Econ final exam practice questions

Which of the following events would shift money demand to the right? a. an increase in the price level b. a decrease in the price level c. an increase in the interest rate d. a decrease in the interest rate

a. an increase in the price level

Some person are counted as out of the labor force because they have made no serious or recent effort to look for work. However, some of these individuals may want to work even though they are too discouraged to make a serious effort to look for work. If these individuals were counted as unemployed instead of out of the labor force, then a. both the unemployment rate and labor-force participation rate would be higher b. the unemployment rate would be higher, and the labor-force participation rate would be lower c. the unemployment rate would be lower, and the labor-force participation would be higher d. both the unemployment rate and labor-force participation rate would be lower

a. both the unemployment rate and labor-force participation rate would be higher

According to the quantity theory of money, a 3 percent increase in the money supply a. causes the price level to rise by 3 percent b. causes the price level to rise by less than 3 percent c. leaves the price level unchanged d. causes the price level to fall by 3 percent

a. causes the price level to rise by 3 percent

The Federal Reserve a. is responsible for conducting the nation's monetary policy, and it plays a role in regulating banks b. is responsible for conducting the nation's monetary policy, but it plays no role in regulating banks c. is not responsible for conducting nation's monetary policy, and it plays a role in regulating banks d. is not responsible for conducting the nation's monetary policy, and it plays no role in regulating banks

a. is responsible for conducting the nation's monetary policy, and it plays a role in regulating banks

The source of the supply of lovable funds a. is saving and the source of demand for loanable funds is investment b. is investment and the source of demand for loanable funds is saving c. and the demand for loanable funds is saving d. and the demand for loanable funds is investment

a. is saving and the source of demand for loanable funds is investment

A economic expansion caused by a shift in aggregate demand causes prices to a. rise in the short run, and rise even more in the long run b. rise in the short run, and fall back to their original level in the long run c. fall in the short run, and fall even more in the long run d. fall in the short run, and rise back to their original level in the long run

a. rise in the short run, and rise even more in the long run

If the price level falls, the real value of a dollar a. rises, so people will want to buy more b. rises, so people will want to buy less c. falls, so people will want to buy more d. falls, so people will want to buy less

a. rises, so people will want to buy more

Fiscal policy is determined by a. the president and Congress and involves changing government spending and taxation b. the president and Congress and involves changing the money supply c. the Federal reserve and involves changing government spending and taxation d. the Federal Reserve and involves changing the money supply

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

The classical dichotomy refers to the idea that the supply of money a. is irrelevant for understanding the determinants of nominal and real variables b. determines nominal variables, but nor real variables c. determines real variables, but not nominal variables d. is a determinant of both real and nominal variables

b. determines nominal variables, but nor real variables

Total output in an economy increases when each person specializes because a. there is less competition for the same resources b. each person spends more time producing that product in which he or she has a comparative advantage c. a wider variety of products will be produced within each country due to specialization d. government necessarily plays a larger role in the economy due to specialization

b. each person spends more time producing that product in which he or she has a comparative advantage

An open-market purchase a. increases the number of dollars and the number of bonds in the hands of the public b. increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public c. decreases the number of dollars and the number of bonds in the hands of the public d. decreases the number of dollars in the hands of the public and increases the number of bonds in the hands of the public

b. increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public

The consumer price index is used to a. monitor changes in the level of wholesale prices in the economy b. monitor changes in the cost of living over time c. monitor changes in the level of real GDP over time d. monitor changes in the stock market

b. monitor changes in the cost of living over time

All else equal, if there are diminishing returns, then which of the following is true if a country increases its capital by one unit? a. output will rise more than it did when the previous unit was added b. output will rise but by less than it did when the previous unit was added c. output will fall by more than it did when the previous unit was added d. output will fall but by less than it did when the previous unit was added

b. output will rise but by less than it did when the previous unit was added

Suppose the MPC is 0.9. There are no crowding out or investment accelerator effects. If the government increases its expenditures by $30 billion, then by how much does aggregate demand shift to the right? If the government decreases taxes by $30 billion, then by how far does aggregate demand shift to the right? a. $283 billion and $254.7 billion b. $283 billion and $283 billion c. $300 billion and $270 billion d. $300 billion and $300 billion

c. $300 billion and $270 billion

Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2013. The price index was 17.6 in 1944 and 218.4 in 2013. In real terms, Sue Holloway's income amounts to about what percentage of Josh Holloway's income? a. 11.0 percent b. 65.2 percent c. 70.9 percent d. 114.7 percent

c. 70.9 percent

Which of the following would cause prices and real GDP to rise in the short run? a. short-run aggregate supply shifts right b. short-run aggregate supply shifts left c. aggregate demand shifts right d. aggregate demand shifts left

c. aggregate demand shifts right

Economists equate money with a. individual wealth b. income regularly earned c. assists people use regularly to buy goods and services d. individual saving

c. assists people use regularly to buy goods and services

changes in nominal GDP reflect a. only changes in prices b. only changes in the amounts being produced c. both changes in prices and changes in the amounts being produced d. neither changes in prices nor changes in the amounts being produced

c. both changes in prices and changes in the amounts being produced

Which of the following events must cause equilibrium price to fall? a. demand increases and supply decreases b. demand and supply both decrease c. demand decreases and supply increases d. demand and supply both increase

