economics exam
Assume that the Federal Reserve increases the monetary base by $1 billion when the reserve requirement is 10 percent. The money supply will increase by:
$10 billion
Assume that the marginal propensity to consume is 0.9. What is the maximum amount that real GDP could change if government expenditures increase by $1 billion?
$10 billion
Assume that the marginal propensity to save is 0.1. What is the maximum amount that real GDP could change if net exports increase by $15 billion?
$150 billion
If the United States had $5,000,000 in exports, $10,000,000 in GDP, $3,000,000 in imports and $1,000,000 in national savings, what would the net exports be?
$2,000,000
When the reserve ratio is 20%, the Fed buys $500,000 worth of government bonds in the open market. What is the maximum amount that the money supply could increase?
$2.5 million
If nominal GDP is $5 trillion in year 1, and real GDP is $4.5 trillion, what is the GDP deflator?
$5 trillion / $4.5 trillion = around 1.111
If $100 of new private investment gets added to the economy, and the marginal propensity to consume is 0.80, by how much will aggregate demand increase?
$500
Given the following, what is the balance of payments? Foreign Investment in Domestic sector = $1,000,000 Domestic Investment in Foreign sector = $500,000 Exports = $1,000,000 Imports - $2,000,000
$500,000 deficit
If a country had $1 million in exports and $1.5 million in imports, what would the trade balance be?
$500,000 deficit
Latervia is a very small country that has exports of $100,000, imports of $20,000, net income from abroad $250,000, and net current transfers $200,000. What is Latervia's current account?
$530,000
How is price elasticity of demand measured?
% change in quantity demanded/% change in price
What is the formula needed to calculate real GDP growth rate?
(Real GDP in year 2 / Real GDP in year 1) -1
If the price of printers increased by 10% and the quantity demanded of printer paper fell by 2%, what is the cross elasticity of demand equal and what does it tell us?
-0.2; the products are complements.
What is the real interest rate when the nominal interest rate on a bank checking account is 1%, and the rate of inflation is 2%?
-1%
A money market account at the bank offers a 4% nominal interest rate, while inflation is expected to be 3%. What is the real interest rate for this account?
1%
What is the GDP for the following information: Consumption = 10,000 Investment = 2,000 Government spending = 1,000 Exports = 7,500 Imports = 7,000
13,500
In December 2016, 155,000 of Mainfield's adult residents were employed while 27,000 were unemployed. What was Mainfield's unemployment rate in December?
15%
Under one formulation of Okun's law, a _____ increase in unemployment results in a _____ percent drop in GDP.
1;2
If a 10% change in price leads to a 30% change in the quantity demanded, then what is the elasticity?
3
If the exchange rate between the U.S. dollar and Mexican Peso is 13 Pesos to 1 U.S. dollar, how many dollars would a gallon of ice cream costing 52 pesos be?
4
Let us assume that the price level remains constant and the nominal gross domestic product is $8 trillion and the money supply is $2 trillion. Use the equation of exchange (MV=PY) to determine what the velocity of money would be.
4
A small island country had a seven percent increase in its money supply from the prior year and a three percent increase in real GDP. Calculate the change in the price level.
4%
If a country has a money supply of 20 billion dollars, a real GDP of 100 billion dollars, and a price level of 1, then what's the velocity of money in this country?
5
If nominal GDP = $5,000 billion and the money supply is $1,000 billion, assuming a constant price level, what is the velocity of money?
5
Assume the following exchange rates: 1 Dollar = 102 Japanese Yen 1 Dollar = 0.6 British Pound 1 Dollar = 0.91 Swiss Franc 1 Dollar = 13 Pesos Which of the following is the least amount of money?
507 pesos
In the country of Athenia, banks charge 10% interest on all loans. If the general price level has been increasing at a rate of 2% per year, what is the real rate of interest in Athenia?
8%
The real interest rate for a consumer loan is 5%, and the expected inflation rate is 3%. What is the nominal interest rate on this consumer loan?
8%
When demand for a product goes from 100 to 200 and income goes up from $40,000 to $45,000 what is the income elasticity of demand?
8.0
Which of the following is a positive statement?
A 3% reduction in paper spending will save 1 billion dollars a year.
What causes movement along a demand curve?
A change in price causes the quantity demanded to change.
Which of the following illustrates a trade surplus?
A country exports $300,000 and imports $150,000.
Which one of these scenarios would cause Cost-Push Inflation?
A decrease in aggregate supply resulting in higher prices
How is a person's likelihood to save related to the simple spending multiplier?
A decrease in the marginal propensity to save will increase the multiplier.
Which of the following is an example of price inelasticity of supply in the short-term?
A grocery store running out of parking spots on a major shopping day.
What is a cartel?
A group that agrees to limit supply to increase prices.
What is the result of cost-push inflation?
A higher equilibrium price and lower economic output.
How would economists graphically illustrate a decrease in the money supply?
A leftward shift of the vertical money supply curve.
Which of the following best defines a monopoly?
A market where a single entity is large enough to set prices without impacting demand.
Which of the following is the best explanation of a free market in the real world?
A market with limited government intervention
What is the standard of living?
A measure of a nation's economic well-being
Labor productivity and economic growth will increase when what happens?
A nation invests into education for all
Which of the following BEST defines technology?
A nation's understanding of how the world works
What is the Fallacy of Composition?
A part of something dictates how the whole will act
A movement along the supply curve is caused by:
A price change.
Who could use a production possibilities curve as a model?
A production manager
What type of income tax system is currently in place at the federal level in the United States?
A progressive tax system
Define protectionism.
A protection to businesses at home through trade barriers.
What happens when actual inflation is higher than expected inflation?
A redistribution of wealth takes place between savers to borrowers
Demand-Pull Inflation is illustrated by which of the following?
A rightward shift of the aggregate demand curve
What's hyperinflation?
A rise in prices exceeding 50% per month.
Which of the following technological innovations would have the greatest impact on the natural rate of unemployment?
A set of robots that can manufacture cars without any human supervision, at the exact same level of efficiency.
Which of these BEST defined an oligopoly?
A situation in which a particular market is controlled by a small group of firms, such as the gasoline industry
How is domestic currency related to exports?
A strong domestic currency decreases exports.
Which of the following is a type of model that would be useful to a microeconomist?
A supply and demand model
command economy is
A system in which resources are allocated by a centralized, top-down authority.
Which of the following is an example of Post Hoc Ergo Propter Hoc?
