ECON131 (exam 1 & 2)

(Table: Individual and Aggregate Consumption Functions) Use Table: Individual and Aggregate Consumption Functions. Which expression represents Fred's individual consumption function? a. C=150+0.7YD b. C = 150 + 0.8YD c. C=100+0.5YD d. C = 100 + 0.7YD

D

(Figure: Aggregate Expenditures I) Use Figure: Aggregate Expenditures I. The equilibrium real GDP is: a. $625 billion. b. $500 billion. c. $300 billion. d. $700 billion.

B

(Figure: Aggregate Expenditures I) Use Figure: Aggregate Expenditures I. When real GDP is $700 billion, there will be a _____ in unplanned inventory investment. a. $125 billion increase b. $200 billion decline c. $125 billion decline d. $200 billion increase

A

(Figure: The Demand and Supply of Wheat) Use Figure: The Demand and Supply of Wheat. If there is an increase in demand of 4,000 bushels per period at each price, the equilibrium price and quantity will be _____ and _____ bushels per period, respectively. a. $8; 8,000 b. $5; 5,000 c. $6; 6,000 d. $7; 7,000

A

A decline in housing prices triggered a collapse of many large investment banks, a credit crisis, and ultimately a severe recession because a. the value of mortgage backed securities declined. b. of the present value calculation. c. of the efficient market hypothesis. d. there was a sovereign debt crisis.

A

If interest rates increase, making bonds more attractive, the demand for stock will _____ and the price of stock will _____. a. decrease; decrease b. increase; decrease c. decrease; increase d. increase; increase

A

In the AD-AS Model, a recessionary gap occurs when a. Y<YP b. Y=YP c. Y<P d. Y>YP

A

Last month, Brent lost his job at the auto parts factory because the factory relocated to Asia. Brent has been looking for similar jobs in his town but has found no openings. Brent is BEST classified as: a. structurally unemployed. b. a discouraged worker. c. out of the labor force. d. frictionally unemployed.

A

The best available measure of the standard of living in a country is: a. real GDP per capita. b. the growth rate of productivity. c. nominal GDP per capita. d. the unemployment rate.

A

The savings-investment spending identity says that: a. savings and investment spending are always equal in a closed economy. b. each person in the economy must save as much as he or she invests. c. each person in the economy must invest as much as he or she saves. d. savings must equal government investment for the economy as a whole.

A

The short-run aggregate supply curve slopes upward because a _____ aggregate price level leads to _____. a. higher; higher output, since most production costs are fixed in the short run b. higher; lower output as costs of production increase c. lower; higher output, since production costs tend to fall in the short run d. lower; higher profit and higher productivity

A

Which example is a LIKELY response to inflation? a. People tend to make more transactions. b. People choose to carry higher money balances. c. People tend to hold on to fewer interest-bearing assets. d. People tend to make fewer transactions.

A

Which of the following statements is NOT true: a. If the nominal GDP growth rate is greater than real GDP growth rate then prices declined b. The goal of GDP is to measure aggregate output c. Nominal GDP always equals real GDP in the base year. d. Trade deficits are associated with capital inflow

A

(Figure: An Increase in Aggregate Demand) Refer to Figure: An Increase in Aggregate Demand. At the Y2level of real GDP: a. a recessionary gap equal to the difference between Y2 and YP occurs. b. an inflationary gap equal to the difference between Y2 and YP occurs. c. an inflationary gap equal to the sum of Y2 and YP occurs. d. the solution at Y2 is a long-run equilibrium.

B

(Table: Pizza Economy II) Use Table: Pizza Economy II. GDP in this economy is: a. $74,000. b. $16,000. c. $5,000. d. $29,000.

B

A beneficial technological change is developed in the production of cranberries. At the same time, scientists discover that cranberries have significant health benefits. This will result in: a. a decrease in the equilibrium price and an uncertain effect on the equilibrium quantity of cranberries. b. an increase in the equilibrium quantity and an uncertain effect on the equilibrium price of cranberries. c. an increase in both the equilibrium price and quantity in the cranberry market. d. a decrease in both the equilibrium price and quantity in the cranberry market.

B

According to Daren Acemoglu, the "reversal of fortune" of many regions over the last 500 years, shows that the most important deep determinant of economic growth is: a. Geography b. Institutions c. Technology d. All of the above

B

Anna recently moved to Honolulu with her husband Joe, who has a new job as an economics professor at UH. Anna is an experienced surgeon who is interviewing with several hospitals in Honlulu. Anna is: a. counted as employed since she is likely to receive a job offer soon. b. frictionally unemployed. c. cyclically unemployed. d. structurally unemployed.

