Econ Final Exam Review
During year, a firm's gross investment is $7,000 and net investment is $5,600. What is the firm's depreciation?
$1,400
The present value of $200 one year from now when the interest rate is 7 percent is
$187
The money price of a pack of frozen burritos is $.20 and the money price of a pack of microwave popcorn is $.40. The opportunity cost of a pack of microwave popcorn is .
$2.00 pack of frozen burritos, which is relative price of a pack of microwave popcorn
If the present value of $220 one year from now is $200, then the interest rate is
10 percent
Which of the following pairs do not match?
Entrepreneurship; interest
Which of following is NOT an asset of the federal reserve?
Federal Reserve Notes
Facts: In an hour James can catch 10 pounds of tuna or pick 10 pounds of apples In an hour, David can catch 10 pounds of tuna or pick 20 pounds of apples The opportunity cost of catching a pound of tuna is for James than David, and the opportunity cost of picking a pound of apples is for James than for David
Lower; Higher
Consider gardening books. What will happen to the market for these books as gardening becomes more popular and simultaneously printing costs increase?
The price of gardening books definitely increases.
Which of the following will shift the supply of loanable funds curve leftward?
a decrease in disposble income
Which of the following decreases the demand for money?
a decrease in real GDP
A macroeconomic equilibrium in which real GDP equals potential GDP is _____ equilibrium. And one in which real GDP exceeds potential GDP is _____ equilibrium.
a full-employment; an above full-employment
All of the following statements about the Federal Reserve are true expect the fact that it
accepts checking deposits from the nation's residents
Which of the following always raises the equilibrium price?
an increase in demand combined with a decrease in supply
when real GDP exceeds potential GDP, then the economy has
an inflationary gap
An economy is in a long-run equilibrium. An increase in aggregate demand creates _____ gap. A rise in the money wage rate decreases ______ and returns the economy to a full-employment equilibrium.
an inflationary; the quantity of real GDP demanded
If the real GDP is less than potential GDP, then the economy is _______ equilibrium.
at a below- employment
As an economic concept, scarcity applies to
both money and time
Purchasing power parity prices are used to construct GDP data that
can be used to make more valid comparisons between one country and another
The monetary base does NOT include
checking accounts at commercial banks
If the price of a sports car increase, the demand for gasoline will _____. (Compliments)
decrease, and the demand curve for gasoline will shift leftward.
An inferior good is a good for which demand
decreases when income increases
Real GDP
fluctuates around potential GDP
George and Michael can gain from exchange
if each specializes in the production of the good for which he has the lower opportunity cost.
What always raises equilibrium price?
increase in demand combined with increase in supply
a discouraged worker ______ counted as officially unemployed and _______ counted as in the labor force.
is not; is not
Which population category equals the sum of employed and unemployed people?
labor force
If households expect an increase in their future incomes, they will save
less and consume more today
What are the functions of depository institutions?
lowering the cost of borrowing
Facts: In an hour James can catch 10 pounds of tuna or pick 10 pounds of apples In an hour, David can catch 10 pounds of tuna or pick 20 pounds of apples so , has a comparative advantage in producing
marginal cost; an hour of reading, if that is her best alternate use of the time
If the price of a good changes but everything else influencing suppliers' planned sales remains constant, there is a
movement along the supply curve
In calculating GDP, household production is
not included because there is no market transaction
If the demand curve for bikes shifts leftward and the supply curve for bikes shifts rightward, the equilibrium
price of bikes definitely decreases.
As the price of a pound of peanuts falls, the..
quantity of peanuts supplied decreases
Labor productivity is defined as
real GDP per hour of labor.
As the ________ interest rate increases, the quantity of loanable funds demanded ________.
real; decreases
The four parts of the business cycle occur in the following order
recession, trough, expansion, peak
The "double coincidence of wants" problem is
resolved by the use of money
If the supply of spring water decreases and at the same time the demand for spring water increases, the equilibrium price ______ and the equilibrium quantity ______.
rises; might increase, decrease, or stay the same
A supply curve that illustrates the law of supply ______.
shows that the quantity supplied decreases as the price falls
Supply curve that illustrates the law of supply .
shows that the quantity supplied decreases as the price falls.
