ECN 211 - Practice Final Exam

When shopping you notice that a pair of jeans costs $20 and that a tee-shirt costs $10. You compute the price of jeans relative to tee-shirts.

The dollar price of jeans is a nominal variable; the relative price of jeans is a real variable.

Refer to Pessimism. What happens to the expected price level and what's the result for wage bargaining?

The expected price level falls. Bargains are struck for lower wages.

Darla puts her money into a bank account that earns interest. One year later she sees that the account has 6 percent more dollars and that her money will buy 7.5 percent more goods.

The nominal interest rate was 6 percent and the inflation rate was -1.5 percent.

Refer to Figure 2-16. Suppose this economy is producing at point B. Which of the following statements would best explain this situation?

There is widespread unemployment in the economy.

A technological advance in the production of the first good increases the opportunity cost of the first good in terms of the second good.

True

Refer to Figure 2-17. The opportunity cost of producing an additional pair of shoes increases as more shoes are produced.

True

When an American household purchases a bottle of Italian wine for $100,

U.S. consumption increases by $100, U.S. net exports decrease by $100, and U.S. GDP does not change.

The principle of comparative advantage does not provide answers to certain questions. One of those questions is

What determines the price at which trade takes place?

Which of the following changes would not shift the supply curve for a good or service?

a change in the price of the good or service

Which of the following is an example of a capital input?

a computer

Which of the following shifts the short-run aggregate supply curve to the right?

a decrease in the expected price level

The short-run effects of an increase in the expected price level include

a lower level of output and a higher price level.

Water pollution from pulp and paper mills harms plants, animals, and humans. This is an example of

a market failure caused by an externality.

Refer to Figure 4-8. Suppose the figure shows the market demand for Big Box e-readers. Suppose the price of the leading competitor's e-readers, a substitute good, decreases. Which of the following changes would occur?

a shift from D1 to D2

When deciding how much to save, people care most about

after-tax real interest rates.

Which of the following results in higher inflation and higher unemployment in the short run?

an adverse supply shock such as an increase in the price of oil

Matilda just graduated from college. In order to devote all her efforts to college, she didn't hold a job. She is going to tour around the country on her motorcycle for a month before she starts looking for work. Other things the same, the unemployment rate

and the labor-force participation rate are both unaffected.

Paper dollars

are fiat money and gold coins are commodity money.

Refer to Figure 4-24. All else equal, the premature deaths of thousands of turkeys would cause a move from

x to y.

Refer to Figure 4-25. All else equal, buyers expecting paper to be more expensive in the future would cause a current move from

x to y.

Refer to Figure 2-6. The opportunity cost of this economy moving from point K to point H is

zero.

For which rate of inflation given below will the real interest rate be higher than the nominal interest rate?

​-0.5%

Which of the following is an example of the menu costs of inflation?

​Tito's Restaurant has to print new menus to update its prices compared to other prices in the economy

People choose to hold a smaller quantity of money if​

​the interest rate increases, which causes the opportunity cost of holding money to increase.

Refer to Figure 6-17. A government-imposed price of $24 in this market is an example of a

binding price floor that creates a surplus.

Which of the following can explain faster growth of real GDP in country A than in Country B?

both greater population growth and greater productivity growth in Country A

The money supply increases when the Fed

buys bonds. The increase will be larger, the smaller is the reserve ratio.

When the Federal Reserve conducts open-market operations to increase the money supply, it

buys government bonds from the public.

In a perfectly competitive market, at the market price, buyers

can buy all they want, and sellers can sell all they want.

To say that a price floor is binding is to say that the price floor a) is set below the equilibrium price. b) All of the above are correct. c) results in a shortage. d) causes quantity supplied to exceed quantity demanded.

causes quantity supplied to exceed quantity demanded.

A legal maximum on the price at which a good can be sold is called a price

ceiling

Positive statements are

claims about how the world is.

You are considering staying in college another semester so that you can complete a major in economics. In deciding whether or not to stay you should

compare the cost of staying one more semester to the benefits of staying one more semester.

A U.S. citizen buys a tea kettle manufactured in China by a company that is owned and operated by U.S citizens. In which of the following components of U.S. GDP is this transaction accounted for?

consumption and imports

Other things the same, continued increases in technology lead to

continued increases in real GDP and continued decreases in the price level.

If inflation is lower than what was expected,

debtors pay a higher real interest rate than they had anticipated.

