ECON 1A Final
If you put $125 into an account that paid 3.25 percent interest, then how much money would you have in the account after 20 years?
$236.98 FV=PV*(1+i)^n FV=future value=? PV=present value=125 i=interest rate=3.25%=0.00325 n=years=20 FV=125*(1.0325^20) =236.979741 The value after 20 years is $236.98
If you put $300 into an account paying 2 percent interest, what will be the value of this account in 4 years?
$324.73 FV=PV*(1+i)^n FV=future value =? PV=present value=300 n=years=4 i=interest rate =2% FV=300*(1.02)^4=324.729648= 324.73
Labor Hours Needed to Make 1 Unit Cheese Bread England 2 3 Spain 3 6 Assume that England and Spain each has 24 labor hours available. If each country divides its time equally between the production of cheese and bread, then total production of cheese is _____.
10
Adam Barb Car; Quantity QUantity Quantity Price Demanded Demanded Demanded $10 10 8 22 $8 12 12 26 $6 14 16 30 $4 16 20 34 $2 18 24 38 $0 20 28 42 Suppose the market consists of the individuals above. If the price falls by $2, the quantity demanded in the market increases by
10 units
Suppose a country has government expenditures of $3,188, taxes of $1,591, consumption of $9,505, exports of $1,418, imports of $1,099, transfer payments of $1,591, capital depreciation of $703, and investment of $2,113. GDP equals _____.
15,125
Bintu's Production Possibilities Frontier If Bintu must work 2 hours to make each cup, then her production possibilities frontier is based on how many hours of work?
16 hours 8 cups x2 =16
If these are the only three sellers in the market, then the market quantity supplied at a price of $6 is ______.
24
A typical American worker covered by unemployment insurance receives
50 percent of his former wages for 26 weeks
If the CPI was 111 in 1967 and is 318 today, then $19 in 1967 purchased the same amount of goods and services as ____ purchases today.
54.43
If Producer A and Producer B are the only producers in the market, then the market quantity supplied when the price is $2 is _____.
6
Which of the following actions best illustrates adverse selection?
A person who has narrowly avoided many accidents applies for automobile insurance
Suppose the interest rate is 10 percent. Which of the following payments has the largest present value?
All of these payments have the same present value to the nearest cent
Waldo works eight hours and produces 7 units of goods per hour. Emerson works six hours and produces 10 units of goods per hour.
Emerson's productivity and output are greater than Waldo's
Choose which of the following statements is true:
Equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources
Calculate the inflation rate from 1980 to 2020 if the 1980 CPI was 90 and the 2020 CPI was 220. Make sure to write your answer in percentage terms and to round it to the nearest two decimal place.
Inflation rate = 144.44% [(Current CPI-Past CPI)/Past CPI] x100 [(220-90)/90]x100 =144.44
If the CPI in 1970 is 60 and the CPI in 2020 is 220, what is the inflation rate from 1970 to 2020?
Inflation rate = 266.67% 1970 CPI = 60 2020 CPI = 220 Inflation Rate= ((2020 CPI - 1970 CPI)/1970 CPI)*100% = ((220-60)/60)*100% =266.67%
If national income is 2200, government spending is 500, and taxes are 400, what is national savings?
S= 320
Popeye produces 20 cans of spinach in 8 hours. Wimpy produces 15 hamburgers in 10 hours. If each hamburger trades for 1.5 cans of spinach, then
Wimpy's production is greater than Popeye's, but his productivity is less
Which of the following would most likely serve as an example of a monopoly?
a local electrical company
A risk-averse person has
a utility curve that slopes upward and a marginal utility curve that slopes downward
In competitive markets, buyers
and sellers are price takers
Sirius has just finished high school and started looking for his first job, but has not yet found one. Other things the same, the unemployment rate
and the labor-force participation rate both increase
The supply curve for stand up paddle boards
does not shift when the price of stand up paddle boards changes because the price of stand up paddle boards is measured on the vertical axis of the graph
Sectoral shifts in demand for output
increase unemployment due to job search
If there are diminishing returns to capital, then
increases in the capital stock increase output by ever smaller amounts
If a decrease in income increases the demand for a good, then the good is a(n)
inferior good
Short-term bonds are generally
less risky than long-term bonds and so they feature lower interest rates
When a country saves a larger portion of its GDP than it did before, it will have
more capital and higher productivity
Other things the same, bonds are likely to have higher interest rates if they have
no tax exemptions and long terms
the primary tool used by the Federal Reserve to change the money supply is _________
open-market operations
The slope of the supply of loanable funds curve represents the
positive relation between the real interest rate and saving
Which of the following is not held constant in a demand schedule?
price
Which of the following will increase a country's real GDP per person?
reducing restrictions on foreign trade and foreign investment
When an economist points out that you and millions of other people are interdependent, he or she is referring to the fact that we all
rely upon one another for the goods and services we consume
When quantity demanded decreases at every possible price, the demand curve has
shifted to the left
Most durations of unemployment are
short, but most unemployment observed at any given time is long term
Amy discovers a way to produce water heaters so they are less expensive and use less natural gas. Amy's discovery is
technological knowledge. If Amy's discovery leads to lower natural gas prices, it has made natural gas less scarce
An understanding of the best ways to produce goods and services is called
technology
Which of the following does not help reduce frictional unemployment?
unemployment insurance
If the best educated and most skilled persons leave a country, then in the short term this country's human capital per worker
will decrease but physical capital per worker will increase
Below is data about the labor market in the city of Productionville Quantity Quantity Wage Demanded Supplied $8 6000 16000 $7 9000 14000 $6 12000 12000 $5 15000 10000 $4 18000 8000 If the local government imposed a minimum wage of $7 in Productionville, then _____ people will be unemployed.
5,000 14,000-9,000=5,000
Suppose that the adult population in the country of Atlantis is 203 million. If 97 million people are employed and 25 million are unemployed, then the labor force participation rate is ______ %.
