econ 203 exam 2

Monthly expenditures for a family of 4 in 2012 averaged $1,400. In 2013, the cost of the same purchases was $1,500. If 2012 is the base year, what was the CPI in 2013?

107

Consumption spending is $4.5 billion, gross private domestic investment is $3 billion, and government expenditures are $2 billion. If GDP is $14 billion, exports are $___ and imports are $____

15 billion, 10.5 billion

According to the "Rule of 70," it will take 4 years for real GDP per capita to double when the growth rate of real GDP per capita is

17.5%

If an economy is growing at a rate of 2.5% per year, how long will it take the economy to double in size?

28 yrs

Caroline is an artist. She purchases canvas, paints, brushes, and accessories for $75. She sells one of her original paintings to an art gallery for $1,500, which, in turn, sells it to an art lover for $4,500. How much value does the gallery add

3000

If the number of employed people is 190 million, the working-age population is 230 million, and the number unemployed is 10 million, then the unemployment rate is

5%

If you want to earn a real interest rate of 3% on money you lend, and you expect that inflation will be 2%, what nominal rate of interest will you charge?

5%

a change in the GDP deflator from 400 in 2013 to 420 in 2014 results from an inflation rate of __ btw 2013 and 2014

5%

In 2013, Kendall Ford, an automobile dealership, spent $20,000 on a new car lift for its repair shop, $2,000 on a new copy machine for its sales division, and $600,000 on Ford Motor company stock. Unsold cars and trucks were valued at $400,000 on January 1, 2013 and unsold cars and trucks were valued at $900,000 on December 31, 2013. What is Kendall Ford's total investment spending in 2013?

522,000

The CPI in 1990 was 131, and the CPI in 2010 was 218. If you earned a salary of $40,000 in 1990, what would be a salary with equivalent purchasing power in 2010?

66,565

If, between 2003 and 2013, the economy's real GDP grew from $20 billion to $40 billion, what was the average annual growth rate in the economy?

7%

In the real world we don't observe countries completely specializing in the production of goods for which they have a comparative advantage. All of the following are reasons for this except A) not all goods and services are traded internationally. B) some countries have more resources than other countries. C) tastes for many traded goods are different in many countries. D) production of most goods involves increasing opportunity costs.

B

Investment, as defined by economists, would not include which of the following? Ford A) buys a new robotic machine (from a plant in Ohio) to assemble cars. B) adds 1,000 new cars to inventories. C) builds another assembly plant in the United States. D) buys U.S. government bond

D) buys U.S. government bond

GDP is not a perfect measure of well-being because

GDP is not adjusted for pollution.

In a closed economy, I = Y _ C _ G

I = Y - C - G.

There is a government budget surplus if

T - TR > G

If the CPI rises from 206.7 to 212.7 between two consecutive years, by how much has the cost of living changed between these two years?

The cost of living has increased by 2.9%

Which of the following would increase disposable personal income?

a decrease in taxes paid

Which policy would reduce structural unemployment?

a job retraining program

An example of a final good would be

a soy latte sold by Starbucks to a student

Increases in real GDP would understate the well-being of a country over time if, over that time period, the

amount of pollution decreased and average hours worked per week decreased.

A decrease in the real interest rate will be caused by

an increase in consumption tax or increasing tax benefits to saving

Which policy would reduce frictional unemployment?

building an online job database that helps workers find jobs

Which of the following is not a durable good? A) furniture B) automobile C) clothing D) refrigerator

clothing

When the U.S. government places a tariff on a product, such as the tariff on tires imported from China, the quantity of the product imported will generally ________ and the price paid by consumers for the product will generally ________.

decrease; increase

The size of the underground economy would tend to decrease if the government of a country

decreased government regulations on businesses.

Borrowers are ________ of loanable funds, and lenders are ________ of loanable fund

demanders, suppliers

Autarky is a situation in which a country

does not trade with other countries.

If your nominal wage rises more slowly than the price level, we can say your real wage has ________ and the purchasing power of a dollar has ________.

fallen; fallen

To cause nominal gdp to decrease but real gdp to increase, the price level ___ and the quantity of final goods and services produced ___

falls, rises

If prices are rising on average, then real gdp will be ___ than nominal gpd in the years _____ the base year

greater, before

An efficiency wage is __ than the market wage and tends to __ productivity

higher, increase

Suppose that homemakers are included as employed in the labor force statistics, rather than being counted as out of the labor force. This would

increase the measured labor force participation rate

If the U.S. government implements a tariff on Chinese tire imports, the price of Chinese-made tires in U.S. will ________, the quantity demanded will ________, and consumer surplus will ________.

increase; decrease; decrease

Legalizing all forms of illegal activities ___ GDP and ___ the size of the underground economy

increases, reduces

The cost to firms of changing prices

is called menu cost

If the ________ cost of production for two goods is different between two countries then mutually beneficial trade is possible

opportunity

If real GDP increases we know for sure that

output has risen.

At full employment level, unemployment rate is not zero, because

people do not find jobs instantaneously.

During the expansion phase of the business cycle,

production increases

Economists believe the most persuasive argument for protectionism is to

protect infant industries.

The federal budget deficit can be reduced by

raising taxes

To examine how the total production of an economy has changed over time, it would be better to examine

real GDP

A good measure of the standard of living is

real gdp per capita

When production in an economy grows more quickly than the population in that economy, which of the following must be occurring?

real gdp per capita is rising

tarrifs and quotas are both designed to

reduce foreign competition faced by domestic firms.

Suppose the labor force stays constant, and the working-age population stays constant, but a greater number of persons who were unemployed become employed. The labor force participation rate will

remain constant

What two factors are the keys to determining labor productivity?

technology and the quantity of capital per hour worked

If labor productivity growth slows down in a country, this means that the growth rate in ________ has declined.

the quantity of goods or services that can be produced by one hour of work

Mike has been unemployed for over a year. He hasn't looked for a job in the last three months, but he's just started looking for work again. Because Mike started looking for a new job,

the unemployment rate increased.

If inflation is positive and is perfectly anticipated who looses

those that hold paper money

Examples of comparative advantage show how trade between two countries can make each better off. Compared to their pre-trade positions, trade makes both countries better off because in each country

total consumption of goods is greater.

If Norwegian workers are more productive than Albanian workers, then trade between Norway and Albani

will take place so long as each country has a comparative advantage in a good or service that buyers in the other country want.

Which of the following would be directly counted in GDP in 2014? A) kitchen cabinets purchased from Home Depot in 2014 to be installed in a house built in 1997 B) kitchen cabinets built in 1887, extracted from the 1887 home, and installed in a brand new countrystyle home C) kitchen cabinets built in 1887, extracted from the 1887 home, and installed in a farm house built in 1950 D) none of the above

A. kitchen cabinets purchased from Home Depot in 2014 to be installed in a house built in 1997

Assume that Australia has a comparative advantage in producing surfboards and New Zealand imports surfboards from Australia. We can conclude that

Australia has a lower opportunity cost of producing surfboards relative to New Zealand.

In a closed economy, which of the following components of GDP is not included? A) investment B) government spending C) net exports D) consumption

C. net exports