Other things the same, if the long-run aggregate supply curve shifts right, prices

decrease and output increases.

If the reserve ratio is 15 percent, and banks do not hold excess reserves, and people hold only deposits and no currency, then when the Fed sells $25.5 million worth of bonds to the public, bank reserves

decrease by $25.5 million and the money supply eventually decreases by $170 million.

What actions could be taken to stabilize output in response to a large decrease in U.S. net exports?

decrease taxes or increase the money supply

If the Fed increases the reserve ratio from 5 percent to 12.5 percent, then the money multiplier

decreases from 20 to 8.

Deflation

decreases incomes and reduces the ability of debtors to pay off their debts.

An increase in the minimum wage

decreases the quantity of labor demanded but increases the quantity of labor supplied.

Assuming the Fisher Effect holds, and given U.S. tax laws, an increase in inflation

does not change the real interest rate but reduces the after-tax real rate of interest.

A basis for the slope of the short-run Phillips curve is that when unemployment is high there are

downward pressures on prices and wages.

A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. In other words, the society faces a tradeoff between

efficiency and equality.

The unique point at which the supply and demand curves intersect is called

equilibrium

Suppose the money market, drawn with the value of money on the vertical axis, is in equilibrium. If the money supply increases, then at the old value of money there is an

excess supply of money that will result in an increase in spending.

Which of the following can lead to market failure?

externalities and market power

An increase in the interest rate causes investment to

fall and the exchange rate to appreciate.

An adverse supply shock causes output to

fall. To counter this a central bank would increase the money supply.

During recessions, income

falls and unemployment rises.

If aggregate demand shifts right then in the short run

firms will increase production. In the long run increased price expectations shift the short-run aggregate supply curve to the left.

Which of the following are human capital and physical capital, respectively?

for a restaurant: the chefs' knowledge about preparing food and the equipment in the kitchen

From time to time, the demand for workers has risen in one region of the United States and fallen in another. This illustrates

frictional unemployment created by sectoral shifts.

Workers searching for jobs that best suit them is most closely associated with

frictional unemployment.

The city of Ann Arbor Michigan buys a police car manufactured in Germany. In the GDP accounts this transaction is included in

government expenditures and imports.

The labor-force participation rate tells us the fraction of the population that

has chosen to participate in the labor market.

The goal of rent control is to

help the poor by making housing more affordable.

Megan is a landscaper. Which of the following are included in her physical capital?

her landscaping equipment, but not her knowledge of landscaping learned in college

Which of the following is not a result of rent control?

higher quality housing

Which of the following shifts aggregate demand to the left?

households decide to save a larger fraction of their income.

According to the liquidity preference theory, an increase in the overall price level of 10 percent

increases the equilibrium interest rate, which in turn decreases the quantity of goods and services demanded.

An increase in the MPC

increases the multiplier, so that changes in government expenditures have a larger effect on aggregate demand.

When the money market is drawn with the value of money on the vertical axis, an increase in the money supply

increases the price level and decreases the value of money.

In the long run, if the Fed decreases the growth rate of the money supply, a) unemployment will be higher. b) real GDP will be lower. c) All of the above are correct. d) inflation will be lower.

inflation will be lower.

Prices direct economic activity in a market economy by

influencing the actions of buyers and sellers.

According to the theory of liquidity preference, a decrease in the price level causes the

interest rate to fall and investment to rise.

A farmer produces oranges and sells them to Fresh Juice, which makes orange juice. The oranges produced by the farmer are called

intermediate goods.

Which of the following is an example of human capital? a) a student loan b) All of the above are correct. c) training videos for new corporate employees d) knowledge learned from reading books

knowledge learned from reading books

In the circular-flow diagram, a) services flow from households to firms. b) profit flows from households to firms. c) All of the above are correct. d) labor flows from households to firms.

labor flows from households to firms.

Assume the MPC is 0.8. Assuming only the multiplier effect matters, a decrease in government purchases of $100 billion will shift the aggregate demand curve to the

left by $500 billion.

A reduction in U.S net exports would shift U.S. aggregate demand

leftward. In an attempt to stabilize the economy, the government could increase expenditures.

Other things the same, a decrease in the price level motivates people to hold

less money, so they lend more, and the interest rate falls.

Other things the same, an increase in the price level makes the dollars people hold worth

less, so they can buy less.

