ECON Final Niga
GDP
Monetary value of all final goods and services produced within a nation in a particular year
Economics involves marginal analysis because
Most decisions involve changes from the present situation
Gross investment
Net investment plus replacement investment
Progressive tax
tax rates are higher the greater one's income
Increase in pizza price would reduce demand for weed. We can conclude that:
they are complementary goods
Part time workers are counted as:
Fully employed and therefore the official unemployment rate may understate the level of unemployment
By an increase in demand we mean that
the quantity demanded at each price in a set of prices is greater
"There is no free lunch" means
All production involves the use of scarce resources and thus the sacrifice of alternative goods
The federal reserve system regulates the money supply primarily by:
Altering the reserves of commercial banks, largely through sales and purchase of gov't bonds
Checkable deposits are:
Included in M1 and in M2
When economists say that people act rationally in their self interest, they mean that individuals:
Look for and pursue opportunities to increase their utility
One reason that the quantity of a good demanded increases when its price falls is that the:
Lower price increases the real incomes of buyers, enabling them to buy more
A tool of monetary policy
Open market operations
The production possibilities curve illustrates the basic principle that:
if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced
National income accountants can avoid multiple counting by:
only counting final goods
The market system does not produce public goods because:
private firms cannot stop customers who are unwilling to pay for such goods from benefiting from them
The Fed can change the money supply by:
1. Changing bank reserves through the sale or purchase of gov't securities 2. Changing the quantities of required and excess reserves by altering the legal reserve ratio 3. Changing the discount rate so as to encourage or discourage commercial banks in borrowing from the central banks
As defined in national income accounting, investment includes:
Business expenditures on machinery and equipment
Study of economics is primarily concerned with
Choices that are made in seeking to use scarce resources efficiently
Holly's break even level of income is $10,000 and her MPC is 0.75. If her actual disposable income is $16,000 her level of:
Consumption spending will be $14,500
What is a correct statement of the impacts of a lump-sum tax
Disposable income will decline by the amount of the tax and consumption at each level of GDP will decline by the amount of tax
Net exports
Exports minus imports
Suppose the MPS=0.25 and autonomous net taxes are increased by $16 in a closed economy. We can predict that:
Planned autonomous expenditures will decrease by $12 16*.25=4 so decrease by 12
If Ben's MPC is .80, this means he will:
Spend eight-tenths of any increase in his disposable income
In a mixed (i.e. private sector & Gov't) closed economy what are the leakages and injections?
Taxes and savings are leakages, while investment and gov't purchases are injections
Assume that a change in gov't policy results in greater production of both consumer goods and investment goods. We can conclude that:
The economy was suffering from unemployment and/or the inefficient use of resources before the policy change
The purchase of gov't securities from the public by the Fed will cause:
The money supply to increase
Natural Rate of Unemployment
The rate of unemployment occurring when the economy is at its potential output
Why is the aggregate demand schedule downward sloping
The real balances effect, the foreign purchases effect, the interest rate effect
If the equation C=20+0.6Y, where C is consumption and Y is disposable income, what would 20 and 6 represent:
Vertical intercept would be 20 and the slope would be 0.6
What will not cause the demand for product k to change
a change in the price of k
Largest component of total expenditures in the US is:
consumption
The consumption schedule (i.e. function) relates:
consumption to the level of disposable income
Spillovers or externalities
relate to both costs and benefits
An effective ceiling price will
result in a product shortage
If the consumption schedule is linear, then the:
saving schedule will also be linear
Economists define saving as
the part of after-tax income which is not consumed
If the required reserve ratio was lowered:
the size of the monetary multiplier would increase