60.1 Adult population= 203 Labor Force = employed unemployed = 97 + 25 = 122 Labor Fore Participation Rate = (Labor Force/ adult population) x 100 = 122/203=0.60099 x 100 =60.1
In 2014, the Italian adult non-institutionalized population was 38.8 million, the labor force was 25.4 million, and the number of people employed was 22 million. According to these numbers, the Italian labor-force participation rate and unemployment rate were about
65.5% and 13.4% REASON - Labour force participate Rate = labour force / adult population x 100 = 25.4 / 38.8 x100 = 65.5% Unemployment rate = unemployment people / labour x100 = 3.4 / 25.4 x 100 = 13.4%
Megan's salary for three consecutive years, along with other values, is presented in the table below. 2011 2012 2013 Annual salary $60,398 $76,244 $85,505 CPI 222 236 273 Real Interest Rate 3% 4% 5% Megan's 2011 salary in 2013 dollars is ___________.
74,273.22
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 is approximately
80% The labor force participation rate refers to the number of people available for work as a percentage of the total population. Labor force participation rate = Labor Force/Eligible population (16 years and above) * 100 where the Labor Force = Employed + Unemployed Thus LFPR = (100+20/150)* 100 = 80%
A judge requires Harry to make a payment to Sally. The judge says that Harry can pay her either $10,000 today or $12,000 two years from today. Of the following interest rates, which is the highest one at which Harry would be better off paying the money today?
9 percent 10000(1 + x/100)^2=12000 (1 + x/100)^2= 6/5 = 9 percent
In June 2009 the Bureau of Labor Statistics reported an adult population of 212 million, a labor force of 184 million and employment of 167 million. Based on these numbers the unemployment rate was _______.
9.24 Unemployment rate = unemployed / total labor force unemployed = 184-167= 17 17/184= 0.0923 = 9.24
Suppose you invest $10,000 at 7% interest to be withdrawn by your heirs in 100 years. According to the rule of 70, your heirs will be able to withdraw approximately _________.
$10,240,000 According to the rule of 70, a sum of money is doubled in 70/r years. Hence, $10000 will become $20000 in 70/7 = 10 years. Then, $20000 will become 2*$20000 = $40000 in 70/7 = next 10 years. Similarly after 30 years the sum of money becomes 40000*2 = 80000. In this way we find that after 100 years will be $10,240,000
Amelia knows that she has about $105 in her bank account. She knows she earned an interest rate of 4 percent, but she doesn't remember how much she opened the account with a year ago. How much did she put in?
$100.96 Future value = Amount deposited * (1+ interest rate)^1 105 = Amount deposited *(1.04) Amount deposited = 105 / 1.04 = $100.96
A painter pays $500 for paint he uses to repaint a house. He then presents a bill for $1200 that covers his time and expenses to the homeowner. How much do these transactions add to GDP? $700
$1200
Kuwan had two jobs. He needed to drop one of his jobs that had a salary of $15,000 a year to pursue a college degree. His annual expenses during college are $12,000 for tuition, $1,000 for books, and $5,400 for food. Assuming that the given values are in constant dollars, what is his real opportunity cost of attending college for five years?
$140,000 =(15,000+12,000+1,000)x5
A tire manufacturer produces 400 tires valued at $20 each. Three hundred tires are sold to a tire shop, which then sells them to households for $50 each. The remaining tires are unsold and are added to the tire manufacturer's inventory. How much is added to GDP?
$17,000
Suppose a closed economy had public saving of -$1 trillion and private saving of $3 trillion. What are national saving and investment for this country?
$2 trillion, $2 trillion
Rita puts $10,000 into each of two different assets. The first asset pays 10 percent interest and the second pays 5 percent. According to the rule of 70, what is the approximate difference in the value of the two assets after 14 years?
$20,000 By the rule of 70Double the value in years =70/growth rate for 10%double in years =70/10=7 years so the value double twice in 14 years and the $10000 become 40000for 5% double in years =70/5=14 so the value double once and it will be 20000 difference =40000-20000=20000 the difference is $20000
The country of Yokovia does not trade with any other country. Its GDP is $20 billion. Its government collects $2 billion in taxes. Consumption equals $15 billion and investment equals $2 billion. What is public saving in Yokovia, and what is the value of the goods and services purchased by the government of Yokovia?
-$1 billion and $3 billion
Looking into the purchases of domestically made goods, we observe that foreign countries purchased $1.2 trillion work of these goods. The domestic residents, on the other hand, bought $1.8 trillion of foreign made consumer goods and services. Calculate the value of net exports in trillions of dollars. If your answer is $10 trillion, write 10.
-0.6 1.2-1.8
Year Nominal GDP Real GDP 1929 2,468 2,008 1930 3,262 2,203 1931 4,129 3,395 1932 5,207 4,380 What is the inflation rate from 1929 to 1931 (in percentage terms)?
-1.05
Note that the formula for growth of real GDP per person (in percentage terms) is given by [(newvalue−oldvalue)/oldvalue]×100 Last year, real GDP in the imaginary nation of Oceania was 583 billion and the population was 115 million. The year before, real GDP was 477 billion and the population was 93 million. The growth rate of real GDP per person (in percentage terms) from two years ago to last year is _____ %.
-1.16 real GDP per person 2 yrs ago = 477000m / 93m = 5129.03 real GDP per person 1 yrs ago = 583000m / 115m = 5069.57 Growth rate = (5069.57-5129.03) / 5129.03 *100 = 0.01159 * 100 = 1.16%
Below is data about the labor market in the city of Productionville Wage Q Demanded Q Supplied $8 6,000 16,000 $7 9,000 14,000 $6 12,000 12,000 $5 15,000 10,000 $4 18,000 8,000 If the local government imposed a minimym wage of $4 in Productionville, how many people would be unemployed?
0 Effective minimum wage is set above the equilibrium,. Here minimum wage is $ 4 which is below the equilibrium wage $ 6 so this minimum wage is ineffective.
Suppose that an economy produces only two types of goods. At a given year, it makes 40,497 units of good A which sells at $9 a unit and 166,968 units of good B which sells at $4 per unit. What is the nominal GDP of this economy for that year?
1,032,345
In the economy of Talikastan in 2015, exports were $730, GDP was $5,272, government purchases were $1,037, imports were $1,307, and investment was $3,497. What was Talikastan's consumption in 2015?