A teacher claiming credit for the school's athletic performance since his arrival.
Which of the following would be considered physical capital in agriculture?
A tractor used by the farmer
The Substitution Bias is which of the following?
A weakness in the Consumer Price Index (CPI)
Which company did the Justice Department require be broken up in the early 1980s because they had become too powerful of a monopoly?
AT&T
The term for being able to make the greatest amount of a good in a given time is:
Absolute advantage
Bob is trying to start ABC Sandwich Shop. The only problem is that Bob is having a really hard time finding a deli meat provider that would give him the supplies necessary to make his sandwiches. What kind of barrier to entry is this?
Access to Suppliers and Distribution Channels
Who coined the term ''invisible hand,'' in what book, and when?
Adam Smith in The Wealth of Nations (1776)
In year one, a worker's nominal wage is $25,000, and the CPI is 100. The following year, the worker's nominal wages stay the same, but the CPI is 105. In order to calculate the worker's real wage in year two, what needs to be done?
Adjust the nominal wage by inflation
If the Federal Reserve suddenly decreases the growth rate of the money supply from 6% to 4% per year, what is likely to happen to aggregate demand and real Gross Domestic Product in the short-run?
Aggregate demand will decrease and real GDP will decline.
What does the word domestic in Gross Domestic Product refer to?
All goods and services that are produced within a nation's domestic borders.
Carlos is examining the processes Haystraw Farms uses to generate crops. He notices that the money the farm is spending and the use of labor are not maximized to produce as much crop as possible. Carlos has found a problem in the farm's _____.
Allocative efficiency
Which of the following is NOT an example of seasonal unemployment?
An economics professor in August
Identify the situation where a weak currency, or lower exchange rate, can be beneficial.
An economy coming out of recession
Which is a characteristic of economic growth?
An economy's long run potential output increases.
Which of the following is NOT an inelastic demand for a product?
An elasticity of 1.5.
Which of the following describes a natural monopoly?
An electric company that has already laid a lot of underground cables and created a power grid.
What is the 'prisoner's dilemma'?
An example of the economic concept of 'game theory'
If a shift factor of demand causes a shift of the demand curve to the right, what will most likely happen?
An increase in price and new equilibrium point.
What is the main benefit of investing in human capital?
An increase in productivity, which leads to greater economic output
Which of the following statements is true?
An increase in the U.S. demand for foreign goods and services will cause an increase in the supply of dollars.
Which of the following will most likely encourage long-run economic growth?
An increase in the per capita savings rate
According to the chart, a government imposed minimum wage of $7 will result in which of the following?
An increase in unemployment of 20 workers.
Which of the following is NOT a producer?
An unemployed college student
In year one, nominal GDP is $5,000, while real GDP is $4,500. In year two, nominal GDP is $5,500, while real GDP is $4,800. What was the growth rate of real GDP between years one and two?
Around 7%
Why do diamonds cost so much?
Artificial shortage induced by producers
How do economists illustrate stagflation?
As a decrease in the short-run aggregate supply curve.
How does the multiplier effect resemble a ripple effect through the economy?
As people spend most of their earnings, money flows through the economy one person at a time.
What does the law of demand suggest?
As prices decrease, demand increases.
The natural rate of unemployment is the rate of unemployment that coincides with which part of a graph of a labor market's supply and demand curves?
At the equilibrium point
Which of the following statements about the natural rate of unemployment is FALSE?
At the natural rate of unemployment, there is only cyclical unemployment.
Which of the following will likely increase productivity in a corporation?
Availability of influenza vaccines
When the Fed lowers the discount rate, what will happen?
Banks borrow more from the Fed, so reserves increase.
Why is the Fed referred to as 'the lender of last resort'?
Banks can always borrow directly from the Fed when other banks will not lend to them.
Why can the currency exchange rate have a large impact on the trade balance?
Because an overvalued currency can make exports less competitive.
Why does the Substitution Bias occur?
Because consumers are willing to substitute a cheaper good for another good that is more expensive
Why does internet piracy cause the supply curve to shift to the left?
Because it destroys demand for the product.
Why is rewarding risk-taking an advantage to capitalism?
Because it provides an incentive for innovation and economic growth
Why is productivity significant to economic growth?
Because nations with a higher productivity grow at a faster rate.
How does the theory of rational expectations relate future economic outcomes to the behavior of those making market decisions?
Because people are forward-looking and incorporate this into their expectations, the future tends to follow their expectations.
Why did the U.S. trade deficit start to grow in the 1990s?
Because the economy grew much faster than that of their major trading partners
Why is it likely that you will be able to easily trade financial bonds from the money market for cash?
Because they usually have short maturities and high liquidity.
Why is it NOT possible to purchase shares of General Motors on the bond market?
Because this needs to be done on the stock market.
Melissa has a choice between two jobs. The first is a job is in New York City with a salary of $90,000. The other job has a salary of $80,000 per year salary in Boise, Idaho. Let's assume that the CPI is 120 in New York, while the CPI is 100 in Boise. If Melissa wants to maximize her 'real wage', which job should she choose?
Boise, because the real wage is $5,000 higher than the real wage in New York.
Deduce the effects of having a higher exchange rate for the U.S. dollar on foreign currencies and imports.
Both foreign currencies and imports become cheaper.
Economic regulators are responsible for overseeing which of the following industries?
Both the financial sector and the utility sector
What are the main categories of investment?
Business expenditures, new residential housing, and changes in business inventories.
Which of the following statements is true regarding the relationships in a market economy?
Businesses pay wages, interest, and profits to households in exchange for use of their factors of production.
How can a normative statement be turned into a positive statement?
By adding facts and data.
How can governments encourage savings and investment?
By decreasing tax rates on savings accounts and investment income
How should a government behave in a capitalist system?
By enacting laws to ensure there is a level playing field
In a situation with two players, how do we find the Nash equilibrium.
By finding the option where each player has no incentive to change their behavior, because doing so would result in a worse outcome
In a situation with two players, how do we find the optimal solution?
By finding the option where each player has no incentive to change their behavior, because doing so would result in a worse outcome
How can the government encourage investment in human capital?
By investing in education
How do tariffs and quotas benefit a country?
By protecting domestic industries and jobs.
How can a government best establish trade barriers?
By using their legal system to limit market access.
Which two components make up the balance of payments account?
Capital/financial and current account.
Which of these industries is closest to perfect competition?
Car washes
_____ is NOT an example of a natural monopoly.
Cell phone service providers
Which of the following methods best describes how data is gathered for the monthly unemployment rate?
