Econ Final Exam Study Guide

b

1. Economists generally believe that inward-oriented policies are more likely to foster growth than outward-oriented policies. a. True b. False

b

1. In the open-economy macroeconomic model, at the equilibrium real interest rate, the amount that people (including government) want to save exactly balances desired domestic investment. a. True b. False

c

A Production Possibilites Frontier is: a. A curve showing a relationship between the inputs of a firm and its output b. A curve showing the relationship between the consumption function and the production function c. A curve showing the maximum attainable combinations of two goods that can be produced with available resources and current technology d. A curve showing the relationship between technology and available resources

c

A U.S. grocery chain borrows money to buy a warehouse in Ohio and another in Italy. Borrowing for which warehouse(s) is included in the demand for loanable funds in the United States? a. Only the one in Ohio b. Only the one in Italy c. Both the one in Ohio and the one in Italy d. Neither the one in Ohio nor the one in Italy

a

A bagel shop sells fresh baked bagels from 5 a.m. until 7 p.m. every day. The shop does not sell day-old bagels, so all unsold bagels are thrown away at 7 p.m. each day. The cost of making and selling a dozen bagels is $1.00; there are no costs associated with throwing bagels away. If the manager has eight dozen bagels left at 6:30 p.m. on a particular day, which of the following alternatives is most attractive? a. Lower the price of the remaining bagels, even if the price falls below $1.00 per dozen b. Lower the price of the remaining bagels, but under no circumstances should the price fall below $1.00 per dozen c. Throw the bagels away and produce eight fewer dozen bagels tomorrow d. Starting tomorrow, lower the price on all bagels so they will all be sold earlier

c

A circular-flow diagram is a model that... a. incorporates all aspects of the real economy b. helps to explain how consumers and the government interact with one another c. helps to explain how the economy is organized d. explains how countries trade with each other

b

A recession tends to cause the federal budget deficit to ______ because tax revenues _____ and government spending on transfer payments _______. a. increase; rise; falls b. increase; fall; rises c. decrease; rise; falls d. decrease; fall; rises

d

A result of this country allowing international trade in crude oil is as follows: a. The effect on the well-being of the country is unclear in that domestic producer surplus increases, while the effect on domestic consumer surplus is unclear. b. The effect on the well-being of domestic crude-oil consumers is unclear in that they now buy more crude oil, but at a higher price per barrel. c. domestic consumers lose by more than domestic producers gain. d. The well being of domestic crude-oil producers is new higher that they now sell more crude oil at a higher price per barrel

b

A tax on a good cause the size of the market to increase. a. True b. False

b

According to the Rule of 70, it takes 70 years for a sum of money to double in value when the interest rate is 5 percent.​ a. True b. False

b

All else equal, a decrease in demand will cause an increase in producer surplus. a. True b. False

d

An example of an automatic stabilizer is... a. 20234: the indexation of social security benefits to the consumer price index b. the interest the government pays on loans c. changing the tax laws to increase marginal tax rates d. the food stamp program

a

Anything other than a change in the interest rate that decreases national saving shifts the supply of loanable funds to the left. a. True b. False

d

Bank capital is... a. the reserves of the bank b. the bank's total assets c. the machinery, structures, and equipment of the bank d. the resources that owners have put into the bank

b

Bank runs and the accompanying increase in the money multiplier caused the U.S. money supply to rise by 28 percent from 1929 to 1933. a. True b. False

a

Both full-time and part-time workers are included in the Bureau of Labor Statistics' "employed" category. a. True b. False

a

By itself, if a U.S. firm builds a new factory overseas, U.S. net capital outflow rises. a. True b. False

a

Differences in opportunity cost allow for gains form trade. a. True b. False

a

During an expansionary fiscal policy action, the interest rate ______. During an expansionary monetary policy, the interest rate _______. a. Increases; decreases b. Decreases; decreases c. Increases; Increases d. Decreases; increases

d

Economists differ in their views of the role of the government in promoting economic growth. At the very least, the governmenr should... a. subsidize key industries b. limit foreign investment to industries that don't already exist in the country c. impose trade restrictions to protect the interest of domestic produces and consumers d. lend support to the invisible hand by maintaining property rights and political stability

d

Equilibrium occurs when... a. Planned aggregate expenditure equals actual investment b. Planned investment equals actual investment c. Savings equal planned investment d. All of these answers are correct

b

For the purpose of calculating GDP, investment is spending on... a. capital equipment, inventories, and structures, excluding household purchases of new housing b. capital equipment, inventories, and structures, including household purchases of new housing c. stocks, bonds, and other financial assets d. real estate and financial assets such as stocks and bonds

c

From 2008-2009 the Federal Reserve created a very large increase in the money supply. According to the short-run Phillips curve this policy should have... a. raise inflation and unemployment b. reduced inflation and raised unemployment c. raise inflation and reduced unemployment d. reduced inflation and unemployment