B

If aggregate expenditures are lower than real GDP: a. aggregate output increases. b. there will be unplanned increases in inventories. c. actual real output is less than equilibrium real output. d. employment increases.

B

In a closed with no government, autonomous consumption is $500, and planned investment spending is $200. The marginal propensity to consume is 0.8. Income-expenditure equilibrium is achieved when GDP is: a. $700 b. $3,500 c. $875 d. $560

B

In the circular-flow model, households: a. buy resources in the factor markets. b. receive transfer payments from the government. c. issue stocks and bonds to raise capital. d. sell products in the market for goods and services.

B

My Aunt Annette bought her house for $7,000 in 1947 (CPI in 1947 = 22.3). What is this sale price in 2018 dollars (CPI in 2018 = 250.5)? a. $7,000 b. $78,632 c. $623 d. $7,228

B

People are likely to save the MOST _____ according to the life-cycle hypothesis: a. when they first enter the labor market b. in their peak earning years c. in retirement d. in their old age

B

Suppose GDP in 2019 is $1000, consumer spending is $600, government purchases are $200, investment spending is $400, and exports are $200. What is the value of imports? a. -$400 b. $400 c. $200 d. $0

B

The demand for stocks: a. mostly depends on their price. b. is mostly a function of buyers' beliefs about their future prices. c. comes from companies who want to borrow money. d. is largely a guessing game.

B

The labor force is the total: a. number of people employed. b. number of people who are employed or unemployed. c. number of people in the population of working age. d. population.

B

The planned aggregate spending line has a slope: a. equal to 1. b. less than 1. c. greater than 1. d. less than 0.

B

The sum of the frictional and structural rates of unemployment is the: a. cyclical rate of employment. b. natural rate of unemployment. c. natural rate of employment. d. cyclical rate of unemployment.

B

The total income of households after taxes and government transfers is called: a. investment. b. disposable income. c. private savings. d. aggregate spending.

B

Wage inequality is more troubling when it reflects a. different priorities in life b. unequal opportunities c. unequal outcomes d. the difficulty of the job

B

Which statement is CORRECT? a. Government spending equals private savings plus the budget deficit. b. The budget deficit equals government spending minus tax revenues. c. The budget deficit equals tax revenues plus government spending. d. Tax revenues equal national savings plus the budget deficit.

B

(Figure: An Increase in Aggregate Demand) Refer to Figure: An Increase in Aggregate Demand. Assume that the economy is initially in long-run equilibrium at YP and P1. Now suppose that there is an increase in the level of government purchases at each price level. This will: a. lead to increased output and a decrease in the price level. b. lead to decreased output and a decreased price level. c. shift the aggregate demand curve from AD1 to AD2. d. shift the aggregate supply curve from SRAS1 to SRAS2.

C

(Figure: Loanable Funds) Use Figure: Loanable Funds. Which scenario might produce a new equilibrium interest rate of 4% and a new equilibrium quantity of loanable funds of $75 billion? a. The government eliminates taxes on income from interest earned. b. The federal government runs a budget deficit, rather than a surplus. c. Profit expectations for business investments become less optimistic. d. Capital inflows from foreign citizens decline.

C

(Figure: The Demand and Supply of Wheat) Use Figure: The Demand and Supply of Wheat. If a price of $10 temporarily exists in this market, a _____ of _____ bushels per period will result. a. shortage; 10,000 b. surplus; 4,000 c. surplus; 8,000 d. shortage; 8,000

C

(Figure: The Labor Market) Use Figure: The Labor Market. The size of the labor force at the equilibrium wage rate is: a. 110,000. b. 200,000. c. 100,000. d. 80,000.

C

(Figure: The Labor Market) Use Figure: The Labor Market. What is the unemployment rate with a minimum wage of $16, assuming all workers without a job are searching? a. 20% b. 10% c. 27% d. Impossible to determine

C

A business will want to borrow to undertake an investment project when the rate of return on that project is _____ rate. a. lower than the interest b. higher than the exchange c. higher than the interest d. equal to the inflation

C

A survey reveals that on the Hawaiian island of Niihau 40 people have jobs, 10 people are not working but are looking for jobs, and 30 people are neither working nor looking for work. The unemployment rate on the island is _____%. a. 50 b. 25 c. 20 d. 12.5

C

During a typical recession a. aggregate output rises b. unemployment decreases c. prices fall d. all of the above

C

Growing wage inequality since 1980 refers to the fact that: a. wages in 2018 are much higher than wages in 1980 after accounting for inflation b. the difference between U.S. and Chinese wages has grown c. the gap in wages between skilled and less-skilled workers has increased d. all of the above

C

In an open economy, GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion. How much is investment spending? a. $3.5 trillion b. $2 trillion c. $4 trillion d. $3 trillion

C

In the long run, the aggregate price level has: a. a negative effect on the quantity of aggregate output. b. a positive effect on the quantity of aggregate output. c. no effect on the quantity of aggregate output. d. an effect on aggregate output but none on employment.