Census workers survey 60,000 households regarding their employment status and then extrapolate that to the rest of the country.
All of the following can cause the supply curve to shift, EXCEPT:
Changes in disposable income.
Which of the following statements is true regarding changes to the unemployment rate?
Changes to either the numerator (number of unemployed) or the denominator (total workforce) can change the unemployment rate.
_____ can often disrupt or make it difficult for domestic firms to compete in various industries.
Cheaper foreign labor
Price ceilings largely benefit:
Consumers
Ethan oversees a large company that produces a significant amount of both goods and services as well as economic profit. Which system of allocation is relevant to Ethan's situation?
Contributive standard
The Federal Reserve achieves its monetary goals by doing which of the following?
Controlling the money supply and interest rates
In a country with a command economy, people are angry because there are surpluses of snow shovels, overalls, and slow cookers, but shortages of toilet paper, canned food, and televisions. Which of the problems associated with command economic systems are they experiencing?
Coordination problem
Country A has a real GDP of $5,000 and a population of 20, while Country B has a real GDP of $20,000 and a population of 100. Which of the following statements is true?
Country A has a higher standard of living.
Country A invests 25% of GDP into human capital, while Country B invests only 9%. Which country will grow faster and why?
Country A will grow faster because it invested more into human capital
Construct Company Ltd. had to lay off quite a few workers because the company has not been able to secure enough work contracts. What type of unemployment is being described?
Cyclical unemployment
What is the term for economic output lost due to a price floor or ceiling?
Deadweight loss.
Which of the following groups of people will benefit from unexpected inflation?
Debtors
Which of the following sets of options available to a consumer seeking to make a purchase does NOT represent a market niche governed by monopolistic competition?
Deciding to purchase an iced coffee, an iced tea, or a smoothie.
Which of the following is NOT an individual cost of unemployment?
Decrease in demand
How does advertising impact the supply and demand curve?
Demand curve shifts to the right
Market equilibrium is the point where which two of the following intersect?
Demand curve; supply curve
If more Americans want to suddenly purchase goods in Mexico, what likely happens?
Demand for pesos increases, dollar falls in value compared to peso
If a new clothing brand becomes more popular because some recent movie stars endorsed the clothing line, how will it affect the market equilibrium for the clothing brand?
Demand increase, causing a new higher equilibrium price.
What happens to demand as price increases for an inelastic good?
Demand stays almost exactly the same
When aggregate demand increases faster than aggregate supply, prices go up. What is this an example of?
Demand- pull inflation
Susie lives in Arkansas and she is in the market for a new car just released by XYZ Car Company. Susie is finding out that the car is in very high demand, and she has seen the price on the car rise twice since she started shopping around. Alan lives in California and he is in the market for the new tablet released by ABC Electronics. Alan is finding out the tablet is hard to get a hold of because it is in such high demand, and the price keeps rising on the tablet at all the retailers Alan is visiting. Rachel lives in New York and she is the market for new leather jacket put out by her favorite clothing line. Rachel is realizing that this is the case for many in New York and so the cost keeps increasing for this leather jacket she wants. What is the above scenario an example of?
Demand-Pull Inflation
What happens when goods have derived demand?
Derived demand exists when demand for a good is determined by the market conditions of another good.
_____ are payments made by those in the domestic economy to purchase financial and physical assets in other countries.
Domestic investments in the foreign sector.
If the price of televisions were to fall, then how would the market be affected?
Downward pressure on supply, and increased quantity demanded.
Why might a company have a perfectly inelastic supply?
Due to a lack of inputs, supply cannot be increased.
Why does Saudi Arabia have a large trade surplus?
Due to the fact that they have over 20% of the world's petroleum reserves
Which of the following statements is FALSE regarding inflation?
During the 1970's, it was extremely low.
Which of the following BEST explains sustainable economic growth?
Economic growth that can be sustained with minimally adverse effects on the environment.
Economy A has a comparative advantage over Economy B. What is the reason for this?
Economy A has a lower opportunity cost.
Which of these government administrators is behaving in a way that exemplifies the problem of moral hazard in a command economic system?
Eloisa, who uses her position to manipulate the distribution of bread so that she can profit from it.
Which of the following BEST describes the intersection between supply and demand?
Equilibrium
Monetarism is the economic viewpoint that states which of the following?
Excessive expansion of the money supply leads to inflation.
Which of the following would likely cause an increase in demand for a good?
Expectations that the price of the good may increase dramatically in the future.
Which one of the following is NOT a characteristic of capitalism?
Extensive government planning
Which of the following statements about the financial/capital account is NOT true?
Financial account surpluses to offset foreign trade deficits are always a good thing.
Which of the following is NOT one of the five requirements for a perfectly competitive market?
Firms sell differentiated products.
Which of the following statements regarding an exchange rate is not true?
Fixed exchange rates are determined by supply and demand forces.
When the central bank raises the reserve ratio from 20% to 25%, how does the multiplier change?
From 5 to 4
Which of the following does NOT impact the trade balance of a country?
GDP
Which if the following is considered the best measure of changes in prices by economists?
GDP deflator
Why is gasoline an inelastic product?
Gasoline is an inelastic product because people are dependent on traveling to their work and moving products all over the country.
All of these are common topics studied in microeconomics, EXCEPT:
Globalization
Which of the following would be included in the GDP?
Goods that are produced by foreigners within the domestic borders of a nation.
Which of the following metrics is used when calculating GDP using the expenditure approach?
Government purchases
Elasticity of demand is said to be elastic when elasticity is:
Greater than 1.
_____ refers to the total amount of goods and services are produced within the economy.
Gross domestic product
What is the definition of GDP?
Gross domestic product: The total value of all goods and services produced in a country in a given year (or other time period).
In economics, the term investment refers to what?
Gross private domestic investment
Why is the Economic Man a flawed model of human behavior?
He lacks humanity.
Who used utility to transform car manufacturing?
Henry Ford
How does inflation make an economy inefficient?
High inflation can quickly destroy an economy.
Which of the following will most likely occur as a result of an increase in labor productivity?
Higher economic output and lower inflation.
According to the quantity theory of money, increasing the money supply will lead to what?
Higher economic output in the short-run and inflation in the long-run
Consider a scenario where there has been a decrease in the exchange rate of the American dollar. How will the inflation and import prices vary?
Higher inflation and higher import prices
Which of the following is NOT a benefit of applying the efficiency wage theory?