b

GDP is not a perfect measure of well-being because... a. the value of leisure is included in GDP b. GDP is not adjusted for pollution c. GDP is adjusted for changes in crime rates d. GDP is adjusted for changes in drug addiction

b

Government policy can do nothing about the natural rate of unemployment. a. True b. False

d

Gross domestic product is calculated by summing up... a. the total quantity of goods and services in the economy b. the total quantity of goods and services produced in the economy during a period of time c. the total market value of goods and services in the country d. the total market value of final goods and services produced in the economy during a period of time

b

If a country places tariffs on imported goods, then its... a. currency depreciates which reduces exports leaving the trade balance unchanged b. currency appreciates which reduces exports leaving the trade balance unchanged c. currency depreciates which increase exports improving the trade balance d. currency appreciates which increases exports improving the trade balance

a

If a tax shifts the demand curve downward, we can infer that the tax was levied on... a. buyers of the good b. both buyers and sellers of the good c. sellers of the good d. we cannot infer anything because the shift described is not consistent with a tax

c

If the interest rate is higher than normal, people are more likely to hold... a. bonds instead of money because as the interest rate starts to rise, the value of the bonds will increase b. money instead of bonds because there is a speculation motive for holding a larger amount of money c. bonds instead of money because the opportunity cost of money is high d. money instead of bonds because the brokerage fees and other costs of buying bonds are high when interest rate is low

d

If the value of net exports is negative, then... a. imports are zero b. exports equal imports c. exports exceed imports d. imports exceed exports

d

If total spending rises from one year to the next, then... a. good and services must be selling at higher prices b. the economy must be producing a larger output of goods and services c. employment or productivity must be rising d. either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or both

d

In a closed economy, public saving is the amount of... a. income that businesses have left after paying for the factors of production b. income that households have left after paying taxes and consumption c. spending that the government undertakes in excess of the taxes it collects d. tax revenue that the government has left after paying for its spending

d

In economics, efficiency is... a. Total productivity is increasing at a constant and equal rate within each sector of the economy. b. There is a low level of inflation and full unemployment of economic resources. c. Income is distributed equally among all citizens. d. The economy is producing those goods and services that citizens desire and is doing so at the least possible cost.

c

Japan is... a. an advanced economy, and over the past century its rate of economic growth has been lower than that of the United States b. a middle-income country, and over the past century its rate of economic growth has been lower than that of the United States c. an advanced economy, and over the past century its rate of economic growth has been higher than that of the United States d. a middle-income country, and over the past century its rate of economic growth has been high then that of the United States

c

John borrows $100 in dollar bills from Mary and deposits the money with Bank of America. The required reserve ratio is 20%. What is the maximum amount by which the banking system can expand checking accounts? a. $400 b. $100 c. $500 d. $300

b

Minimum-wage laws dictate... a. both a minimum wage and a maximum wage that firms may pay workers b. only a minimum wage that firms may pay workers c. the exact ways that firms must pay workers d. only a maximum wage that firms may pay workers

b

National savings is equal to Y-T-C. a. True b. False

a

Net Exports equal... a. exports less imports b. import plus (export less imports) c. Gross national product less new imports d. net exports less imports

a

People who report being not in the labor force but who, in fact, want to work but have given up trying to find a job after an unsuccessful search cause the reported unemployment rate to be lower than it would otherwise be. a. True b. False

b

Proponents of zero-inflation policies acknowledge that the public is unconcerned about the inflation rate. a. True b. False

c

Refer to the Table in Figure 1. For Matthew, the opportunity cost of designing one Web site is... a. 4 brochures b. 10 brochures c. 5 brochures d. 1/5 of a brochure

a

Some degree of unemployment is inevitable in a complex economy. a. True b. False

a

To explain the long-run determinants of the price level and the inflation rate, most economists today rely on... a. quantity theory of money b. theory of hyperinflation c. disequilibrium theory of money and inflation d. price-index theory of money

d

Suppose that a new government is elected in Eurnesia. The new government takes steps toward improving the court system and reducing government corruption. The citizens of Eurnesia find these efforts credible and outsiders believe these changes will be effective and long lasting. These changes will probably raise... a. neither productivity nor real GDP per person in Eurnesia b. real GDP per person but not productivity in Eurnesia c. productivity but not real GDP per person is Eurnesia d. real GDP per person and productivity in Eurnesia

d

Suppose the government imposes a $10 per unit tax on a good. The tax causes consumer surplus to decrease by the area... a. A + B + C b. A + B + C + D + F c. A d. B + C

c

The adjustment of _______ is the rationing mechanism in market economies. a. demand b. supply c. price d. quantity

a

The basic aggregate demand and aggregate supply curve model helps explain... a. short term fluctuations in real GDP and the price level b. long term growth c. price fluctuations is an individual market d. output fluctuations in an individual market

d

The change in the price of a good leads to a change in ______ which leads to a ______. a. supply; movement along a supply curve b. supply; shift of the supply curve c. quantity supplied; shift of the supply curve d. quantity supplied; movement along the supply curve

b

The flatter the demand curve that passes through a given point, the more inelastic the demand. a. True b. False

c

The increase in unemployment that occurs during recessions and depressions is called... a. frictional unemployment b. structural unemployment c. cyclical unemployment d. normal unemployment

