Econ exam 2
which of the situations is an example of the crowing-out effect on investment as it pertains to macroeconomics?
Jack wants to borrow money to create a cowboy-themed inflatable bounce house for kids called "Wild Wild West". However, the government is running a deficit which has increased interest rates so much that Jack can no longer afford to borrow the money
As interest rate decreases, what happens to the quantity of loanable funds demanded?
Quantity demanded will increase.
If the recent financial crisis raises awareness about the dangers of not saving, leading to an increase in overall savings rates across the country, the loanable funds market will experience an increase in the ______ loanable funds and ______ in equilibrium interest rates.
supply of, a decrease
rent controls are a typical example of a price ceiling. Which one is not the consequence of rent control?
surplus of affordable housing
Suppose Los Angeles introduces a price floor on taxi rides. Which of the following will likely happen in the market for taxi rides?
taxi owners will increase the quality of the ride by improving the interior of their taxis
a rule village in a developing country has an economy based on agriculture. Then the government of the country provides the village with newly developed hybrid seeds that more than double the agricultural yield per acre. This story illustrates the growth of per capita GDP in the village through which facto(s) of production?
technological knowledge
suppose the government issues every family earning less than $25,000 a year a voucher, worth $500 a month that can be applied to any unit of housing. Which choice is the most likely impact of this policy
the amount of available housing will increase
in your city, it is illegal to charge more than a certain amount of money for an apartment. People have been signing leases for the highest legal amount but also agreeing to pay a monthly bribe "on the side" to their landlord in order to get the apartment in the first place and to get timely maintenance. What is the effect of the bribes?
the bribes minimize the damage from the rent control
which of the following do economists consider and investment
the construction of a new factory
hich factor brings the supply and demand of loanable funds into balance?
the real interest rate
for most of recorded history, economic growth has been
virtually nonexistent
Which of the events is likely to occur when the business cycle is in a period of expansion?
an increase in economic growth
consider an economy that is operating at its steady state. An increase in the investment rate in this economy will lead to
an increase in the growth rate of output in the short run but zero growth in output in the long run
Which of the events is likely to occur when the business cycle is in a period of recession (contraction)?
an increase in unemployment
The source of the _______ for loanable funds is investment.
demand
the lower the price ceiling is relative to the market equilibrium price, the:
larger the shortage
The development of smaller mp3 players
technology
Because of diminishing returns, an increase in the savings rate
will have a proportionally smaller impact on productivity in well‑developed economies than in poor economies with very little capital to start with.
all else equal, which hypothetical scenario exhibits a country with the most economic growth?
Froland, a country that resolves most trials and legal issues within a year
suppose a major hurricane damages many trees in a coastal town, increasing the market price of tree removal from $1000 per tree to $1250 per tree. The attorney general threatens legal action against tree removal services who raise their prices above pre hurricane levels. If the average consumer is willing to pay up to $1300 for such tree removal services, is the attorney general helping the consumer?
No, consumers value more tree removal services at a price higher than they are being charged
raising the minimum wage is NOT an effective way to eliminate poverty because increases in the minimum wage:
create higher unemployment
Suppose that, to make bread affordable for low-income consumers, the government imposes a price ceiling on bread. a. In the graph below, adjust the price line to show a binding price ceiling. Market for breadPrice of breadQuantity of breadSupplyDemandBinding price ceiling b. Which of the following are potential consequences of a price ceiling on bread?
decline in the quantity of bread the development of a black market in bread a shortage of bread
If the government forced all bread manufacturers to sell their products at a "fair price" that was half the current, free‑market price, what would happen to the quantity supplied of bread? The quantity supplied will
fall
To keep it simple, assume that people must wait in line to get bread at the controlled price. Would consumer surplus rise, fall, or can you tell with the information given? Consumer surplus will
fall
With these price controls on bread, would you expect bread quality to rise or fall? Bread quality will
fall
suppose a government decides to make health insurance affordable by repairing all health insurance companies to cut their prices by 30%. What will probably happen to the number of people covered by health insurance?
fall
An improvement in adult literacy
human capital
An increase in the college student population
human capital
a business that pays for its workers to attend a technical college is increasing its
human capital
if the supply of loanable funds increases and the demand for loanable funds increases at the same time, interest will
increases decrease, or remain the same
according to the slow growth model, which of these would not increase economic output in a developing nation?
increasing their government ownership of agricultural land
The _______ represents the price of a loan.
interest rate
Which of the terms acts as the "price" in the market for loanable funds?
intrest rate
in rich countries, governments almost always set the fares for taxi rides. The prices for taxi rides are the same in safe neighborhoods and in dangerous neighborhoods. Where is it easier to find a cab? why?
it is easier in safe neighborhoods because taxi drivers will choose safe over dangerous routes for the same money
suppose the city council in a larger city decides to pass a law which forces landlords to charge a maximum rent of $750/ month for a one bedroom apartment. Prior to the rent control, the average rent for one bedroom apartment was $1750/month which is likely to occur as a result of the price ceiling?
landlords will begin decreasing the quality of one bedroom apartments by not making repairs or paying for upkeep
suppose the country of altaria only produces one style of good, pink tutu. Last year, nominal GDP was $50,000 and this year it is $200,000. What can be definitively concluded?
none of these statements are necessarily true
Economics is characterized by many statistics and measurements. Suppose that an analyst is interested in comparing the economy of today with the economy ten years ago. Which term is least likely to be useful for this purpose?
normal GDP
in ancient Egypt, the bronze law set maximum prices for wages, preventing them from rising above what rules perceived as the minimum needed to survive. if this was $0.10 a day for a porter (someone who carries things short distance) and the market wage was $0.08 a day, which of the following would be a plausible consequence of this law?
nothing unusual would happen
The acquisition of computers by companies
physical capital
if a price ceiling on gasoline is imposed, the total price of gasoline a buyer pays is likely to equal the legal price
plus the value of corruption
if two counters have the same steady-state levels of output, the country that is________ today will _______ in per capita output
poorer, catch up
More of which three factors could increase the speed of technology growth in the future? The factors are
population, incentives, ideas.