Higher turnover
Which of these probably has inversely proportional derived demand to hamburger patties?
Hot dogs
Which of the following does the cross price elasticity of demand between two goods NOT tell us?
How an income change will influence demand for each product.
Which of the following statements BEST explains the velocity of money?
How many times a single dollar is spent, or turned over within a certain time period
If GDP is calculated by both the expenditure approach and the income approach, what will be the difference in the end values?
If calculated correctly, there is no difference between GDP calculated using the expenditure approach or the income approach.
What are goods that are produced in a foreign country but sold in a home country called?
Imports
Why do governments impose minimum wages?
In order to help unskilled workers pay the bills.
If the Federal Reserve lowers reserve requirements, nominal GDP will most likely do which of the following?
Increase
If a shoe store was running a big sale over the weekend, what would they be hoping to do?
Increase quantity demanded
What will the purchase of government bonds from the public in the open market by the central bank do?
Increase the money supply
If a seller knows that the demand for his good or service is inelastic, then what would they most likely do?
Increase the price.
Which of the following is NOT an effect of a trust?
Increased consumer confidence
Which of the following is an example of causation?
Increased consumption of hot chocolate during cold weather
Which of the following allows us to cope with scarcity of resources?
Increased efficiency, or getting more outputs from the same inputs.
Which of the following was NOT a benefit of destroying 'Ma Bell'?
Increased market share for AT&T
Which of the following is a cause of Cost-Push Inflation?
Increases in the costs to produce
Which of the following is NOT a likely result of a prolonged rate of unemployment?
Increasing support for free trade
Which of the following does NOT influence the trade deficit or surplus a country experiences?
Individual retirement account balances
When quantity demand for product drops when incomes goes up, the product is a(n) _____.
Inferior good
A retired woman lives entirely on Social Security income, while a farmer borrows money to buy a new tractor. How would inflation affect them?
Inflation helps the farmer but hurts the retiree
The quantity theory of money describes the relationship between what fiscal components?
Inflation, the money supply, real output, and prices.
What does the circular flow model of the economy illustrate?
Injections and leakages that take place in the economy.
Which of the following statements is NOT true regarding investment?
Investment refers to purchases of stocks, bonds, or mutual funds.
Which of the following is MOST likely to produce higher economic growth in the long run?
Investment tax credits
Which of the following is FALSE regarding the productivity of a nation?
It cannot be increased because of rising prices.
What is the major drawback of using nominal GDP to measure the economic output of a nation?
It creates a false impression of the amount of output taking place from one year to the next because of the change in prices
Last year, an assembly-line worker earned $10 per hour when the Consumer Price Index (CPI) is 100. This year, the same worker earned $12 per hour, but the CPI has increased to 125. What happened to the worker's real wage?
It decreased.
What is true about contractionary monetary or fiscal policy?
It decreases our income, decreases our demand for imports, and increases the exchange rate.
When savings leaks out of the circular flow model, what happens to it?
It flows to borrowers who then inject it back into the economy.
Why does the Federal Reserve require commercial banks to maintain reserves with them?
It gives the Federal Reserve more control over the money supply and interest rates.
Predict the effect on the exchange rate when the Federal Reserve uses monetary policy to increase income or available money.
It increases demand for foreign currencies and lowers exchange rate.
In a fractional reserve banking system, how does a decrease in reserve requirements affect the money supply?
It increases the money multiplier and the money supply.
Why is physical capital important to an economy?
It increases the productivity of goods and services.
Why is fiscal policy important for the economy?
It influences aggregate demand.
Why do many think of normative economics as subjective?
It is based on opinions.
Which of the following is a characteristic of the income elasticity of demand?
It is between 0 and 1 for necessities
Why might a government decide to grant a monopoly in a heavily regulated industry?
It is cheaper to regulate only one company and ensure it acts in a business-friendly fashion.
Why does frictional unemployment occur in the workforce?
It is due to normal turnover in the labor market and the time it takes for workers for find new jobs
Which of the following statements is FALSE about long run economic growth?
It is illustrated as a rightward shift in the short-run aggregate supply curve.
How is investment, in economics, related to spending?
It is more concerned with business spending than consumer spending.
Why is the GDP deflator considered superior to the consumer price index?
It is not based on a fixed basket of goods.
Which of the following statements is true regarding a minimum wage?
It is set above the market wage.
Which of the following is an inaccurate description of The Federal Reserve?
It is the US mint.
Which of the following statements is FALSE regarding the discount rate?
It is the rate that banks charge to other banks when they need more reserves.
Which of the following is FALSE regarding the Federal Reserve?
It issues debit cards.
Which of the following statements is FALSE regarding the Substitution Bias?
It leads to an understatement in inflation.
Which of the following statements is NOT true regarding the expenditure approach?
It measures the total income earned by households.
Which of the following is true when using the income approach to measure GDP?
It measures total income earned by all households in a nation.
What is the benefit of using Real GDP?
It removes the effect of rising prices.
What is the value of using real GDP?
It removes the effects of rising prices.
How is labor productivity, measured as output per worker, affected by economic drivers?
It rises with increases in technology.
Why is the balance of payments useful for understanding the state of the economy?
It shows all the inflows and outflows of the economy.
Nominal GDP in year one was $16,000, while nominal GDP in year two was $19,320. Real GDP was $16,000 in year one and $15,500 in year two. What does this indicate about the economy?
It was in recession.
How did increased regulation impact the mortgage market after 2008?
It was more difficult for consumers to get mortgages.
What happens when a computer gets produced this year and distributed to a retail store's inventory?
It will be counted as an investment until it is sold.
When the reserve requirement is 20% and banks hold no excess reserves, how will an open market sale of $500,000 of government securities by the Fed affect money supply?
It will decrease the money supply by up to $2.5 million.
Susie Smith is a celebrity who is famous for her fashion advice. She recently wore a scarf and spoke publicly about how much she liked it. What is likely to happen to the supply of that scarf and why?
It will increase, because as the demand for a product increases, the supply increases.
Which is TRUE of the market value of an intermediate good?
It will not be counted in the GDP because it is not a final good.
How would we describe a supply surplus in terms of supply and demand?
It's when supply exceeds demand.
The same pair of shoes can be imported from different countries. The prices of the shoes in Japan, Mexico, England, and India are 3330 Yen, 646 Pesos, 28 Pound Sterling, and 2535 Rupees respectively. The exchange rates are 111 Yen, 17 Pesos, 0.8 Pound Sterling and 65 Rupees to 1 U.S. dollar. The cheapest pair of shoes can be purchased from:
Japan
If the American dollar rose in value in relation to the Japanese Yen, what would likely be the effect?