1,315
Suppose you put $7,475 into a bank account today. Interest is paid annually and the annual interest rate is 6 percent. The future value of the $7,475 after 5 year is
10,003.24 Future Value = Present Value / (1+Rate)^n FV = 7475*(1+0.06)^5 =10,003.24
Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base year. In 2012, the basket's cost was $50; in 2014, the basket's cost was $51; and in 2016, the basket's cost was $52. The value of the CPI in 2014 was
102.0 CPI 2014 = Price of basket in 2014/Price of basket in base year(2012)*100 = ($51/$50)*100 =102
The price index was 128 in 2013, and the inflation rate was 24 percent between 2012 and 2013. The price index in 2012 was
103.2
Note that the formula for growth of real GDP per person (in percentage terms) is given by [(newvalue−oldvalue)/oldvalue]×100 Last year real GDP per person in the imaginary nation of Olympus was 5,349. The year before it was 4,804. The Olympian real GDP per person grow during the period by about ____ %.
11.35 Growth in Real GDP per person=(RGDP2-RGDP1)/RGDP1=(5349-4804)/4804= 11.35%
Year Nominal GDP Real GDP 2014 7,981 5,852 2015 9,589 7,506 2015 11,616 10,167 2017 13,770 12,078 What is the GDP Deflator for 2016?
114.25
If Argentina and Peru each divides its time equally between producing corn and fish, then total production is
12 tons of corn and 11 tons of fish
Suppose a basket of goods and services has been selected to calculate the CPI and 2014 has been selected as the base year. In 2013, the basket's cost was $90; in 2014, the basket's cost was $104; and in 2015, the basket's cost was $118. The value of the the inflation rate (in percentage terms) from 2014 to 2015 is ______.
13.46
The Bureau of Labor Statistics counts a member of a surveyed household as an adult if that person is at least
16 years old
Labor Data for Aridia: (absent chart) The labor force of Aridia in 2010 was
16000 (employed+unemployed) (1400+200)
Suppose you are deciding whether to buy a particular bond. If you buy the bond and hold it for 3 years, then at that time you will receive a payment of $2,087. If the interest rate is 1 percent, then the present value is
2,025.62 Present Value = Future Value / (1+Rate)^n PV = 2087/(1+0.01)^3 =2025.62
The country of Caspir produces only cereal and milk. Quantities and prices of these goods for the last several years are shown below. The base year is 2016. Price of QUantity of Price of Quantity of Year Cereal Cereal Milk Milk 2015 2 156 7 282 2016 4 277 6 378 2017 2 348 4 237 2018 4 457 5 276 What is the 2017 real GDP?
2,776
If the interest rate is 9 percent, then what is the present value of $6,900 to be received in 10 years?
2,914.63 Present Value = Future Value / (1+Rate)^n PV = 6900/(1+0.09)^10 =2914.63
Suppose that for an hour's work, Manoy and Rwandi have the following production opportunities table: Pasta Soup Manoy 10 20 Rwandi 20 40 Compute how many soups Rwandi can do after 8 hours. If your answer is 1000 soups, write 1000.
320 soups (40x8=320)
In 2018, ABC Corporation had total earnings of $387 million and 46 million shares of the corporation's stock were outstanding. If the price-earnings ratio for ABC is 39, then what is the price of a share of its stock?
328.11 So, Earning per share = total earning / total outstanding share = $387 million / 46 Million Shares = $8.41 million earning per share > price earning ratio = Price per share / Earning per share. So, 39 = Price per share / $8.41 price per share = 39*$8.41 = 327.99 is Price of share
Buskin's Corporation has issued 4 million shares of stock. Its earnings were $28 million, of which it retained 40 percent. What was the dividend per share?
4.2 Retained amount = 40% of 28 million = $ 11.2 million Left amount = 28 million - 11.2 million = 16.8 million Dividend per share = Total earnings left/No. of shares = 16.8 million/ 4 million = $ 4.2
If the natural rate of unemployment is 4.1 percent and the actual rate of unemployment is 8.5 percent, then by definition there is cyclical unemployment amounting to _______ percent of the labor force.
4.4 Natural rate of unemployment = frictional unemployment + structural unemployment Cyclical unemployment = actual rate of unemployment - natural rate of unemployment 8.5-4.1=4.4
The price index was 136 in one year and 142 in the next year. What was the inflation rate between the two years?
4.41
You deposited $5,000 in an account that pays about 3% interest rate per year. If you decide to keep the account untouched for five years, how much would you have in the account after five years?
Answer = $5,796.37 Initial deposit = $5000 R = 3% Time (n) = 5 years So, Value of amount in account after 5 years = 5000*(1+R)^n Value of amount in account after 5 years = 5000*(1+3%)^5 Value of amount in account after 5 years = 5796.37
The federal minimum wage in 1950 was $0.75. It 2020, it was $7.25. The 1950 CPI was 23.5 while the 2020 CPI was 256. Calculate the 1950 minimum wage in 2020 dollars.
Answer = $8.17 in 2020 dollars
When examining international trade trade data, we find that the foreign countries purchased $1.2 trillion worth of our domestically-produced goods. The domestic residents, on the other hand, bought $1.8 trillions of foreign made consumer goods and services. Calculate the value of net exports in trillions of dollars. If your answer is $10 trillion, write 10
Answer = -$0.6 trillion
Troy's GDP grows at the rate of 5% per year. According to the rule of 70, how many years will it take for the country's GDP to quadruple?
Answer = 28 Formula used: Number of years it takes for a country's economy to double = 70 / growth rate Number of years it takes for a country's economy to quadruple = (70/growth rate)×2 = (70/5)×2 = 28 years
A company evaluates the production possibilities of workers making two items: noodles and grains. Rowan and Leticia have the following production possibilities for an hour's work: Noodles Grains Rowan 10 20 Leticia 20 40 Compute how many grains Leticia can do after 8 hours. If your answer is 1000 grains, writ 1000.
Answer = 320 grains 40x8=320
Suppose that the economy experiences a linear production technology and that the opportunity cost of a stick of butter in terms of milk bottles in 2 bottles of milk. What is the opportunity cost, in terms of milk bottles, of raising the production of butter from 200 to 400 sticks. As a reference if you answer 5000 milk bottles, write 5000.
Answer = 400 400x2=800 200x2=400 800-400=400
Nelville has 100,000 individuals who are 16 and over. Of this population, 10,000 are unemployed and 80,000 are employed. If the labor market definitions in Nelville are the same as in the U.S., what is the size of the group that is not in the labor force?