Refer to Figure 35-6. Curve 1 is the

long-run Phillips curve.

Which of the following, other things the same, would make the price level decrease and real GDP increase?

long-run aggregate supply shifts right

Wealth is redistributed from creditors to debtors when inflation was expected to be

low and it turns out to be high.

The existence of money

makes trade easier.

If people decide to hold less money, then

money demand decreases, there is an excess supply of money, and interest rates fall.

If an increase in inflation permanently reduced unemployment, then

money would not be neutral and the long-run Phillips curve would slope downward.

Higher inflation makes relative prices

more variable, making it less likely that resources will be allocated to their best use.

When new goods are introduced, consumers have more variety from which to choose. As a result, each dollar is worth

more, and the cost of living decreases.

Real GDP a) All of the above are correct. b) falls when households save a smaller fraction of their income. c) increases as production falls. d) moves in the opposite direction as unemployment.

moves in the opposite direction as unemployment.

Real GDP a)increases as production falls. b) falls when households save a smaller fraction of their income. c) All of the above are correct. d) moves in the opposite direction as unemployment.

moves in the opposite direction as unemployment.

Real GDP a) increases as production falls. b) All of the above are correct. c) falls when households save a smaller fraction of their income. d) moves in the opposite direction as unemployment.

moves in the opposite direction as unemployment.

Christopher is an unpaid, stay-at-home father who works as a volunteer at the local Habitat for Humanity chapter. Currently, Christopher is not looking for a paid job. The Bureau of Labor Statistics counts Christopher as

neither in the labor force nor unemployed.

Refer to Figure 6-16. In this market, a minimum wage of $2.75 is

nonbinding and creates neither a labor shortage nor unemployment.

Inflation can be measured by the

percentage change in the consumer price index.

Which of the following is not a rationing mechanism used by landlords in cities with rent control?

price

With respect to the consumer price index, the substitution bias arises because a) All of the above are correct. b) consumers are slow to adjust their buying patterns from year to year in response to price changes. c) consumers are eager to buy new products as they are introduced, despite their lack of full information about the quality of those products until they buy and use them. d) prices of goods and services do not change in the same proportion from year to year.

prices of goods and services do not change in the same proportion from year to year.

Electronics firms may be able to get patents on their ideas. Doing so makes their ideas

private goods rather than public goods. This gives people more incentive to engage in research.

Which of the following is not included in U.S. GDP?

production of U.S citizens working in foreign countries.

Which of the following is included in the consumption component of U.S. GDP? a) purchases of staplers, paper clips, and pens by U.S. business firms b) purchases of newly constructed homes by U.S. households c) All of the above are correct. d) purchases of natural gas by U.S. households

purchases of natural gas by U.S. households

Consumption consists of spending by households on goods and services, with the exception of

purchases of new houses.

Suppose John and Wayne are the only two demanders of cowboy movies. Each month, John buys six cowboy movies when the price is $10 each, and he buys four cowboy movies when the price is $15 each. Each month, Wayne buys four cowboy movies when the price is $10 each, and he buys two cowboy movies when the price is $15 each. Which of the following points is on the market demand curve?

quantity demanded = 10; price = $10

From 2008-2009 the Federal Reserve created a very large increase in the money supply. According to the short-run Phillips curve this policy should have

raised inflation and reduced unemployment.

In 2001, Congress and President Bush instituted tax cuts. According to the short-run Phillips curve, in the short run this change should have

raised inflation and reduced unemployment.

The classical dichotomy refers to the separation of

real and nominal variables.

The aggregate quantity of goods and services demanded changes as the price level rises because

real wealth falls, interest rates rise, and the dollar appreciates.

The term "productivity"

refers to the quantity of goods and services produced from each unit of labor input.

Suppose the cost of operating a 100 room hotel for a night is $10,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $30 and a customer is willing to pay $60 for the night, the hotel manager should

rent the room because the marginal benefit exceeds the marginal cost.

An increase in quantity supplied

results in a movement upward and to the right along a fixed supply curve.

A favorable supply shock will shift short-run aggregate supply

right, making output rise.

Other things the same, if the price level rises, then domestic interest rates

rise, so domestic residents will want to hold fewer foreign bonds.

If the central bank increases the money supply, in the short run, the price level

rises and unemployment falls.

If the Federal Reserve decided to raise interest rates, it could

sell bonds to lower the money supply.