A

The majority of economists believe that policies that reduce the saving rate will reduce long-run living standards. a. True b. False

c

The minimum wage was instituted to ensure workers... a. employment b. a middle-class standard of living c. a minimally adequate standard of living d. unemployment compensation

d

The natural resources used in production are made available in the... a. goods and services market b. product marked c. government market d. factor market

a

The opportunity cost of working out for one hour is the value of the next-best activity that you could have done in that hour.​ a. True b. False

a

The overriding reason why households and societies face many decisions is that... a. Resources are scarce b. Goods and services are not scarce c. Incomes fluctuate with business cycles d. People, by nature, tend to disagree

a

The present value of any future sum of money is the amount that would be needed today, at current interest rates, to produce that future sum. a. True b. False

d

The price level is... a. relative variable b. dichotomous variable c. real variable d. nominal variable

c

The process of countries becoming more open to foreign trade and investment is known as... a. autarky b. foreign exchange c. globalization d. protectionism

c

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

d

The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10 percent. Total consumer spending on aged cheddar cheese will... a. decrease, and total consumer spending on bread will increase b. increase, and total consumer spending on bread will decrease c. increase, and total consumer spending on bread will increase d. decrease, and total consumer spending on bread will decrease

b

To evaluate the size of the federal budget deficit or surplus over time, it would be best to look at the... a. absolute size of the budget deficit or surplus b. budget deficit or surplus as a percentage of GDP c. budget deficit or surplus as a percentage of tax revenues d. budget deficit or surplus as a percentage of government spending

b

To improve living standards, policymakers should... a. provide tax breaks for the middle class b. impose restrictions on foreign competition c. formulate policies designed to increase productivity d. only a minimum wage that firms pay workers

b

Trade does not benefit a nation if that nation has a comparative advantage in the production of that good. a. True b. False

a

Unemployment generally ______ during recessions and ______ during expansions. a. rises; falls b. falls; rises c. rises; rises d. falls; falls

d

Unemployment implies that in the labor market... a. quantity demanded of labor exceeds quantity supplied b. there are too few workers for the jobs available c. there is an excess demand for labor d. there is an excess supply of labor

b

Using the money demand and money supply model, an open market purchase of Treasury securities by the Federal Reserve would cause the equilibrium interest rate to... a. increase d. decrease c. not change d. increases if the economy is in recession

c

What must be given up to obtain an item is called... a. absolute value b. comparative worth c. opportunity cost d. out-of-pocket cost

b

When the U.S. government purchases capital equipment, such as a computer, these expenditures are part of investment in GDP. a. True b. False

b

Which of the following is NOT a source of economic growth? a. Proactive government economic policies b. Unused resources c. New technology d. Increased capital stock

c

Which of the following is an example of a capital input? a. A share of stock b. $50,000 c. A computer d. An hour of worker's time

b

Which of the following is correct? a. Countries with the highest growth rates over the last 120 years are the ones that had the highest level of real GDP 120 years ago. b. Even though Japan had a higher growth rate of real GDP per person than the United States over the last 120 years, it's level of real GDP per person is less than that of the United States. c. Most countries have had little fluctuation around their average growth rates during the past 120 years d. The ranking of countries by income changes little over time

b

Which of the following is correct? a. The word economy comes from the Greek word for "rational thinker" b. Economists study management of scare resources c. Because economists believe that people pursue their best interests, they are not interested in how people interact d. All of the above are correct

c

Which of the following is not an example of a market? a. In Florida, there are many buyers and sellers of the key lime pie b. A small town has only one seller of electricity c. In the United States, a sick person cannot legally purchase a kidney d. The availability of the Internet shopping has expanded the clothing choices for buyers who do not live near large cities

c

Which of the following statements is correct? a. The owners of bonds sold by the Microsoft Corporation are part owners of that corporation. b. Perpetuities are short-term bonds. c. The expected future profitability of a corporation influences the demand for that corporation's stock. d. When a corporation sells stock as a means of raising funds it is engaging in debt finance

d

While pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms' owners, workers, and customers. This statement illustrates the principle that... a. people respond to incentives b. people face tradeoffs c. rational people think at the margin d. trade can make everyone better off

a

You bought some shares of stock and, over the next year, the price per share increased by 5 percent, as did the price level. Before taxes, you experienced... a. a nominal gain, but no real gain, and you paid taxes on the nominal gain b. both a nominal gain and a real gain, and you paid taxes only on the real gain c. a nominal gain, but no real gain, and you paid no taxes on the transaction d. both a nominal gain and a real gain, and you paid taxes on the nominal gain

c

You lose your job, as a result, you buy fewer iTunes music downloads. This shows that you consider iTunes music downloads to be... a. A complementary good b. A substitute good c. A normal good d. An inferior good