Answer: 10,000 100,000-10,000-80,000=10,000
Which of the following is not correct?
Countries that have had higher output growth per person have typically done so without higher productivity growth
Which of the following statements is correct?
Differences in natural resources can explain some of the differences in standards of living around the world
Assume a farmer has the ability to produce corn and/or beans. Whenever the farmer spends 1 hour less producing corn and 1 hour more producing beans, he reduces his output of corn by 2 bushels and raises his output of beans by 3 bushels. In view of these assumptions, the farmer's production possibilities frontier is bowed out.
False
Unless two people who are producing two goods have exactly the same opportunity costs, then one person will have absolute advantage in one good, and the other person will have absolute advantage in the other good.
False
In a given economy, consumers spent $5.5 trillion while the government spent $1.5 trillion. We also find that investments total $1 trillion, transfer payments are $0.5 trillion, imports are about $1.25 trillion, and exports are $0.75 trillion. Calculate the value of GDP in trillions of dollars. If your answer is $10 trillion, write 10.
GDP = $7.5 trillion [$5.5 trillion+$1 trillion+$1.5 trillion+($.75 trillion-$1.25 trillion)]
When evaluating economic data, we find that consumers spent $5.5 trillion while the government spent $1.5 trillion. We also find that investments total $1 trillion, transfer payments are $0.5 trillion, imports are about $1.25 trillion, and exports are $0.75 trillion. Calculate the value of GDP in trillions of dollars. If your answer is $10 trillion, write 10
GDP = $7.5 trillion [$5.5 trillion+$1 trillion+$1.5 trillion+($.75 trillion-$1.25 trillion)]
Wholesome Wheat Bakery buys $10.00 worth of flour from Mikes' Mill and uses the flour to make bread. Wholesome Wheat sells the bread to the public for $22.00. Taking these two transactions into account, what is the effect on GDP?
GDP increases by $22.00
Amazon is considering a new factory that costs $1 billion and will yield $2 billion in ten years. Considering a ten-year timeline, what is the future value of the cost (in billions of dollars) of the factory if the annual interest rate is 5%? If your answer is $10 billion, write 10.
If the interest rate is 5%, the future value of the $1 billion for the factory is X= $1.63 billion Present value of the new factory(PV) = $1 billion Annual Interest rate(i) = 5.0% Time(n) = 10 years We need to find the future value of the factory Future value = PV*(1+i)^n Therefore, Future value = 1.0*(1+0.050)^10= 1.26*(1.053)^10 =1.63
Mixster Concrete Company is considering buying a new cement truck. The owners and their accountants decide that this is the profitable thing to do. Before they can buy the truck, the interest rate and price of he trucks change. In which case do these changes both make them less likely to buy the truck?
Interest rates rise and truck prices rise.
John is a stockbroker. He has had several job offers, but he has turned them down because he thinks he can find a firm that better matches his tastes and skills. Curtis has looked for work as an accountant for some time. While the demand for accountants does not appear to be falling, there seems to be more people applying than jobs available.
John is frictionally unemployed, and Curtis is structurally unemployed
__________ refers to economywide risk created by variation in output.
Market Risk
Output produced in one growing season corn soybeans Iowa 30 45 Nebraska 40 80 Iowa and Nebraska can both produce corn and soybeans, and can switch between the production of corn and soybeans at a constant rate. The table illustrates the amount of corn or soybeans each state can produce in one growing season. Based upon the information in the table, we can determine that
Nebraska has an absolute advantage in both corn and soybeans
If Shawn can produce donuts at a lower opportunity cost than Sue, then
Shawn has a comparative advantage in the production of donuts
Which of the following statements is correct?
The CPI can be used to compare dollar figures from different points in time
Which of the following is correct?
The CPI is better than the GDP deflator at reflecting the goods and services bought by consumers
Which of the following is correct?
The financial system channels funds from savers to borrowers.
Financial intermediaries typically require mortgage borrowers to have homeowner's insurance and do credit checks before making the loan
The insurance requirement is designed primarily to reduce the risk of moral hazard; the credit check is designed primarily to reduce adverse selection
Which of the following is correct?
The level of real GDP per person is a good gauge of economic prosperity, and the growth rate of real GDP per person is a good gauge of economic progress
Which of the following is included in the calculation of GDP?
The purchase of tutoring services from a tutor who holds citizenship outside the country but resides within the country
A manufacturer produces 1 million televisions in the first quarter of the year. It sells 900,000 of them before the end of the first quarter, and holds the others in its warehouse. How will the 100,000 unsold televisions be treated in the GDP statistics?
The televisions will be counted as a change in inventory in the first quarter and so will be included in first-quarter GDP
The local car dealership has an increase in inventory of 100 newly produced cars in 2015. In 2016, it sells all 100 cars. Which of the following statements is correct?
The value of the cars in inventory will be counted as part of 2015 GDP, and the value of the cars sold in 2016 will not increase 2016 GDP
Ken and Traci are two woodworkers who both make tables and chairs. In one month, Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs. Given this, we know that
Traci has an absolute advantage in chairs
If a person chooses self-sufficiency, then she can only consume what she produces.
True
It takes Anne 3 hours to make a pie and 4 hours to make a shirt. It takes Mary 2 hours to make a pie and 5 hours to make a shirt. Anne should specialize in making shirts and Mary should specialize in making pies, and they should trade.
True
Suppose Hank and Tony can both produce corn. If Hank's opportunity cost of producing a bushel of corn is 2 bushels of soybeans and Tony's opportunity cost of producing a bushel of corn is 3 bushels of soybeans, then Hank has the comparative advantage in the production of corn.
True
Micah buys a used car for $10,000 and spends $200 on a new radio that is made in the U.S. The end result of these two transactions is
U.S. consumption purchases increase by $200 and U.S. GDP increases by $200
Which of the following is correct?
Unemployment Rate = ((number of unemployed) / (number of employed + number of unemployed) )*100
James offers you $1,000 today or $X in 7 years, If the interest rate is 4.5 percent, then you would prefer to take the $1,000 today is and only if
X<1,360.86 X = P(1+i)^n X= $1000(1+0.045)^7 = 1360.86
Which of the following is the correct formula for calculating the inflation rate?