C

In the market for fish tacos, the factor that does NOT shift the supply curve to the left is: a. an increase in the price of fish. b. an increase in the wages of taco shop workers. c. a decrease in the price of tacos. d. fewer taco shops.

C

Real GDP tends to understate our economic well-being because it: a. includes the value of services produced in the home. b. includes expenditures on crime prevention equipment. c. excludes the value of leisure. d. includes health care costs related to the consumption of cigarettes.

C

Shoe-leather costs are the costs of: a. living adjustments as inflation increases. b. the raw material used in production. c. the increased number of transactions as inflation increases. d. having to change prices as inflation increases.

C

Skill Biased Technical Change (SBTC) leads to wage inequality by: a. increasing the supply for less-skilled workers and decreasing the supply for skilled workers b. decreasing the supply for less-skilled workers and increasing the supply for skilled workers c. decreasing the demand for less-skilled workers and increasing the demand for skilled workers d. increasing the demand for less-skilled workers and decreasing the demand for skilled workers

C

Stagflation is usually caused by a _____ shock. a. positive supply b. negative demand c. negative supply d. positive demand

C

Suppose your bond pays $400 at the end of the year and interest rates are 3%. What is the price of your bond today? a. $133 b. $412 c. $388 d. $1200

C

The aggregate price level is the: a. average price of shares on the stock market. b. average price of commodities. c. overall level of prices. d. same as the average price of gasoline.

C

The demand curve for monthly subscriptions to HBO has shifted to the right. What could have caused it? a. an increase in the price of HBO subscriptions b. a fall in the price of HBO subscriptions c. an increase in the incomes of buyers d. an increase in the supply of HBO subscriptions

C

When consumers receive more disposable income, their spending: a. will stay the same, but their savings will decrease. b. and their savings will both decrease. c. will increase. d. will decrease.

C

Which factor will shift the short-run aggregate supply curve to the RIGHT? a. a decrease in government purchases of goods and services b. an increase in nominal wages c. a widespread decrease in commodity prices d. a decrease in productivity

C

Which financial assets are shares of ownership in a company? I. bondsII. loan-backed securitiesIII. stocks a. I only b. II only c. III only d. I, II, and III

C

Workers today are more productive than workers were in the past because: a. they now are physically stronger on average. b. they are paid more. c. they now have more physical capital embodying better technology. d. more of them use the same number of machines as in the past.

C

The price of Apple stock will increase today if a. new reviews of the next iphone are positive b. investors believe Apple carries less risk. c. interest rate decline. d. all of the above.

D

(Table: Peanut Butter and Jelly Economy) Use Table: Peanut Butter and Jelly Economy. Between 2010 and 2011, nominal GDP _____ by _____%. a. increased; 16.67 b. increased; 12.5 c. decreased; 12.5 d. increased; 31.25

D

(Table: Peanut Butter and Jelly Economy) Use Table: Peanut Butter and Jelly Economy. From 2010 to 2011 real GDP _____ by _____%. a. increased; 43.75 b. decreased; 50 c. decreased; 12.5 d. increased; 12.5

D

(Table: Peanut Butter and Jelly) Use Table: Peanut Butter and Jelly. Suppose a market basket consists of 20 jars of peanut butter and 10 jars of jelly. If 2012 is the base year, what is the rate of inflation between 2012 and 2013? a. 44.5% b. 22.5% c. 4.5% d. 11.25%

D

(Table: Peanut Butter and Jelly) Use Table: Peanut Butter and Jelly. Suppose a market basket consists of 20 jars of peanut butter and 10 jars of jelly. If 2012 is the base year, what is the value of the price index in 2013? a. $44.50 b. 90 c. 100 d. 111.25

D

According to official statistics, discouraged workers: a. do not like their job. b. are working part-time but are looking for a full-time job. c. are getting paid too little. d. have given up looking for a job.