Suppose that businesses and consumers become much more optimistic about the future of the economy. To stabilize output, the Federal Reserve could

sell bonds to raise interest rates.

Tax increases

shift aggregate demand left while increases in government expenditures shift aggregate demand right.

When quantity demanded increases at every possible price, the demand curve has

shifted to the right.

In the long run, a decrease in the money supply growth rate

shifts the short-run Phillips curve left so unemployment returns to its natural rate.

Proprietary technology is technology

that is known or controlled only by the company that discovered it.

Suppose that over the past year, the real interest rate was 5 percent and the inflation rate was 3 percent. It follows that

the dollar value of savings increased at 8 percent, and the purchasing power of savings increased at 5 percent.

Which of the following is an example of physical capital?

the equipment in a factory

A U.S. firm produces nail guns in the first quarter of 2010 and adds them to its inventory. In the second quarter of 2010 the firm sells the nail guns to a U.S. construction company. In which quarter(s) is (are) GDP higher?

the first but not the second

Suppose the Fed decreased the growth rate of the money supply. Which of the following would be lower in the long run?

the inflation rate, but not the natural rate of unemployment

Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that

the nation is not using all available resources or is using inferior technology or both.

According to the classical dichotomy, which of the following is influenced by monetary factors? a) the real wage. b) All of the above are correct. c) the real interest rate. d) the nominal interest rate.

the nominal interest rate.

Fiscal policy is determined by

the president and Congress and involves changing government spending and taxation.

The sticky-wage theory of the short-run aggregate supply curve says that the quantity of output firms supply will increase if

the price level is higher than expected making production more profitable.

Which of the following is not held constant in a supply schedule?

the price of the good

If the Federal Reserve decreases the rate at which it increases the money supply, then unemployment is higher in

the short run but not the long run.

​In a market with a binding price control, a) ​the costs of production are fully reflected in the price paid. b) ​the price observe reflects the scarcity of the good. c) ​all of the above are true. d) there is an imbalance between the quantity supplied by sellers and the quantity demanded by buyers.

there is an imbalance between the quantity supplied by sellers and the quantity demanded by buyers.

The government of Blenova considers two policies. Policy A would shift AD right by 500 units while policy B would shift AD right by 300 units. According to the short-run Phillips curve, policy A will lead

to a lower unemployment rate and a higher inflation rate than policy B.

The labor-force participation rate measures the percentage of the

total adult population that is in the labor force.

Refer to Figure 2-6. A movement from point H to point K could be caused by a) fewer resources available for production of pillows. b) a decrease in society's preference for pillows. c) All of the above are correct. d) unemployment

unemployment

Refer to Monetary Policy in Flosserland. Suppose the Flosserland Department of Finance has run a public relations campaign claiming it will reduce inflation to 12.5% and actually reduces inflation to that level. Suppose at first that the public thought inflation would only drop to 18%, but eventually become convinced that the inflation rate will stay at 12.5%.

unemployment rises in the short run, and is the same as it's original value in the long run.

The opportunity cost of an item is

what you give up to get that item.

If the reserve ratio is 8 percent, then an additional $800 of reserves can increase the money supply by as much as

$10,000.

Refer to Table 23-6. In 2013, this country's real GDP was

$1200.

In the economy of Talikastan in 2015, exports were $500, GDP was $6400, government purchases were $1700, imports were $400, and investment was $1800. What was Talikastan's consumption in 2015?

$2800

Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006. The consumer price index was 177 in 2001 and 221.25 in 2006. Ruben's 2001 salary in 2006 dollars is

$75,000; thus, Ruben's purchasing power increased between 2001 and 2006.

Suppose in the year 2000 Ken earned $60,000 per year. If the CPI in the year 2000 was 172.2 and in 2015 was 236.7, what is the minimum level of income Ken would have needed to earn in 2015 to have maintained the same standard of living he had in 2000?

$82,474

If a $1,000 increase in income leads to an $800 increase in consumption expenditures, then the marginal propensity to consume is

0.8 and the multiplier is 5.

Refer to Table 3-23. The opportunity cost of 1 pound of pork for the rancher is

1 pound of tomatoes.

Refer to Table 3-22. Zimbabwe's opportunity cost of one hairbrush is

10/3 toothbrushes and Portugal's opportunity cost of one hairbrush is 6/5 toothbrushes.