[(CPI in year 2-CPI in year 1)/CPI in year 1] x 100
If a shortage exists in a market, then we know that the actual price is
below the equilibrium price, and quantity demanded is greater than quantity supplied
Esmerelda worked part-time for her mother's business without pay. Tabitha was absent from work because she had strep throat. Who is counted as "employed" by the Bureau of Labor Statistics?
both Esmerelda and Tabitha
Regarding the two individuals above, whose demand for sandwiches conforms to the law of demand? Price Harry's Q Darbys; Jake's $3 3 4 3 $5 1 2 x
both Harry's and Darby's
Assume that Maya and Miguel can switch between producing mixers and producing toasters at a constant rate: Houses Needed to Make One Unit Mixer Toaster Maya 8 5 Miguel 20 10 Maya has an absolute advantage in the production of
both goods and a comparative advantage in the production of mixers
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
When the price of a good is lower than the equilibrium price
buyers desire to purchase more than is produced
Diversification of a portfolio
can eliminate firm-specific risk, but it cannot eliminate market risk
Wine Cheese US 16 32 France 8 4 The US has a comparative advantage in the production of
cheese
The most obvious benefit of specialization and trade is that they allow us to
consume more goods than we otherwise would be able to consume
Total output in an economy increases when each person specializes because
each person spends more time producing that product in which he or she has a comparative advantage
Gwen is an unpaid worker in her family's restaurant. The Bureau of Labor Statistics counts Gwen as
employed and in the labor force
People who hold well-diversified portfolios of stocks have greatly reduced or eliminated
firm-specific risk, but still they have reason to worry about their wealth decreasing as a result of recessions
In the 1800s, Europeans purchased stock in American companies that used the funds to build railroads and factories. The Europeans who did this engaged in
foreign portfolio investment
Which of the following statistics is usually regarded as the best single measure of a society's economic well-being?
gross domestic product
Which of the following measures how the level of well-being in a country has changed over time?
growth rate of real GDP per person
The producer that requires a smaller quantity of inputs to produce a certain amount of a good, relative to the quantities of inputs required by other producers to produce the same amount of that good,
has an absolute advantage in the production of that good
wealth utility $50,000 7000 51,000 7250 52,000 7499 53,000 7746 If Matt's current wealth is $51,000, then
his gain in utility from gaining $1,000 is less than his loss in utility from losing $1,000. Matt is risk averse Given that Matt's current wealth = $51,000 If Matt loses $1,000, his utility decreases from 7250 utils to 7000 utils Decrease in utility for losing $1,000 = 7250 - 7000 = 250 utils If Matt gains $1,000, his utility increases from 7250 utils to 7499 utils Increase in utility for gaining $1,000 = 7499 - 7250 = 249 utils Therefore, it is evident that Matt's gain in utility from gaining $1,000 is less than Matt's loss in utility from losing $1,000.
For a competitive market,
if a seller charges more than the going price, buyers will go elsewhere to make their purchases
Abby's Brandi's Carrie's DeeDee's Quantity QUantity Quantity Quantity Price Demanded Demanded Demanded Demanded $12 2 1 3 4 $10 4 4 4 5 $8 6 7 5 6 $6 8 8 4 7 $4 10 9 3 8 $2 12 10 2 9 Suppose that the individuals above are the only four buyers in the market. When the price decreases from $6 to $4, the market quantity demanded
increases by 3 units
The country of Cedarland does not trade with any other country. Its GDP is $17 billion. Its government purchases $5 billion worth of goods and services each year and collects $6 billion in taxes. Private saving in Cedarland is $5 billion. For Cedarland,
investment is $6 billion and consumption is $6 billion
A mutual fund
is an institution that sells shares to the public and uses the proceeds to buy a selection of various types of stocks, bonds, or both stocks and bonds
You hold bonds issued by the city of Sacramento, California. The interest you earn each year on these bonds
is not subject to federal income tax and so these bonds pay a lower interest rate than otherwise comparable bonds issued by the U.S. government
The factors below affect structural unemployment except for
job search
Human capital is
knowledge and skills that workers have acquired
One can argue that the average American today is "richer" than the richest American 100 years ago, given that 100 years ago,
many of the goods and services that we now take for granted were not available
For a particular good or service, a group of buyers and sellers is called
market
The primary economic function of the financial system is to
match one person's saving with another person's investment
Which of the following is not a cause of frictional unemployment?
minimum-wage laws
Assume that Huang and Min can switch between producing parasols and producing porcelain plates at a constant rate: Labor Hours Needed to Make One Unit Parasol Plate Huang 2 6 Min 2 4 Huang has an absolute advantage in the production of
neither good and a comparative advantage in the production of parasols
Consider a small economy in which consumers buy only two goods: apples and pears. In order to compute the consumer price index for this economy for two or more consecutive years, we assume that
neither the number of apples nor the number of pears bought by the typical consumer changes from year to year
A manufacturing company is thinking about building a new factory. The factory, if built, will yield the company $300 million in 7 years, and it would cost $220 million today to build. The company will decide to build the factory if the interest rate is
no greater than 4.53 percent NPV = -220 + 300(pvifa 4.53 , 7 years) -220 + 300 (5.8862) -220 + 1765.86 1545.86 so here if discount (interest rate) go beyond 4.53 then npv become negative
Suppose an economy produces only cheese and fish. In 2010, 20 units of cheese are sold at $5 each and 8 units of fish are sold at $50 each. In 2009, the base year, the price of cheese was $10 per unit and the price of fish was $75 per unit. For 2010,
nominal GDP is $500, real GDP is $800, and the GDP deflator is 62.5
When all market participants are price takers who have no influence over prices, the markets have
numerous buyers and sellers
Babe Ruth, the famous baseball player, earned $80,000 in 1931. Today, the best baseball players can earn more than 400 times as much as Babe Ruth earned in 1931. However, prices have also risen since 1931. We can conclude that
one cannot determine whether baseball stars today enjoy a higher standard of living than Babe Ruth did in 1931 without additional information regarding increases in prices since 1931
If Huedepool Beer runs into financial difficulty, the stockholders as
part owners of Huedepool are paid after bondholders get paid
A professor spends 10 hours per day giving lectures and writing papers. For the professor, a graph that shows his various possible mixes of output (lectures given per day and papers written per day) is called his
production possibilities frontier
the amount of goods and services produced from each unit of labor is known as
productivity
In a closed economy, if Y and T remained the same, but G rose and C fell but by less than the rise in G, what would happen to public and national saving?