Japanese goods and services will be relatively cheaper for Americans
Which of the following individuals would be counted as unemployed?
Jennifer, who is about to start a new job
If Jim can make 40 chocolates in one hour and Kate can make 20 chocolates in that same hour, who has the absolute advantage?
Jim
Jim owns a custom printing business. According to the theory of rational expectations, how would he reach a decision about whether to expand his business in the next year?
Jim will use his past experiences along with all information available to him.
If Jim can make 40 chocolates or 2 cakes in one hour, and Kate can make 20 chocolates or 2 cakes in one hour, who has the comparative advantage in cake-making and why?
Kate, because making one cake costs 10 chocolates.
You are overseeing the construction of buildings on an island. Why would you want to build high-rises?
Land is very scarce but air space is not.
Which of the following is NOT a subject in the study in macroeconomics?
Local real estate
Which of the following is an example of a regressive tax?
Lottery tickets
How does an increase in the money supply impact economic output within the US economy?
Lower interest rates encourage additional borrowing and investment, leading to higher aggregate demand.
Which of the following is the correct formulation of the equation of exchange?
M x V = P x Y
Select the person who is considered as being unemployed.
Maggie, who is a university graduate looking for a full-time job.
Which of the following scenarios would be included when calculating the GDP?
Margie buys a new set of sunglasses that were made in the US.
What is the term used to describe the way the behavior of buyers and sellers affects the level of prices for goods and services, without government interference?
Market Forces
When the pressure for higher prices is exactly matched by a pressure for lower prices, a state of _____ has been reached.
Market equilibrium
_____ is when the amount of goods or services sought by buyers is equal to the amount of goods or services produced by sellers.
Market equilibrium
Which of the following workers is MOST likely to be classified as structurally unemployed?
Matt, an unemployed worker whose skills are now obsolete.
What are some of the objectives of the Fed?
Maximize employment, stabilize prices, and moderate interest rates
What is the primary difference between microeconomics and macroeconomics?
Microeconomics looks at scarcity for companies, while macroeconomics looks at it for entire economies.
_____ is the study of business and consumers, while _____ is the study of the economy as a whole.
Microeconomics; macroeconomics
Governments often impose minimum wages in order to help unskilled workers. Which of the following statements is true?
Minimum wages increase unemployment.
How is savings directly connected to economic growth?
Money in savings accounts gets loaned out to businesses who invest into the economy.
What are subsidies?
Money that's paid directly to producers to encourage the production of certain goods.
Jeb is starting up a restaurant, and he's trying to decide how much to pay his servers. He knows that the market-clearing wage for servers is $10 per hour. According to efficiency wage theory, how much should he pay them? Why?
More than $10 per hour, in order to motivate his servers to work harder and stay with the company longer.
How is nominal GDP calculated?
Multiplying price x quantity in the same year for every good and finding the total.
How is real GDP calculated?
Multiplying the quantity x the price in a base year.
What is the accounting methodology used to calculate the GDP, regardless of the approach used?
National income accounting
When quantity demand stays the same while income drops, what kind of product is it?
Necessity
Odetta is a middle-aged woman who is disabled and on a fixed income. Which standard of allocation is relevant to her situation?
Needs standard
While there are fictitious examples of game theory, which of the following is a good example of game theory in the real-world?
Negotiating a strike or other union action
How do governments plan for greater consumer demand?
New roads
Which country did not make use of utility to build its road network in the 1970s?
Nigeria
Rachel manages a box factory and just hired Franco. Does Franco count as physical capital?
No; he is considered human capital.
In year one, nominal GDP is $5,000, while real GDP is $4,500. In year two, nominal GDP is $5,500, while real GDP is $4,800. Which of the following statements is TRUE?
Nominal GDP increased more than real GDP.
The velocity of money is a ratio of what quantities?
Nominal GDP to a measure of the money supply
When economists want to measure current production of an economy at current prices, they use which of the following?
Nominal gross domestic product
Using the chart below, which statement is true regarding wages over the three year period? YEAR: CPI: Nominal Wage: 1 100 40,000 2 110 50,000 3 125 50,000
Nominal wages rose, while real wages stayed the same.
The purchases and sales of government securities in the open market by the Federal Reserve are referred to as which of the following?
Open market operations
Which of the following does positive economics NOT rely on?
Opinions
Mark has $15 that he wants to spend on something that entertains him. He was planning to buy a book with this money, but then he decided to watch a new movie with this money. The fact that Mark cannot read the book because he opted for the film is an example of _____.
Opportunity cost
The Consumer Price Index (CPI) is based on a fixed basket of goods that the average citizen buys. The Substitution Bias causes this index to do which of the following?
Overstate the level of inflation
Which one of the following groups of people are NOT taken into consideration when calculating unemployment rates?
People not working and not looking for work
Which of the following would be negatively affected from unanticipated inflation?
People that own investments that pay a fixed rate of interest, such as bonds
Which of the following is an example of a good that may not be fully elastic in the long-term?
Petroleum
Economists call the equipment and structures used to produce goods and services:
Physical capital
Which of the following statements is TRUE?
Price elasticity of supply tends to be more inelastic in the short-term than in the long-term.
Bob is looking for a job, but he lacks the credentials to get a specialized job with a high starting salary. It is likely he will have to start working in an entry level position. Which of the following would benefit Bob in this scenario?
Price floor.
Which of the following is true if competitors in an oligopoly try to beat each other with lower prices?
Price war occurs, and it is not good for consumers because it ultimately limits competition.
Which of the following economic problems is NOT associated with a command system of economics?
Prices are determined by what consumers are willing to pay, so some consumers won't be able to afford certain goods and services.
What does the 'perfect' in 'perfect competition' describe?
Prices are perfect, meaning they are in equilibrium at a point that is both the highest consumers are willing to pay and the lowest producers are willing to sell.
Which of the following statements describes how prices work under monopolistic competition?
Prices are set by producers.
If Mary's nominal income rises by 4%, while her real income fell by 2%, what happens to the level of prices?
Prices increase by 6%.
If nominal GDP increased by 5.1% and real GDP increased by 2.5% last year, which of the following is TRUE?
Prices went up during the year.
Which functions does the Economic Man fulfill in an economy?