In one day Madison Laundry washed 4,000 pounds of laundry with 5 workers who each worked 8 hours. What was its productivity?

100 pounds of laundry per hour

If the price index was 90 in year 1, 100 in year 2, and 95 in year 3, then the economy experienced

11.1 percent inflation between years 1 and 2, and 5 percent deflation between years 2 and 3.

Refer to Table 28-2. The unemployment rate in Aridia in 2010 was

12.5%.

Suppose the typical household spends $3,500 on goods and services during the month of January, and $4,300 on the same goods and services in February. Using January as the base period, what is the consumer price index for February?

122.9

If the price level increased from 120 to 144, then what was the inflation rate?

20 percent.

Refer to Scenario 29-2. Suppose the Bank of Tazi loaned the banks of Tazi 10 million tazes. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much would the money supply change?

200 million tazes

Suppose that in some tax year you earned a nominal interest rate of 6 percent. During the time you held these funds inflation was 1 percent. You compute that you made a real after-tax interest rate of 3 percent. What was your tax rate?

33.3 percent.

If the MPC = 0.75, then the government purchases multiplier is about

4

Refer to Scenario 29-1. Suppose the Central Bank of Namdia loaned the banks of Namdia 5 million dias. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much would the money supply of Namdia change?

40 million dias

The CPI was 220 in 2012 and 231 in 2013. Phil borrowed money in 2012 and repaid the loan in 2013. If the nominal interest rate on the loan was 10 percent, then the real interest rate was

5 percent.

Refer to Figure 3-16. At which of the following prices would both Hosne and Merve gain from trade with each other?

5 wallets for 3.75 purses

Refer to Table 28-4. What is the adult male unemployment rate in Meditor?

5.6%

Refer to Table 3-10. Assume that Japan and Korea each has 2400 hours available. If each country divides its time equally between the production of cars and airplanes, then total production is

64 cars and 16 airplanes.

Refer to Table 3-29. Juanita's opportunity cost of programming one cellular phone is testing

7.5 cellular phones and Shantala's opportunity cost of programming one cellular phone is testing 5/2 cellular phones.

In 2016 based on people ages 15-74 the Swedish adult non-institutionalized population was about 7.3 million, the labor force was 5.2 million, and the number of people employed was 4.8 million. According to these numbers, the Swedish labor-force participation rate and unemployment rate were about

71.2% and 7.7%

Refer to Table 24-6. If the base year is 2010, then the consumer price index was

83.33 in 2009, 100.00 in 2010, and 96.67 in 2011.

Refer to Table 29-7. Assuming the Bank of Springfield and all other banks have the same reserve ratio, then what is the value of the money multiplier?

9.1

Which of the following statements about inputs is correct?

A forest is an example of a natural resource; it is also an example of a renewable resource.

On the basis of theory and empirical evidence, economists have reached several conclusions about economic growth. Which of the following is not one of these conclusions?

A relatively simple way to increase growth rates permanently is to increase a country's saving rate.

Bridget drinks three sodas during a particular day. The marginal benefit she enjoys from drinking the third soda a) can be thought of as the total benefit Bridget enjoys by drinking three sodas minus the total benefit she would have enjoyed by drinking just two sodas. b) is likely different from the marginal benefit provided to Bridget by the second soda. c) determines Bridget's willingness to pay for the third soda. d) All of the above are correct.

All of the above are correct.

Refer to Figure 34-4. Suppose the current equilibrium interest rate is r3. Which of the following events would cause the equilibrium interest rate to decrease? a) Money demand decreases. b) The price level decreases. c) The Federal Reserve increases the money supply. d) All of the above are correct.

All of the above are correct.

Which of the following effects helps to explain the slope of the aggregate-demand curve? a) the wealth effect b) the exchange-rate effect c) the interest-rate effect d) All of the above are correct.

All of the above are correct.

Which of the following is not included in GDP? a) the honey produced and sold by a beekeeper b) the services of an exterminator c) a can of bug spray d) All of the above are included in GDP.

All of the above are included in GDP.

Refer to Figure 2-1. Which arrow represents the flow of goods and services?

B

Which of the following lists contains, in this order, natural resources, human capital, and physical capital?

For a furniture company: wood, the skills and knowledge of its workers, saws.

Consider the market for gasoline. Buyers

would lobby for a price ceiling, whereas sellers would lobby for a price floor.

If unemployment is above its natural rate, what happens to move the economy to long-run equilibrium?