public and national saving would fall
Other things the same, an increase in the interest rate makes the quantity of loanable funds supplied
rise, and investment spending fall
Thinking that the surge in COVID-19 cases may be weaning, Binaxnow, a leader of at-home tests, asked its employees to destroy the company's extra stacks of tests. Unfortunately, another wave of COVID-19 cases hit the US. Considering these, scenarios, we know that the price of Binaxnow tests ______________ while the quantity of these tests ___________________.
rises; has an ambiguous change
Long-term bonds are
riskier than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds
If the government's expenditures exceeded its receipts, it would likely
sell bonds directly to the public
Most spells of unemployment are
short, but most unemployment observed at any given time is long term
A improvement in production technology will shift the
supply curve to the right
Wheat is the main input in the production of flour. If the price of wheat decreases, then we would expect the
supply of flour to increase
Minimum wages create unemployment in markets where they create a
surplus of labor. Unemployment of this type is called structural
Which of the following agencies calculates the CPI?
the Bureau of Labor Statistics
The field of finance primarily studies
the implications of time and risk for allocating resources over time
In the long run the unemployment rate equals
the natural rate of unemployment
Suppose the person to whom this utility function applies begins with $600 in wealth. Starting from there,
the pain of losing $200 of her wealth would exceed the pleasure of adding $200 to her wealth
In a particular production process, if the quantities of all inputs used double, then the quantity of output doubles as well. This means that
the relevant production function has the constant-returns-to-scale property
If the government institutes policies that diminish incentives to save, then in the loanable funds market
the supply of loanable funds shifts leftward
Which of the following is not a reason people choose to depend on others for goods and services?
to allow people to produce outside their production possibilities frontiers
When examining the economic data, we find that the minimum wage in 1970 of a given country was $1.25. In 2015 it was $7.25. The CPI in 1970 was30.9 while the CPI in 2015 was 234.6. Calculate the minimum wage in 2015 dollars.
$9.49 in 2015 dollars 1970 MW = $1.25 2015 MW = $7.25 1970 CPI = 30.9 2015 CPI = 234.6 1970 MW in 2015 dollars = (1970 MW) (2015 CPI/1970 CPI) = $1.25 (234.6/30.9)=$9.49
All else equal, which of the following would increase the unemployment rate? (i) an increase in the number of women who return to work after being stay-at-home mothers (ii) a preference among older men to retire early (iii) an increase in the maximum number of weeks for which someone can receive government unemployment benefits (iv) an increase in the number of previously unemployed women who stop looking for work and become discouraged workers
(ii) and (iii) only
Financial intermediaries typically require mortgage borrowers to have homeowner's insurance and do credit checks before making the loan
the insurance requirement is designed primarily to reduce the risk of moral hazard; the credit check is designed primarily to reduce adverse selection
Discouraged workers are included in
the number of unemployed, frictional unemployment, the labor force NONE OF THE ABOVE IS CORRECT
If the efficient markets hypothesis is correct, then
the stock market is informationally efficient
Which of the following is correct?
there is no consensus among economists about whether unions are good or bad for the economy
When an economy produces at a point on its Production Possibilities Frontier, then
there is no way to produce more of one good without producing less of the other
According to fundamental analysis, a saver should prefer to buy stocks that are undervalued.
undervalued. This means the price of the stock is low given the value of the corporation
The Bureau of Labor Statistics places people in the "employed" category if they are
work without pay in a family member's business
Suppose interest of 5% for two years can be earned on $1,000 saved today with no risk. What is the least amount a person would need to have a 50% chance of winning to be willing to face a 50% chance of losing $1,000 today and be considered risk averse?
$1,101.51 to be paid in two years X=P(1+i)^n = $1,000(1+0.05)^2
You are tearing down a building and find $1 in change that someone lost when working on the building 140 years ago. If, instead of being careless with the $1 in change, this person had deposited it into a bank and earned 2 percent interest every year for 140 years, how much would be in the account today according to the rule of 70?
$16 According to the rule of 70, the value doubles every 70/2 = 35 years. Hence in 35 years $1 would become $2, and in 70 years $2 would become $4. and in 105 years $4 would become $8 and in 140 years $8 would become $16. Overall in 140 years $1 would become $16 in today's value.
Suppose you put $500 into a bank account today. Interest is paid annually and the annual interest rate is 5.5 percent. The future value of the $500 is
$653.48 after 5 years and $854.07 after 10 years X = P(1+i)^n X = $500(1+0.055)^5 = 653.48 X = $500(1+0.055)^10= 854/07
Below is a figure that shows the supply and demand of workers (in hundreds of units): At equilibrium wage, how many workers are unemployed?
0
Suppose that some country had an adult population of about 25 million, a labor-force participation rate of 60 percent, and an unemployment rate of 6 percent. How many people were unemployed?
0.9 million Labor force (million) = Adult population x Labor-force participation rate = 25 x 60% = 15 Number unemployed (million) = Labor force x Unemployment rate = 15 x 6% = 0.9 Number employed (million) = Labor force - Number unemployed = 15 - 0.9 = 14.1
The working age population in Melston is 100,000. Of this population, 10,000 are unemployed and 80,000 are employed. What is the size of the group that is not in in the labor force?
10,000
Levoit made 500 more air purifiers than its sales in 2019. In 2020, it sold 500 air purifiers. Which of the following is true?
The value of the air purifiers in inventory will be counted as part of 2019 GDP, and the value of air purifiers sold in 2020 will not increase 2020 GDP.
Think of an economy that only sells three products. We have the product information for three years given in the following table: 2018 2019 2022 P Q P Q P Q Masks 2 100 2.5 150 6 250 Airline T 300 50 350 80 250 40 Internet S 40 80 45 100 60 200 Given that the base year is 2019, what is the real GDP 2018?
2018 Real GDP = 21350 Real GDP of 2018=P2019xQ2018 =(2.5x100)+(350x50)+(45x80) =21350
We collected the following information about a very simple economy: 2019 2020 2021 Fish 2 100 2.5 150 6 250 Vegetables 300 50 350 80 250 40 Woods 40 80 45 100 60 200` Given the base year of 2021, what is the nominal GDP for 2019?