Producer and Consumer
Ebay's success represents which of the following barriers to entry for another company in the same space?
Product differentiation
n the long run, what is a country's standard of living dependent on?
Productivity
Which of the following statements about goods and services in a monopolistic competition is TRUE?
Products and services produced by different firms in the industry are different in some way other than just price.
If the United States radically overhauled the tax code and established a flat tax, what type of tax structure would it have?
Proportional tax
What are the two reasons that economic output can increase?
Quantity increased and prices increased.
_____ refers to a specific quantity offered for sale at a specific price.
Quantity supplied
According to the quantity theory of money, an increase in the money supply results in an increase in which of the following?
Real GDP
Why is real GDP a poor indicator of economic growth?
Real GDP is a short run measure, and economic growth is a long run potential.
Which one of the following scenarios would cause a nation's standard of living to increase?
Real GDP rises faster than the population.
How will an increase in national saving affect the real interest rate and therefore investment?
Real interest rate will fall and investment will rise.
Which of the following is FALSE regarding real interest rates?
Real interest rates are determined in the money market
When economists estimate Gross Domestic Product using the income approach, which types of income are included?
Rent, wages, interest, and profit.
What is the term for determining how resources are used?
Resource allocation
What is directly connected with borrowing for private investment in the market for loanable funds?
Savings
Which of the following represents the basic concept of economics?
Scarcity exists and utility is a reliable measure of how useful something is to someone.
Which of these is often acceptable to increase utility?
Short- term loss
When demand for a product is greater than supply, a _____ exists and there is _____ pressure on prices.
Shortage; upward
Which of the following best summarizes the infant industry argument?
Small and newer domestic industries may need trade protection
If a large amount of existent infrastructure is required to run a particular kind of business, we would expect all of the following effects EXCEPT:
Smaller businesses competing with the monopoly would coalesce into one single competitor.
What occurs when the rate of unemployment goes up at the same time as inflation?
Stagflation
What was the largest company to be busted by the Sherman Antitrust Act of 1890?
Standard Oil
Which of these institutions has the authority to levy taxes in the United States?
State governments
If Anytown, USA has a high unemployment rate but also has a large number of unfilled computer programming jobs, what type of unemployment are they suffering from?
Structural unemployment
You have an economics test tomorrow that you would like to pass. Which of the following activities has the greatest utility?
Studying economics
_____ is an amount of money paid directly to domestic producers to make them more competitive with foreign imports.
Subsidy
_____ refers to the various quantities offered for sale at various prices.
Supply
What determines the price of a good or service in a capitalistic economy?
Supply and demand
On the supply and demand graph, what is the term for the area above the market equilibrium line?
Surplus
Which one of the following is a negative effect of efficiency wage theory?
Surplus of labor
Which of the following gives an example of utility changing depending on the circumstances?
Take-out that is good enough for your friend may not make the impression you want on your date.
Identify the scenario where there is NO embargo.
Tariffs on Japanese cars
What effect do taxes levied at the federal and state levels have on consumer prices?
Taxes cause prices to increase.
Which of the following is a normative statement?
Taxes should be higher.
What economic problem occurred in 2008 that led to the passage of the Dodd-Frank Act?
The Great Recession
What prevailing economy theory was the theory of rational expectations developed to counter?
The Keynesian theory that promotes government intervention in the economy.
If U.S. exports to Japan increased, what most likely happened?
The U.S. dollar decreased in value compared to the Japanese Yen.
What happened if the rate of inflation as reported by the Consumer Price Index is 3%?
The actual rate of inflation may be lower because of the Substitution Effect.
Which of the following is necessary to be able to identify the Nash equilibrium?
The available actions of each player in the game
If the Consumer Price Index rises from 101 to 104, which of the following statements is true?
The average level of prices for a fixed basket of goods and services rises by 3%.
Which of the following statements BEST explains how a high velocity of monetary exchange effects the economy?
The changes in the money supply will have a greater effect on nominal GDP
Why do most economists not subscribe to the classical theory of unemployment?
The classical theory of unemployment views employment as theoretically possible, while most economists think that an unemployment rate of zero is unobtainable over the long term.
What is the correct answer in the prisoner's dilemma?
The correct answer is unknown without knowing the other player's decision.
When a firm is determining whether or not to relocate a factory, which of the following is of the MOST use?
The cost per unit produced.
When consumers change their personal income, populations change, or the price of a substitute good changes, what happens to the demand curve?
The demand curve shifts to an entire new demand line.
What is the interest rate that the Federal Reserve charges on loans it makes to member banks called?
The discount rate.
What is game theory?
The economic concept that attempts to identify the optimal decision for one decision maker when another player's unknown selection impacts the original decision maker's results.
What is human capital?
The education and experience of the labor force
Human capital refers to which of the following?
The education and experience of the labor force.
Why can a natural monopoly be advantageous for consumers?
The efficiency results in lower average costs for the consumer.
What is the biggest risk associated with monopolies?
The entity with complete market share could increase prices as high as they wanted, since consumers would have nowhere else to go.
How would buying or selling government bonds affect the federal funds rate, if it was the government that initiated the sale?
The government uses the sales of securities to change the money supply, thus changing the federal funds rate.
What happens when the government provides a tax incentive for businesses to invest?
The increased investment leads higher demand for loanable funds.
On a normal demand curve, if we know an individual will demand five units of a good when the good is priced at $5, what statement is MOST LIKELY true if the price of the good changes to $4?
The individual will purchase more units of the good.
Which of the following is a barrier to entry?
The insurance industry has special licensing requirements for those selling insurance.
Which of the following accurately describes the discount rate?
The interest rate member banks pay when they borrow directly from the Fed.
If all other factors remain equal, what would happen to interest rates when the amount of money circulating in the economy is increased?
The interest rate would decline.
Which of the following best describes the function of the invisible hand?
The invisible hand sends signals between producers and consumers that result in optimum prices and supply levels.
Why might a national wheat plague cause cost-push inflation?
The lack of wheat will make common items more expensive.
As Rosa considers where to build her new bakery, she also factors in the number of other bake shops in the area. If she builds in an area where she is one of many bakeries, she will be forced to charge lower prices in order to compete with the other bakeries already in the neighborhood. This is an example of which economic theory?
The law of supply and demand
How do barriers to entry affect the number of producers in an industry?
The lower the barriers to entry, the more producers there will be.
What is the natural rate of unemployment?
The lowest sustainable rate of unemployment over a long period of time.