The larger the public's currency drain from the banking system, the
smaller is the money multiplier
Employees who lack the proper skills due to technological advancements and lose their jobs is an example of
structural unemployment
the idea that a government budget deficit decreases investment is called
the crowding-out effect
U.S. residents come to believe that the dollar will appreciate in the future, that is, the exchange rate in the future will be higher than the current exchange rate. As a result,
the demand curve for dollars shifts rightward
Because of the choices people make in the pursuit of profit, new growth theory argues that
the economy can enjoy a period of indefinite growth.
A financial decision should be pursued when
the net present value is positive
According to the quantity theory of money, in the long run, an increase in the quantity of money results in an equal percentage increase in
the price level
The money price of a pack of frozen burritos is $.20 and the money price of a pack of microwave popcorn is $.40. The relative price of a pack microwave popcorn is an opportunity cost because. .
the relative price tells us how many packs of frozen burritos we must give up to get a pack of microwave popcorn
Which of the following measurements of inflation tracks the rate at which infrequently changed prices are changing?
the sticky-price CPI
Full employment occurs when
the unemployment rate equals the natural unemployment rate
If the price of chocolate chip cookies rises, then
there is a movement upward along the demand curve for chocolate chip cookies.
Business cycles are
unpredictable, but always have two phases and two turning points.
You rank your choices for activities in the following order: go to the library, work out at the gym, have breakfast with friends, and sleep late. Suppose you choose to go to the library. Your opportunity cost is
working out at the gym
Suppose the money market has an equilibrium interest rate of 5 percent. If the actual interest rate is 3 percent, which of the following occurs to bring the money market back to equilibrium?
People sell bonds, the price of bonds falls and the interest rate rises
If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, then the real interest rate is
5 percent
A country's exports were $2,088 billion and imports were $2,666 billion. What was the value of net exports?
-578 billion
Using the rule of 70, if a country's current growth rate of real GDP per person was 10 percent a year, how long would it take the country's real GDP per person to double?
7 years
If, as Adrienne's income increases, her demand for leather gloves increases, then for Adrienne, leather gloves are
a normal good.
If the real interest rate is below equilibrium real interest rate,
a shortage of loanable funds will cause the real interest rate to rise
Potential GDP increases when
an advance in technology occurs
The country of Stanley is at an above-full employment equilibrium. Which of the following events will return Stanley to full employment?
an increase in the money wage rate
If FED sells government securities
commercial banks reserves will decrease
The consumer price index (CPI)
compares the cost in the current period to the cost in a reference base period of a basket of goods typically consumed in the base period.
A rise in the real interest rate
creates a movement upward along the demand for loanable funds curve
Unemployment that is the result of recessions is called
cyclical unemployment
The law of supply states that other things remaining the same, the _____ the price of a good, the _____.
higher; greater is the quatity supplied
The law of supply states that other things remaining the same, the the price of a good, the .
higher; greater quantity supplied
The law of demand states that other things remaining the same, the _____ the price of a good, the _____.
higher; smaller is the quantity demanded
An increase in the demand for computers and a decrease in the number off sellers of computers will ______.
increase the price of a computer
an increase in the demand for computers and a decrease in the number of sellers of computers will.
increase the price of a computer
A decrease in the price of wheat, a compliment in production of straw, will _____ the equilibrium price of straw and _____ the equilibrium quantity of straw.
increase; decrease
In the US interest rate rises while interest rates in the rest of the do not change, the higher US interest rate
increases the demand for dollars
the nominal interest rate minus the real interest rate approximately equals the
inflation rate
A demand curve that illustrates the law of demand _____.
is downward sloping
Because of the biases in calculating the CPI, actual inflation is
less than the measured inflation rate.
Flights to Paris are a normal good and people's incomes rise. At the same time, the price of jet fuel rises. The equilibrium price of a flight to Paris ________ and the equilibrium quantity of flights to Paris ________.
rises; might increase, decrease, or not change
Real GDP is calculated by
summing together the value of the year's production using the prices of the reference base year
An assumption of neoclassical growth theory is that
technological change is random
The key financial institutions in the United States include all of the following except
the U.S. Treasury
A classical economist believes that
the economy is self-regulating and always at full employment
Sarah takes out a loan today for $26,000 at an interest rate of 2% a year. She plans to repay the loan after 5 years. How much will she have to pay?
$28,706
Nominal GDP is
GDP valued at prices of that year
Which graph shows the impact of scientists developing a more powerful fertilizer?
Figure A (Qunatity increases)
The two main official measures of money in the United States today are ______. The two main official measures of money in the United States ______ really money.
M1 and M2; are
________ predicts that real GDP per person can grow indefinitely.
New growth theory