2019 Nominal GDP = 18400 = 2019Px2019Q =2x100 + 300x50 + 40x80 =18400
We collected the following information about a very simple economy: 2019 2020 2021 Fish 2 100 2.5 150 6 250 Vegetables 300 50 350 80 250 40 Woods 40 80 45 100 60 200` Given the base year of 2021, what is the real GDP for 2019?
2019 Real GDP = 17900 = Quantity of fish X Price of fish in the base year + Quantity of vegetable X Price of vegetable in the base year + Quantity of woods X price of woods in the base year = 100X6 + 50X250 + 80X60 =600+12500+4800 = 17,900
Take an economy that only sells three products. We have the product information for three years given in the following table: 2018 2019 2020 P Q P Q P Q Masks 2 100 2.5 150 6 250 Airline T 300 50 350 80 250 40 Internet S 40 80 45 100 60 200 Given that the base year is 2019, what is the nominal GDP for 2020?
2020 Nominal GDP = 23,500 Nominal GDP = P2020 x Q2020 =(6x250)+(250x40)+(60X200) =23,500
A country's GDP is growing at the rate of 5% per year. According to the rule of 70, how many years will it take for the country's GDP to quadruple?
28 doubles every 70/5 = 14 doubles again (quadruples) after 28 years
The adult non-institutionalized population in the town of Bedrock is 75 thousand. Within Bedrock, 5 thousand are unemployed, and 40 thousand are employed. The number of people not in the labor force is
30 thousand Not in labor force = Adult population - Employed - Unemployed 75-49-5=30
Observe the production possibilities table of an economy that makes pita bread and baklavas. Pita Bread Baklava 0 1000 100 800 200 600 300 400 400 200 500 0 Calculate the opportunity cost, in terms of Baklavas, of increasing production of Pita bread from 200 to 400. As a reference, if your answer is 5000 Baklavas, write 5000.
400 (600-200=400)
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
If the town of Gotham the adult population is 560 thousand, the number unemployed is 25 thousand, and 185 thousand are not in the labor force. The unemployment rate is _________
6.7% 560-185=375; 25/375*100=6.67%
Sylvia had two jobs. Her lower paying job paid $15,000 a year. Upon enrolling in college, she decided to drop her lower paying job. Her annual expenses during her college career are $12,000 for tuition, $1,000 for books, and $5400 for food. Assuming that the given values are in constant dollars, what is her real opportunity cost for attending college for five years?
Answer: $140,000
(not included) The following is a given bank's t-account: Assets Liabilities and Owners' Equity Reserves= $2,500 Deposits= $10,000 Loans= $8,500 Debt= $100 Short-term S= $500 Capital (owners equity)= $900 Calculate the leverage ratio
Answer= 12.22
The consumption function is given by
C=300+0.6(Y-T)
Two artists have the following production possibilities for one month of work: Sculptures Paintings Jemma 4 8 Renaldo 2 8 Calculate Jemma's opportunity cost of making sculptures in terms of paintings:
For each sculpture, Casio gives up 2 paintings. 8/4=2
The following is the production possibilities table for on day of work: Tables Chairs Casio 4 8 Lailiani 2 8 Calculate Casio's opportunity cost of making tables in terms of chairs:
For each table, Casio gives up 2 chairs Tables: 4/4=1 and Chairs: 8/4=2
Who of the following would necessarily be included in the Bureau of Labor Statistics "unemployed" category?
Huey, who did not work during the previous four weeks, Dewey, who tried to find new employment during the previous four weeks, Loui, who was an unpaid worker during the previous four weeks NONE OF THE ABOVE IF CORRECT
The investment function is
I = 700 - 80r
Tesla is considering a new factory that costs $1 billion and will yield $2 billion in ten years. Considering a ten-year timeline, what is the future value of the cost (in billions of dollars) of the factory if the annual interest rate is 5%? If your answer is $10 billion, write 10.
If the interest rate is 5%, the future value of the $1 billion for the factory is X= $1.63 billion X = P(1+i)^n X=($1B)(1+0.05)^10
The Bureau of Labor Statistics collected information about a small town. If found that 25 have full-time jobs, 20 have one part-time job, 5 have two part-time jobs, 10 would like to work and are looking for jobs, 10 would like to work but are so discouraged they have given up looking, 10 are running their own businesses, 10 are retired, and 10 are small children. What is the labor force participation rate of the town? Make sure to write your answer in percentage terms and to round it to the nearest two decimal place.
Labor Force Participation Rate = 77.8% Working age population = People having full time job + People having one part time job + People having two part time job + Unemployed people + Discouraged workers + Business men =25+20+5+10+10+10 =80 Labor force = People having full time job + People having one part time job + People having two part time job + Unemployed people = 25 + 20 + 5 + 10 = 60 Labor force participation rate = (Labor force / Working age population) * 100 = (60 / 80) * 100
___________ is the sum of the employed and the unemployed.
Labor force
Laura says that the present value of $700 to be received one year from today if the interest rate is 6 percent is less than the present value of $700 to be received two years from today if the interest rate is 3 percent. Cassie says that $00 saved for one year at 6 percent interest has a smaller future value than $700 saved for two years at 3 percent interest.
Only Cassie is correct
(not included?) The following are Federal Reserve policies except for the
Payroll Tax rate
An economy has a national income equal to 2200, government spending equal to 500, and taxes equal to 400. The investment function is I = 700 - 80r while the consumption function is C = 300 + 0.6(Y-T) Calculate the national savings
S = 320 Y= C+I+G 2200= 300+0.6(2200-400) + 700-80r+500 r=4.75 National savings = 700-80(4.75) =320
If stock prices follow a random walk, it means
stock prices are just as likely to rise as to fall at any given time
A bond is priced at $90. If the face value is $100, what is the nominal interest rate of the bond? Make sure to write your answer in percentage terms and to round it to the nearest two decimal place.
The answer should be 11.11% 100-90=10 10/100 =10.0% ???
Take a bond whose face value is $100. If the price paid for the bond is $90, calculate the nominal interest rate of the bond.