How are the market and individual demand curves related?
The market demand curve is the sum of all individual demand curves.
If a high tariff is imposed on a specific brand of handbags coming from France, what is a likely effect of this action?
The market will be flooded with fake, black market handbags bearing the same name at lower prices.
How does the precision of inputs affect a model?
The model becomes more accurate.
Why do economists designing new models to test economic ideas often fall victim to bias?
The model is specified based on what the economist hopes to find.
Cross price elasticity of demand is equal to the percentage change in quantity demanded for Product A, divided by:
The percentage change in price of product B.
In the short run, economic growth is measured in terms of which of the following?
The percentage change in real GDP
What is market equilibrium?
The point at which supply meets demand.
How does price elasticity of demand and cross price elasticity of demand differ?
The price elasticity of demand measures how responsive the quantity demanded for a good is in response to a change in the good's own price, while the cross price elasticity of demand measures how responsive the quantity demanded for a good is in response to a change in the price of another good.
If the rate of economic output, measured in real GDP, outpaces the rate of change in the money supply, then how is the price level affected?
The price level will decrease.
If the supply curve shifts to the left, what most likely happened?
The price of input costs increased.
All of the following situations could lead to a natural monopoly EXCEPT:
The product is relatively easy to make.
What is the reserve requirement?
The proportion of customer deposits a bank is required to hold in reserve.
How is an individual demand curve created?
The quantity of an item a person is willing to buy is plotted along with the price of the item.
Bob sees a tablet for sale at the electronics store that he has seen before, but now the price is higher. According to the law of supply, what will happen, assuming all other factors are held constant?
The quantity of tablets supplied will increase.
What is the prime rate?
The rate banks charge to their best customers.
According to the equation of exchange, which of the following usually has the largest impact on inflation?
The rate in change of the money supply
What is the most important determinant of saving?
The real interest rate
What is the definition of utility?
The real value of something in its usefulness, not anything implicit.
What is one difference between a game theory decision and other strategic business decisions?
The results of a game theory decision are directly influenced by the decisions of another party.
What does income elasticity of demand show us?
The sensitivity of changes in income on quantity demanded for products and services
Why would the revenue of a singer from the United States that held a concert abroad not included in the U.S. GDP?
The service happened outside of the U.S.
Which of the following is an ethereal added utility to a consumer?
The smell of espresso
What is economics?
The study of a society's allocation of resources
Which of these is the BEST definition of microeconomics?
The study of how individuals and businesses behave and make decisions based on limited resources
How is a supply and demand graph affected by a supply surplus?
The supply curve moves to the right.
How does innovation impact the supply and demand curve?
The supply curve shifts to the right.
Over the course of a summer, New Hampshire experiences a shortage of potatoes. How will the supply and demand graph for potatoes be affected in this state?
The supply curve will move to the left.
When the labor market is in equilibrium, how does labor affect other economic drivers?
The supply of labor is equal to the demand for labor.
What happens if the Federal Reserve sells a large amount of government securities in the open market?
The total amount of loans in the banking system will decrease.
What will happen if the Federal Reserve sells a significant amount of government securities in the open market?
The total amount of loans made by commercial banks will decrease.
What is the nominal gross domestic product?
The total market value of goods and services produced, measured in current dollars.
What is the utility of a good?
The total usefulness it has for someone.
If the cross price elasticity between apples and oranges is 2, which is correct?
The two goods are substitutes, and a price increase in one good will cause an increase in the quantity demanded of the other.
Whom was Economic Man invented to portray?
The typical human
If discouraged workers were actually counted in the unemployment rate:
The unemployment rate would be higher.
Economists define Real GDP per capita as which of the following?
The value of economic output of a nation divided by the population
Which president had a reputation as a trust-buster?
Theodore Roosevelt
Why is it possible for an economic model to fail?
There are various inputs that economist can not control such as the weather or the actions of others.
In economics, scarcity means that:
There is a finite amount of resources.
According to Okun's law, how are employment and GNP related?
There is a positive relationship between them.
Why are surpluses and shortages bad?
They are inefficient.
How do quotas and tariffs impact the supply of goods available to consumers and domestic prices in general?
They decrease the supply of goods and increase prices.
Which of the following statements is FALSE about the monetary tools of the Federal Reserve?
They include changing tariffs on imported goods.
How does the idea of utility influence producers in the products they create for consumers?
They know they must create useful products because utility states that consumers will always pay for things which give them the most use.
Why are product shortages normally a bad thing for economic markets?
They mean that the economy is not working at full efficiency.
Why was American Telephone and Telegraph able to remain a trust as late as the 1980's?
They monopolized use of their long-distance phone lines.
Why do banks choose to borrow directly from the Fed?
They need additional reserves and cannot borrow from other banks.
Why are capital flows significant for an economy?
They represent money sent from overseas in order to pay for foreign goods and invest in markets.
For the last year, the rate of unemployment has been above the natural rate for the labor market. How does this affect labor costs?
They tend to be less expensive than when unemployment is at its natural rate.
How do trade barriers affect supply and price of a good?
They will cause the price to increase while causing a decrease in supply.
How can a fiscal policy affect exchange rates?
Through interest rate, income, and price level effect
How can government overspending cause hyperinflation?
To cover the costs of the overspending, the government borrows from a central bank, which causes the money supply to rise, making the money worth less.
Why is research and development significant?
To discover new knowledge for the purpose of developing new products or processes.
Why are protectionist strategies used in trade restrictions?
To restrict importations of goods or services from foreign countries.
What is the primary purpose of economic models?
To show a direction of movement.
Why is outsourcing often used?
To take advantage of lower labor costs in foreign countries.
Why are models used?
To visualize multiple inputs
Which of the following is FALSE concerning trade?
Trade surplus in the U.S. started in 1975
What theory seeks to explain that individuals who act in their own self-interest might deplete a common resource important to a whole group of people?
Tragedy of the commons
How can the rational expectations theory be applied to the labor market and the government's role in employment levels?
Unemployment levels will find a natural equilibrium, government actions to reduce these levels will lead to higher prices.
Which of the following are NOT common types of barrier to entry in economics
Unskilled jobs and free enterprise
Why do economists use real GDP?
Using nominal GDP can create a false impression of the amount of output happening in the economy from one year to another.
Which one of the following pursuits will the Economic Man always pursue as a consumer?
Utility
Why would a company ever consider utility if it meant a significant up front cost or short-term loss of profits?