Steve decides not to rent out his second home since he is not allowed to set the rate above $1000 per month even though he knows he could find renters willing to pay much more. Select the term that best fits the scenario.
price ceiling
Garret is an undergraduate looking for a job to pay for college. As Garret seeks employment, he is glad to know that he will be paid at least $7.25 per hour. Select the term that best fits the scenario.
price floor
which of the following is not a reason why negative consequences can result from efforts to control prices?
prices reflect the amount of profit that producers want to gain for providing good, services, labor, or financial capital to the market
the u.s gov limits the amount of sugar that can be purchased from foreign sugar producers. It is a scenario of
quota
How can sellers increase profits when they face a price ceiling?
reduce the quality of the product and provide less customer service
consider a hypothetical model for the lovable funds market. Suppose that the government decides to reduce the federal goods and services tax (GST). How does this tax reduction impact investment and why? The tax reduction
reduces investment because lowering the GST reduces savings
An economy can increase its capital stock by
reducing consumption spending.
a price ceiling creates a _________ when it is set __________ the equilibrium price
shortage; below
As the nation's leading expert in economics, you have been asked to present a series of economic policies you believe would be helpful to the nation. Because of budget constraints, the legislature also wants you to rank your suggestions. Which policy would be last on your list of policy proposals?
strict population control measures
labor unions are composed of high-skilled workers but generally support minimum wage laws that typically affect only law-skilled workers. Their support makes more sense if one considers that low-skilled labor is a ________ high skilled labor and minimum wages________ the quantity demanded of low skilled labor
substitute for, increase
The source of the _______ for loanable funds is saving.
supply
which transaction is not included in gross domestic product?
Francis receives her social security check
which of the following is NOT an example of the need to borrow to finance large investments?
Jamie pays for college by working two jobs on the weekends
many people say that if people save more, that is bad for the economy. They say that spending money on consumer goods keeps the money moving through the economy. Does the slow model say that?
No, a higher savings rate is good for the economy
What effect will an increase in interest rates have on the quantity of loanable funds supplied?
Quantity supplied will increase.
Which statement accurately characterizes the distribution of real GDP per person internationally?
Real GDP per person varies greatly across countries.
If the projected rate of return for a project is less than the interest rate for a loan that is necessary to complete the project, how will the borrowing business act?
The business will not take out the loan.
In 2000, a small country has real GDP of $20,000 and a population of 150. By 2010, real GDP has grown to $30,000, and improved nutrition has allowed the population to increase to 220. Which statement must be true for this nation?
The standard of living is higher in 2010 than it was in 2000.
suppose a doctor spends half of the year in the united states and the other half in Canada and work in both places. How should her production get allocated between U.S and Canadian GDP?
The value of the services produced in the United States gets counted for GDP, and the value of the services produced in Canada gets counted for Canadian GDP.
Akemi, who is a Japanese citizen, works in the United States as a computer programmer. The value of her output is included in
U.S GDP and Japan's GNP
The Japanese car maker Honda owns production facilities in Marysville, Ohio. If the cars made there are sold exclusively in the United States, in which category would the cars be counted?
US GDP
the edict on maximum prices, established by the roman emperor Diocletian, created truce ceilings on various jobs and goods in a failed effort to curb inflation. For example, legal play for a farm laborer could be no more than $0.108 a day (payment set in modern currency). If the market rate of fair labor was $0.12 a day, which would be a plausible consequence of this law?
a laborer would work less hard than he otherwise would
In the late 1500s, the city of Antwerp was under siege by the Duke of Parma. The siege caused the price of food to rise, so the government of Antwerp established a price ceiling set at a value similar to that before the siege. (This bears a striking resemblance to modern antigouging laws used in times of disaster.) Merchants, fearing the duke's ability to sink their ships, refused to ferry food into the city that they could sell only at a normal price. Which important effect of a price control BEST describes this story?
a loss in gains from trade
a binding and effective interest rate ceiling creates ________ loanable funds
a shortage of
Which of the statements is the best description of business cycle?
alternating periods of increasing and decreasing economic output
Consider the graph. Suppose the production function and investment curves shift from Y1 to Y2 and from investment1 to investment2 . Which change is the most likely cause of this shift? The shift is due to
an advancement in technology
A set of tires installed on a vehicle in an automobile factory is counted as:
an intermediate good and its market price is not part of GDP
Betty lives in a state where the minimum legal price for a gallon of milk is $2.50. She convinces a local dairy farmer to sell her milk for $2.00 her gallon instead. Betty and the farmer are participating in a
black market
Select the definition of consumption smoothing.
borrowing in periods of low income and saving in periods of high income to make consumption less variable than income