The nominal interest rate it = 0.1111 F= P(1+i) $100 = $90 (1+i) 1.11=1+i 0.11=i
A car lot purchased truck made in Mexico. The trucks are purchased by US residents. These transactions are included in
U.S. consumption and U.S. imports
Suppose that the population is divided among the following groups: 25 have full-time jobs, 20 have one part time job, 5 have two part-time jobs, 10 would like to work and are looking for jobs, 10 would like to work but are discouraged they have given up looking, 10 are running their own business, 10 are retired, and 10 are small children. What is the unemployment rate?
Unemployment Rate = 14.3% LF = Full-timers + one part-timers + two part-timers + looking for job + businessmen = 25 + 20 + 5 + 10 + 10 = 70 U = looking for job = 10 Unemployment rate (UR): This is the ratio of U and LF, by a multiplication of 100 for percentage. UR = (U / LF) × 100 = (10 / 70) × 100 = 1,000 / 70 = 14.29% rounded to two decimal places.
The Bureau of Labor Statistics collected information about a small town. If found that 25 have full-time jobs, 20 have one part-time job, 5 have two part-time jobs, 10 would like to work and are looking for jobs, 10 would like to work but are so discouraged they have given up looking, 10 are running their own businesses, 10 are retired, and 10 are small children. What is the unemployment rat of the town? Make sure to write your answer in percentage terms and to round it to the nearest two decimal place.
Unemployment Rate = 14.3% Total employed = 25 ( have full-time jobs ) + 20 (have one part-time job ) + 5 ( have two part-time jobs ) = 50 Total unemployed = would like to work and are looking for jobs = 10 Labor force = Total employed + Total unemployed = 50 + 10 = 60 Unemployment rate = (Total unemployed / Labor force ) * 100 = ( 10 / 60 ) * 100 = 0.1667 * 100 = 16.67 % ????
Which of the following is correct?
Unemployment Rate = number of unemployed / (number of employed + number of unemployed) * 100
Which of the following is not correct?
Unions play a much larger role in the U.S. labor market now than they did in the past
When stock prices follow a random walk, we know that
stock prices are just as likely to rise as to fall at any given time
Suppose Emilio offers you $500 today or $X in 10 yeears. If the interest rate is 6 percent, then at what value of X would you be indifferent between the two options?
X=895.42 X = P(1+i)^n X= $500(1+0.06)^10 = 895.42
John has been a sky diver for many years. When the company John works for offers its employees the option to purchase a life insurance policy, John Purchases a policy. This illustrates the problem of
adverse selection
Masks protect the individuals wearing them from illnesses and prevent transmitting airborne viruses to others. This additional benefit that society can get from wearing masks known as
an externality
Which of the following is not a commonly-cited explanation for the dramatically increasing labor-force participation rates for women from 1950 to the present?
an increasing number of women who work to support their parents
When the federal reserve lowers the discount rate, the Fed motivates banks to
borrow more from the Fed and lend more to the public. The money supply increases.
Suppose that some people are counted as unemployed when, to maintain unemployment compensation, they search for work only at places where they are unlikely to be hired. If these individuals were counted as out of the labor force instead of as unemployed, then
both the unemployment rate and labor-force participation rate would be lower
When conducting open market purchases, the Federal Reserve
buys government bonds, and in so doing increases the money supply
An increase in the minimum wage
decreases the quantity of labor demanded but increases the quantity of labor supplied
The _______ says that the value of an asset reflects all publicly available information about its value.
efficient market hypothesis
Writing in the Wall Street Journal in 2009, economist Jeremy Siegel argued that, in the years leading up to the financial crisis of 008-2009.
financial firms acted in too risky a fashion, the federal reserve's efforts to rein in the risky behavior of certain financial firms were inadequate, falling house prices "crashed the banks and the economy" All of the above are correct
Which of the following do unions not cause?
frictional unemployment
Workers searching for jobs that best suit them is most closely associated with
frictional unemployment
Suppose that a country becomes relatively better than other countries at producing wind generators, in this country
frictional unemployment and so the natural rate o unemployment will increase
Cyclical unemployment
has a different explanation than does the natural rate of unemployment, refers to the year-to-year function in unemployment around an economy's natural rate of unemployment, is closely associated with short-run ups and downs of economic activity ALL OF THE ABOVE ARE CORRECT
Diminishing marginal utility of wealth implies that the utility function
has decreasing slope and a person is risk averse
Efficiency-wage theory suggests that paying
high wages might be profitable because they raise the efficiency of a firm's workers.
Teenagers have more frequent unemployment spells so, on average, they spend more time searching for jobs. Other thing the same, this means that teenagers have a
higher unemployment rate. If a larger portion of the adult population were teenaged, the natural rate of unemployment would be higher
If we observe diminishing marginal returns to capital , we expect that
increases in the capital stock increase output by ever smaller amounts
Which of the following is not an explanation for structural unemployment?
job search
Frictional unemployment results from
job searching. It is often though to explain relatively short spells of unemployment
Susan is a plant manager in charge of a factory in a relatively poor country. Even though market wages are low, she decides to raise the wages of her workers. Her decision
might increase profits if it means that the wage is high enough for her workers to eat a nutritious diet that makes them more productive
Which of the following causes of unemployment is associated with a wage rate above the market equilibrium level?
minimum-wage laws, unions, efficiency wages ALL OF THE ABOVE ARE CORRECT
A manufacturing company is thinking about building a new factory. The factory, if built, will yield the company $300 million in 7years, and it would cost $220 million today to build. The company will decide to build the factory if the interest rate is
no greater than 4.53 percent FV = P(1+r)^n 300,000,000 = 220,000,000 * (1 + r) ^ 7 300,000,000 / 220,000,000 = (1 + r) ^ 7 1.3636 = (1 + r) ^ 7 (1.3636) ^ 1 / 7 = 1 + r 1.0453 = 1 + r r = 1.0453 - 1 r = 0.0453 or 4.53%
Suppose that interest rates unexpectedly rise and that FineLine Corporation announces that revenues from last quarter were down but not as much as the public had anticipated they would be down. According to the efficient markets hypothesis, which of these things make the price of FineLine Corporation Stock fall?
only the interest rate rising
given a market economy, economic activity is affected by
prices and self-interest
Scarcity in an economy may arise from the fact that
resources are limited
If more people think a corporation's stock is overvalued than think it is undervalued then there is a
surplus, so its price will fall