Inflation expectations fall which shifts the short-run Phillips curve to the left.

The banking system currently has $50 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 10 percent. If the Fed raises the reserve requirement to 12.5 percent and at the same time sells $10 billion worth of bonds, then by how much does the money supply change?

It falls by $180 billion.

Who was appointed Chair of the Board of Governors in 2014 by President Barack Obama?

Janet Yellen

The information below for 2008 in millions was reported by the World Bank. On the basis of this information, which list below contains the correct ordering of real GDP per person from highest to lowest?

Kenya, Tanzania, Ghana

Suppose that real GDP grew more in Country A than in Country B last year. a) Country A must have a higher standard of living than country B. b) Country A's productivity must have grown faster than country B's. c) Both of the above are correct. d) None of the above are correct.

None of the above are correct.

Which of the following pairs of students has a double coincidence of wants?

Piper and Molly

Initially, the economy is in long-run equilibrium. The aggregate demand curve then shifts $80 billion to the left. The government wants to change spending to offset this decrease in demand. The MPC is 0.75. Suppose the effect on aggregate demand of a tax change is 3/4 as strong as the effect of a change in government expenditure. There is no crowding out and no accelerator effect. What should the government do if it wants to offset the decrease in real GDP?

Raise both taxes and expenditures by $80 billion dollars.

On a Sunday morning, Tom sold 300 cups of coffee for a total of $750.

The $750 is a nominal variable. The 300 cups of coffee is a real variable.

Refer to Table 6-5. Suppose the government imposes a price ceiling of $3 on this market. What will be the size of the shortage in this market?

75 units

If the price level increased from 120 to 130, then what was the inflation rate?

8.3 percent.

The adult population in the town of Shelbyville is 150 thousand. If 100 thousand people are employed and 20 thousand are unemployed, then the labor force participation rate is approximately

80%.

When the money market is drawn with the value of money on the vertical axis, if the price level is below the equilibrium level, there is an

excess supply of money, so the price level will rise.

If the Fed raised the reserve requirement, the demand for reserves would

increase, so the federal funds rate would rise.

Refer to Table 24-4. The cost of the basket

increased from 2012 to 2013 and increased from 2013 to 2014.

If people had been expecting prices to rise but in fact prices fell, then who among the following would benefit?

lenders and people holding a lot of currency

Which of the following is included in GDP? a) marijuana purchased illegally from a drug dealer. b) All of the above are included in GDP. c) marijuana produced and consumed by a man in his attic d) marijuana purchased legally in Colorado.

marijuana purchased legally in Colorado.

Suppose the central bank pursues an unexpectedly tight monetary policy. In the short-run the effects of this are shown by

moving to the right along the short-run Phillips curve.

Data on the unemployment rate in the U.S. since 1960 show that the unemployment rate is

never zero.

People who are unemployed because wages are, for some reason, set above the level that brings labor supply and demand into equilibrium are best classified as

structurally unemployed.

Refer to Figure 25-1. The shape of the curve is consistent with which of the following statements about the economy to which the curve applies? a) In the long run, a higher saving rate leads to a higher growth rate of productivity. b) In the long run, a higher saving rate leads to a higher growth rate of income. c) All of the above are correct. d)Returns to capital become increasingly smaller as the amount of capital per worker increases.

Returns to capital become increasingly smaller as the amount of capital per worker increases.

Marion collected Social Security payments of $250 a month in 1985. If the price index rose from 90 to 108 between 1985 and 1986, then her Social Security payments for 1986 should have been

$300.

If the CPI was 108.00 in 1942 and is 336.96 today, then $10 in 1942 purchased the same amount of goods and services as

$31.20 purchases today.

If the reserve ratio is 12.5 percent, then $1,000 of additional reserves can create up to

$8,000 of new money.

Janelle earned a salary of $62,000 in 2004 and $80,000 in 2014. The consumer price index was 126 in 2004 and 170 in 2014. Janelle's 2004 salary in 2014 dollars is

$83,651.

Refer to Table 6-5. Which of the following price floors would be binding in this market?

$9

Refer to Figure 2-9, Panel (a). The opportunity cost of moving from point M to point L is

2 donuts.

Proponents of rational expectations theory argued that, in the most extreme case, if policymakers are credibly committed to reducing inflation and rational people understand that commitment and quickly lower their inflation expectations, the sacrifice ratio could be as small as

0

Refer to Scenario 34-2. The marginal propensity to consume for this economy is

0.64.

