into by a future date as a result of earning interest. b. sum of all present values for a portfolio of savings instruments. c. equivalent of present value divided by the real interest rate. d. total amount of interest paid on a loan by a future date.

a. amount that your money will grow into by a future date as a result of earning interest.

(Figure: Graph) Refer to the graph to answer the question. In the graph, the movement from point M to point Q represents: a. an increase in demand. b. a decrease in demand. c. an increase in quantity demanded. d. a decrease in quantity demanded.

a. an increase in demand.

Depreciation refers to the: a. decline in capital due to wear and tear, obsolescence, accidental damage, and aging. b. decline in the quality of output produced by a business. c. spending by a business on new capital assets. d. fall in the price of output that the business produces.

a. decline in capital due to wear and tear, obsolescence, accidental damage, and aging.

The concept of equity focuses on: a. fairness. b. the level of economic surplus. c. profit. d. efficiency.

a. fairness.

The principle that your best choice depends on your other choices, the choices others make, developments in other markets, and expectations about the future is known as the _____ principle. a. interdependence b. opportunity cost c. cost-benefit d. marginal

a. interdependence

GDP is defined as the: a. market value of all final goods and services produced within a country in a given year. b. market value of all consumer goods purchased within an economy. c. value of all output produced by businesses within a country in a given year. d. value of all intermediate goods produced within a country in a given year.

a. market value of all final goods and services produced within a country in a given year.

The "market value" of a good or service refers to the: a. units of that good or service that are purchased by consumers. b. current dollar value of that good or service. c. units of that good or service that are produced in the current period. d. total market demand for that good or service.

b. current dollar value of that good or service.

You go to Starbucks and see that the price of your favorite tall vanilla latte has gone up by 25 cents. All sizes of the vanilla lattes are now more expensive. As a result of this price increase, you would expect to see a: a. fall in the demand for vanilla lattes. b. fall in the quantity demanded of vanilla lattes. c. rise in the demand for vanilla lattes. d. rise in the quantity demanded of vanilla lattes.

b. fall in the quantity demanded of vanilla lattes.

The U.S. Department of Education sponsors the i3 program (Investing in Innovation), which provides grants to educational institutions and schools that have a proven track record of high student achievement. This is an example of a government program designed to build: a. labor resources. b. human capital. c. physical capital. d. physical factories and plants.

b. human capital.

Menu costs are the: a. variety of costs that cause producers to change their prices. b. marginal costs of adjusting prices. c. total costs of producing goods and services. d. costs of producing restaurant meals.

b. marginal costs of adjusting prices.

Analysis based on value judgments is called _____ analysis. a. subjectivity-based b. normative c. valuative d. positive

b. normative

In the field of economics, the observation that the living standard of a household is more stable than its income, because people think in terms of their long-term earnings as they spend, is known as: a. consumption and inequality of living standards. b. permanent income versus current income. c. wealth and inequality of purchasing power. d. intergenerational mobility and inequality of opportunity.

b. permanent income versus current income.

Forward guidance occurs when the Federal Reserve: a. carries out open market operations to influence future interest rates. b. provides information about the future course of monetary policy in order to influence expectations about future interest rates. c. follows the same future course of monetary policy that it has been following in the past. d.provides information about current monetary policy in order to influence expectations about future interest rates.

b. provides information about the future course of monetary policy in order to influence expectations about future interest rates.

A trade cost is: a. the difference in price between a good that is bought or sold abroad rather than domestically. b. the cost associated with producing a good that is bought or sold abroad. c. an extra cost incurred as a result of buying or selling a good abroad rather than domestically. d. the price of a good that is bought or sold abroad.

c. an extra cost incurred as a result of buying or selling a good abroad rather than domestically.

(Figure: Graph) Refer to the graph to answer the question. The movement from point M to point N represents: a. a decrease in demand. b. an increase in demand. c. an increase in quantity demanded. d. a decrease in quantity demanded.

c. an increase in quantity demanded.

Market failure occurs when market forces lead to: a. high quantity. b. high price. c. an inefficient outcome. d. a marginal benefit that is equal to marginal cost.

c. an inefficient outcome.

Enforceable property rights encourage economic growth by encouraging: a. the sale of property rights. b. the growth of human capital. c. investment. d. depreciation.

c. investment.

Shifts in demand: a. always lead to increases in equilibrium quantity. b. lead to price and quantity to move in opposite directions. c. lead to price and quantity to move in the same direction. d. always lead to increases in equilibrium price.

c. lead to price and quantity to move in the same direction

The concept of diminishing marginal utility means that an additional dollar of income will yield _____ marginal benefit compared to the previous dollar of extra income. a. more b. an unpredictable amount of c. less d. the same

c. less

The slope of the consumption function is the: a. marginal propensity to invest. b. average level of consumption over time. c. marginal propensity to consume. d. marginal propensity to import.

c. marginal propensity to consume.

Holding all else constant, if people eat out more at expensive restaurants when they earn more, then expensive restaurant meals are: a. goods with a network-effect. b. inferior goods. c. normal goods. d. goods with a congestion-effect.

c. normal goods.