D

According to the research of Raj Chetty, moving from the bottom of the income distribution as a kid to the top of the income distribution as an adult is a. equally likely in Canada and the U.S. b. Chetty's research is about geographic mobility and not intergenerational mobility c. most likely to happen if you grow up in the U.S. (i.e the "American Dream") d. twice as likely to happen if you grow up in Canada instead of the U.S.

D

Aggregate output is: a. the total quantity of intermediate goods produced by an economy. b. equal to consumer spending on goods and services. c. the value of new construction, changes in inventories, and the purchase of physical capital by businesses. d. the total quantity of final goods and services produced by an economy.

D

Between 2000 and 2006, there was a housing bubble in the United States which was caused by a. innovations in the mortgage market b. a global savings glut c. lack of oversight and regulation d. all of the above

D

Deflation is a(n): a. increase in the average level of prices. b. decrease in the purchasing power of a unit of money. c. appreciation of the nation's currency. d. decrease in the average level of prices.

D

Economists mostly agree that the problem of climate change necessitates government action in the form of market-based incentives such as: a. tax rebates to those causing negative externalities. b. a reduction in the amount of gasoline that each person is allowed to purchase. c. a reduction in the price of green cars and appliances. d. a carbon tax or a cap and trade system.

D

In a market basket of goods: a. the quantities may change and the prices are held constant. b. both the prices and the quantities are held constant. c. both the prices and the quantities may change. d. the quantities stay constant and the prices may change.

D

Intermediate goods are NOT counted in GDP because: a. these goods are produced in the underground economy. b. these goods involve financial transactions. c. these goods are not produced for the market. d. doing so would result in double counting.

D

Investment spending is spending on: a. bonds. b. shares of stock. c. productive physical capital, bonds, and shares of stock. d. productive physical capital.

D

Long-run economic growth depends almost entirely on: a. population growth. b. the number of hours worked. c. agricultural production growth. d. labor productivity growth.

D

One difference between a closed and an open economy is that: a. in the latter, the government is more open to the idea of financing investment spending than in the former. b. in the former, foreign savings complement domestic savings in financing investment spending. c. in the former, foreign savings finance more investment spending than in the latter. d. in the latter, foreign savings complement domestic savings in financing investment spending.

D

Suppose country A and B both have RGDPpc = 100 in 1980. Country A grows at 1% per year and country B grows at 3% per year. In 2015 how much larger is country B than country A? a. About five times larger b. About three times larger c. About four times larger d. About twice as large

D

Suppose that the stock market crashes, which causes a large decrease in the value of many households' financial assets. The most likely outcome is a _____ the aggregate demand curve. a. rightward shift of b. movement down c. movement up d. leftward shift of

D

Suppose there is higher than expected inflation and that wages kept pace with this increase in the price level. Who benefits? a. Lenders b. Producers c. Consumers d. Borrowers

D

The consumer price index in 1979 was 72.6. In 1980, it was 82.4. What was the rate of inflation from 1979 to 1980? a. 17.6% b. 9.8% c. 11.89% d. 13.5%

D

The financial system performs certain tasks to make the financial market more efficient. These tasks include: a. providing liquidity. b. reducing risk. c. reducing transaction costs. d. all of the above.

D

The rate of unemployment is found by dividing the: a. number of people looking for work by the population. b. unemployed and discouraged workers by the labor force. c. labor force by the number of people looking for work. d. number of people not working but looking for work by the sum of the number of people not working but looking for work and the number of people employed.

D

What is part of U.S. GDP but not U.S. GNP? a. Ford produces a Mustang in Detroit b. Ford produces a Mustang in Mexico City c. Toyota produces a Camry in Tokyo d. Toyota produces a Camry in Kentucky

D

Which factor would shift the demand curve for new textbooks to the right? a. a decrease in the price of paper b. a fall in the price of new textbooks c. a fall in the price of used textbooks d. an increase in college enrollment

D

Which statement describes a serious challenge to the efficient markets hypothesis? a. Individual investors behave in systematically irrational ways. b. Stock prices fluctuate more than can be explained by news about fundamentals. c. Stock prices follow a random walk. d. Stock prices fluctuate more than can be explained by news about fundamentals, and individual investors behave in systematically irrational ways.

D

Which statement illustrates the law of demand? a. Oil companies drill for new sources because prices are higher. b. An increase in tuition encourages more students to enroll in college because the quality of education has risen. c. Fewer people play golf because incomes are lower. d. Consumers buy more personal computers because prices have fallen.

D