Refer to Table 28-2. The number of adults not in the labor force of Aridia in 2012 was

1,400

A barber shop produces 192 haircuts a day. Each barber in the shop works 8 hours per day and produces the same number of haircuts per hour. If the shop's productivity is 2 haircuts per hour of labor, then how many barbers does the shop employ?

12

Refer to Scenario 29-1 . Suppose the Central Bank of Namdia purchases 25 million dias of Namdian Treasury Bonds from banks. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much would the money supply of Namdia change?

200 million dias

Refer to Table 3-22. Suppose Zimbabwe decides to increase its production of toothbrushes by 10. What is the opportunity cost of this decision?

3 hairbrushes

Refer to Table 3-24. If England and Spain each spends all its time producing the good in which it has a comparative advantage and the countries agree to trade 2 units of bread for 6 units of cheese, then England will consume

34 units of cheese and 2 units of bread and Spain will consume 6 units of cheese and 3 units of bread.

Refer to Figure 3-18. The opportunity cost of 1 bowl for Bintu is

4 cups.

Refer to Figure 3-21. Azerbaijan's opportunity cost of one bolt is

4 nails and Uzbekistan's opportunity cost of one bolt is 2 nails.

Refer to Figure 28-3. If the government imposes a minimum wage of $8, then unemployment will increase by

4,000 workers.

Government policies can change the costs and benefits that people face. Those policies have the potential to a) alter people's behavior. b) alter people's decisions at the margin. c) produce results that policymakers did not intend. d) All of the above are correct.

All of the above are correct.

Other things the same, which of the following happens if the price level rises? a) Initially there is an excess demand for money in the money market. b) Money demand shifts rightward. c) The interest rate rises. d) All of the above are correct.

All of the above are correct.

The circular-flow diagram a) incorporates two types of decision makers: households and firms. b) represents the flows of inputs, outputs, and dollars. c) is an economic model. d) All of the above are correct.

All of the above are correct.

Transfer payments a) alter household income, but they do not reflect the economy's production. b) are payments that flow from government to households. c) are not made in exchange for currently produced goods or services. d) All of the above are correct.

All of the above are correct.

Which of the following is not included in GDP? a) the services of an exterminator b) the honey produced and sold by a beekeeper c) a can of bug spray d) All of the above are included in GDP.

All of the above are included in GDP.

Refer to Table 4-2. Whose demand does not obey the law of demand?

Carrie's

An associate professor of physics gets a $200 a month raise. She figures that with her new monthly salary she can buy more goods and services than she could buy last year.

Her real and nominal salary have risen.

Which of the following statements about markets is most accurate?

Markets are usually a good way to organize economic activity.

A Minnesota farmer buys a new tractor made in Iowa by a German company. As a result,

U.S. investment and GDP increase, but German GDP is unaffected.

In the short run, an increase in the money supply causes interest rates to

decrease, and aggregate demand to shift right.

If he devotes all of his available resources to cantaloupe production, a farmer can produce 120 cantaloupes. If he sacrifices 1.5 watermelons for each cantaloupe that he produces, it follows that

his opportunity cost of one watermelon is 2/3 of a cantaloupe.

When a binding price floor is imposed on a market, a) the quantity demanded at the price floor exceeds the quantity that would have been demanded without the price floor. b) all sellers benefit. c) All of the above are correct. d) price no longer serves as a rationing device.

price no longer serves as a rationing device.

Apple founder Steve Jobs received patents on many of his ideas. While the patents existed, his ideas were

private goods and proprietary knowledge.

Suppose OPEC succeeds in raising world oil prices by 300 percent. This price increase causes inventors to look at alternative sources of fuel for internal-combustion engines. A hydrogen-powered engine is developed which is cheaper to operate than gasoline engines. Which problems in the construction of the CPI does this situation represent?

substitution bias and introduction of new goods

Today's supply curve for gasoline could shift in response to a change in

the expected future price of gasoline.

High-school athletes who skip college to become professional athletes

understand that the opportunity cost of attending college is very high.

Because the CPI is based on a fixed basket of goods, the introduction of new goods and services in the economy causes the CPI to overestimate the cost of living. This is so because

when a new good is introduced, it gives consumers greater choice, thus reducing the amount they must spend to maintain their standard of living.