c. demand decreases and supply increases

Productivity is defined as the quantity of a. labor required to produce a nation's GDP b. labor required to produce one unit of goods and services c. goods and services produced from each unit of labor input d. goods and services produced per unit of time

c. goods and services produced from each unit of labor input

The producer that requires a smaller quantity of inputs to produce a certain amount of a good, relative to the quantities of input required by other producers ti produce the same amount of that good, a. has a low opportunity cost of producing that good, relative to the opportunity costs of other producers b. has a comparative advantage in the production of that good c. has an absolute advantage in the production of that good d. should be the only producer of that good

c. has an absolute advantage in the production of that good

When the Fed decreases the money supply, we expect a. interest rates and stock prices to rise b. interest rates and stock prices to fall c. interest rates to rise and stock prices to fall d. interest rates to fall and stock prices to rise

c. interest rates to rise and stock prices to fall

In the short-run an increase in the costs of production makes a. output and prices rise b. output rise and prices fall c. output fall and prices rise d. output and prices fall

c. output fall and prices rise

Dollar bills, rare paintings, and emerald necklaces are all a. media of exchange b. units of account c. stores of value d. all of the above are correct

c. stores of value

The long-run aggregate supply curve shifts right if a. the price level rises b. the price level falls c. the capital stock increases d. the capital stock decreases

c. the capital stock increases

GDP is defined as the a. value of all good and services produced within a country in a given period of time b. value of all goods and services produced by citizens of a country, regardless of where they are living, in a given period of time c. value of all final goods and services produced within a country in a given period of time d. value of all final goods and services produced by citizens of a country, regardless of where they are living, in a given period of time

c. value of all final goods and services produced within a country in a given period of time

The model of aggregate demand and aggregate supply explains the relationship between a. the price and quantity of a particular good b. unemployment and output c. wages and unemployment d. real GDP and price level

d. real GDP and price level

The market demand curve a. is found by vertically adding the individual demand curves b. slopes upward c. represents the sum of prices that all the buyers are willing to pay for a given quantity of the good d. represents the sum of the quantities demanded by all the buyers at each price of the good

d. represents the sum of the quantities demanded by all the buyers at each price of the good

The quantity supplied of a good is the amount that a. buyers are willing and able to purchase b. sellers are able to produce c. buyers and sellers agree will be brought to market d. sellers are willing and able to sell

d. sellers are willing and able to sell

Which of the following shifts aggregate demand to the left? a. the price level rises b. interest rate falls c. the dollar depreciates for some reason other than a change in the price level d. stock prices fall for some reason other than a change in the price level

d. stock prices fall for some reason other than a change in the price level

The unemployment rate is computed as the number of unemployed a. divided by labor force, all times 100 b. divided by the number of employed, all time 100 c. divided by the adult population, all times 100 d. time the labor-force participation rate, all times 100

a. divided by labor force, all times 100

The sticky-wage theory of the short-run aggregate supply curve that the quantity of output firms supply will increase if a. the price level is higher than expected making production more profitable b. the price level is higher than expected making production less profitable c. the price level is lower than expected making production more profitable d. the price level is higher than expected making production less profitable

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

A bond buyer is a a. saver. Long term bonds have less risk than short term bonds b. saver. Long term bonds have more risk than short term bonds c. borrower. Long term bonds have less risk than short term bonds d. borrower. Long term bonds have more risk than short term bonds

b. saver. Long term bonds have more risk than short term bonds

During a certain year, the consumer price index increased from 120 to 132 and the purchasing power of a person's bank account increased by 4 percent. For that year, a. the nominal interest rate was 6 percent b. the nominal interest rate was 14 percent c. the inflation rate was 12 percent d. the inflation rate was 9 percent

b. the nominal interest rate was 14 percent

The opportunity cost of an item is a. the number of hours needed to earn money to buy the item b. what you give up to get that item c. usually less than the dollar value of the item d. the dollar value of the item

b. what you give up to get that item

The quantity demanded of a good is the amount that buyers are a. willing to purchase b. willing and able to purchase c. willing, able, and need to purchase d. able to purchase

b. willing and able to purchase

Monetary policy is determined by a. the president and Congress and involves changing government spending and taxation b. the president and Congress and involves changing the money supply c. the Federal Reserve and involves changing government spending and taxation d. the federal Reserve snd involves changing the money supply

d. the federal Reserve snd involves changing the money supply

People choose to hold a larger quantity of money if a. the interest rate rises, which causes the opportunity cost of holding money to rise b. the interest rate falls, which causes the opportunity cost of holding money to rise c. the interest rate rises, which causes the opportunity cost of holding money to fall d. the interest rate falls, which causes the opportunity cost of holding money to fall

d. the interest rate falls, which causes the opportunity cost of holding money to fall

Which of the following statements about real and nominal interest rate is correct? a. when the nominal interest rate is rising, the real interest rate is necessarily rising; when the nominal interest rate is falling, the real interest rate us necessarily falling b.if the nominal interest rate is 4 percent and the inflation rate is 3 percent, the the real interest rate is 7 percent c. an increase in the real interest rate is necessarily accompanied by either an increase in the nominal interest rate, an increase in the inflation rate, or both d. when the inflation rate is positive, the nominal interest rate is necessarily greater than the real interest rate

d. when the inflation rate is positive, the nominal interest rate is necessarily greater than the real interest rate