The Producer Price Index is an index that tracks the: a. price of all goods and services produced domestically. b. highest prices consumers pay over time for imported goods and services. c. price that businesses pay over time for the inputs used in the production process. d. average price that consumers pay over time for a representative basket of goods and services.

c. price that businesses pay over time for the inputs used in the production process.

Comparative advantage explains why people: a. try to gain a wide range of skills. b. lack focus in their production decisions. c. specialize and trade. d. work at the job they love the most.

c. specialize and trade.

The three major pillars of the financial sector are the: a. foreign exchange market, the bond market, and the government. b. stock market, the labor market, and the bond market. c. stock market, the bond market, and the banks. d. banks, the goods market, and the labor market.

c. stock market, the bond market, and the banks.

Suppose that a CPI basket includes avocadoes, pineapples and oranges. Avocadoes become very expensive, and consumers substitute away from avocadoes and buy hummus instead. If the CPI basket does not change to reflect the move away from avocados, the result is: a. the failure to capture real variables versus nominal variables. b. understated inflation. c. substitution bias. d. quality bias.

c. substitution bias.

When a manager uses comparative advantage to assign tasks in a workplace, then each: a. task is assigned to the worker who is best at doing the task. b. worker learns how to do all tasks to increase flexibility in assignments. c. task is assigned to the worker with the lowest opportunity cost for performing the task. d. worker is assigned to the tasks for which he or she has the highest aptitude and efficiency.

c. task is assigned to the worker with the lowest opportunity cost for performing the task.

A market's deadweight loss is calculated as: a. the loss to consumers when a product malfunctions or fails to meet expectations. b. the economic loss that a firm has when it is not producing its profit-maximizing output. c. the economic surplus at the efficient quantity minus the economic surplus at the actual quantity. d. the price at equilibrium minus the price at actual quantity.

c. the economic surplus at the efficient quantity minus the economic surplus at the actual quantity.

What is the Federal Reserve's mandate? a. to print as many dollars as possible without causing inflation b. to encourage inflation and raise unemployment c. to ensure maximum employment while maintaining stable prices d. to ensure that interest rates remain low all the time

c. to ensure maximum employment while maintaining stable prices

The working age population includes people who are: a. age 16 or older. b. not retired. c. not in the military or institutionalized. d. age 16 or older who are not in the military or institutionalized.

d. age 16 or older who are not in the military or institutionalized.

Sunk costs are costs that: a. are potential costs associated with a particular decision. b. should be considered in any decision. c. are part of the opportunity costs of a decision. d. are incurred in the past and cannot be reversed.

d. are incurred in the past and cannot be reversed.

The consumer price index is an index that tracks the: a. price that businesses pay over time for the inputs used in the production process. b. price of all goods and services produced domestically. c. highest prices consumers pay over time for imported goods and services. d. average price that consumers pay over time for a representative basket of goods and services.

d. average price that consumers pay over time for a representative basket of goods and services.

The cost-benefit principle states that a decision should be pursued only if the: a. benefits are positive. b. costs are negative. c. costs are greater than the benefits. d. benefits are greater than the costs.

d. benefits are greater than the costs.

Frictional unemployment is unemployment: a. due to a temporary downturn in the economy. b. that occurs because of seasonal changes. c. that occurs because wages don't fall to bring labor demand and labor supply into equilibrium. d. due to the time it takes for employers to search for workers and for workers to search for jobs.

d. due to the time it takes for employers to search for workers and for workers to search for jobs.

To maximize production, people should: a. learn all the skills so that they can perform any task needed. b. focus on the task in which they have an absolute advantage. c. focus on improving their weakest skills. d. focus on the task in which they have a comparative advantage.

d. focus on the task in which they have a comparative advantage.

The loanable funds market is the market for: a. wholesale goods and services. b. machines. c. retail goods and services. d. funds used to buy, rent, or build capital.

d. funds used to buy, rent, or build capital.

Discretionary spending is spending that: a. includes all state and local government spending. b. supports programs that do not get determined annually but instead are set in law. c. includes all federal government spending. d. is appropriated by Congress annually.

d. is appropriated by Congress annually.

Diminishing marginal benefit: a. is when buying an additional item yields a larger marginal benefit than the previous item. b. is when consumers do not follow the rational rule. c. is not important in determining a consumer's purchase decision. d. is when buying an additional item yields a smaller marginal benefit than the previous item.

d. is when buying an additional item yields a smaller marginal benefit than the previous item.

The law of diminishing returns states that: a. the lower the level of human capital in an economy, the lower the economic growth rate. b. when all inputs are held constant, there is an upper limit to the amount of output that can be produced. c. the level of capital accumulation is directly related to the level of human capital in an economy. d.when one input is held constant, while other inputs are increased, eventually output will increase by smaller and smaller amounts.

d. when one input is held constant, while other inputs are increased, eventually output will increase by smaller and smaller amounts.