Utility may improve efficiency in your company in the long-term which will increase the potential profit ceiling compared to what it was in a lower efficiency process.
Which of the following is NOT a component of the current account?
Value of personal savings accounts
Which of the following individuals is structurally unemployed?
Wanda, who picks berries at a farm over the summers.
Why is unemployment a significant concern for businesses?
We live in a consumption-based economy.
The Fed's monetary policy has the greatest effect on real Gross Domestic Product under what set of conditions?
When interest rates are low and the interest rate has a large effect on investment spending.
When does investment demand increase?
When investors are more optimistic about the future
According to rational expectations theory, if the government or the central bank work actively to increase GDP what will be the end result?
When people discover that the government or central bank intends to act, they will change their behavior and raise their prices accordingly.
When is a good considered to have an elastic supply?
When the percentage change in quantity supplied is greater than the percentage change in price.
The Bureau of Labor Statistics categorizes an individual as unemployed if they are:
Without a job but looking for work
Which is the best example of a regional monopoly?
a power company
Last year, the Consumer Price Index (CPI) was 120, and Bob's household earned $80,000. Assuming this year's CPI is 130, what would Bob's household need to earn in order to have the same purchasing power as last year?
about $87,000
A binding price floor is _____ the market equilibrium point.
above
When are exchange rates determined by demand and supply forces?
always
Which of the following is NOT a variable that influences net exports?
balance of trade
A binding price ceiling line is _____ the market equilibrium point.
below
Which of the following is an example of a financial market?
capital market
Which of the following industries is best described as a national oligopoly?
cell phone providers
What does the Consumer Price Index measure?
changes in the price level of an economy
Which of these countries provides a current or historical example of a command system of economics?
china
If you needed to increase the GDP, why might you focus on consumption to do this?
consumption is the largest share.
Real GDP evaluates _____ production at _____ prices.
current; past
Derek was working in construction when the housing bubble burst following the 2008 financial crisis. The demand for new construction declined, and Derek lost his job. This scenario is an example of which type of unemployment?
cyclical
When expansionary monetary policy leads to a decrease in interest rates, the exchange rate _____.
decreases
What is the rate at which one currency is converted in another called?
exchange rate
Which of the following is an injection into the circular flow model?
exports
Which exchange rate would most likely be used for a good or service that will be delivered at a future date?
forward
The prisoner's dilemma is a common example of what economic theory?
game theory
_____ describes the economic concept of making strategic plans based on anticipations of competitors' actions.
game theory
What controls exist to help discourage monopolies in the U.S. economy?
government regulations
What is most likely to happen with a strong dollar?
higher imports
When actual unemployment falls below the natural rate, that LIKELY results in _____.
higher inflation
Cost-push inflation occurs when _____.
higher production costs push up prices
All of the following impacts the velocity of money except
how many years ago the currency was printed
Unexpectedly high inflation _____ savers and _____ borrowers.
hurts; helps
Which of the following is NOT a valid exchange medium for factors of production?
imports
What would you expect if there is an increase in exchange rate?
imports get cheaper
All of the following are types of exchange rates that countries can use, except:
infinite
Bribery can be _____, but of course is illegal.
innovative
Tommy's Tweezers has had a change in inventory, increasing by 100,000. What component of the GDP would this affect?
investment
All of the following are true, EXCEPT that the current account _____.
is also known as the capital account
How does efficiency wage theory generally affect a company's turnover rate?
it decreases
Identify the agency of the U.S. government that is required to approve all proposed mergers and acquisitions.
justice department
Which of the following metrics is used when calculating GDP using the income approach?
labor and wages
What are the factors of production?
land, labor, capital, entrepreneurship
The word comfortable meaning different things to different people is an example of _____.
loaded terminology
What do we call the wage that occurs when labor supplied equals labor demanded?
market-clearing wage
One of the biggest capital markets is the stock market which is associated with all of the following except
money markets
Which of the following is NOT associated with foreign trade?
mutual funds
admit opinions and feelings
normative analysis
When calculating GDP, transfer payments are:
not counted in the GDP
In terms of economics, barriers to entry are _____.
obstacles that make it difficult to enter a particular industry or field
Which of the following is NOT an example of physical capital?
patents
Governments have sought to limit the supply of drugs with all of the following strategies, EXCEPT:
placing caps on production.
focus solely on facts
positive analysis
Movement along the supply and demand curve is caused by changes in the quantity demanded or quantity supplied as a result of _____ changes.
price
Which of the following is NOT a determinant of the productivity of a nation?
price controls
The CEOs of Verizon, AT&T, T-Mobile, and Sprint are out golfing. The CEO of Sprint suggests a plan where they all offer cell plans that have different levels of data, minutes, and texts, but that when compared, they all cost the same. What is the CEO suggesting?
price fixing
A _____ sets a numerical limit on how much of a product can be imported into a country.
quota
In order to adjust a nominal interest rate for inflation, which of the following formula should be used?
r = n - i
One way to create new technologies is by investing into _____.
research & development
Economists maintain that _____ is central to the actions of individuals, families and companies.
scarcity
The goods markets are the life force of the economy and encompasses all of the following except
stocks and bonds
When the American dollar buys more than its equivalent in another currency, it is considered to be _____ the other currency.
strong compared to
Mary Beth ran a local newspaper business. She found that fewer people were purchasing the local paper since they were able to conveniently access the news online via their computers and smart phones. Mary Beth's business was no longer making a profit, and she was forced to close its doors. This led to people losing their jobs, such as journalists, printers, and newspaper delivery boys. This is an example of _____.
structural unemployment
A _____ is a tax imposed by the government on imports coming into a country.
tariff
As a market structure, monopolistic competition offers goods and services _____.
that do not have substitutes outside the industry
Game theory is the idea that the results of one, or more, players' decisions are based on _____.
the behaviors or choices of other players
Economists describe an economy that is at the natural rate of unemployment as _____.
the full employment level of output
Hyperinflation is usually associated with:
the growth rate of the money supply
What are the two methods economists use to measure Gross Domestic Product (GDP)?
the income and expenditure approach
If the unemployment rate rose from 5% to 7%, but more people were employed, what likely occurred?
the population grew at a faster rate than the number of employed people did.
If the consumer price index is equal to 100 in year 1, and 103 in year 2, what does this mean?
the prices have risen by 3 percent.
Economists use the _____ to explain the link between inflation and the money supply.
the quantity theory of money
What does the GDP deflator represent?
the ratio of nominal GDP to real GDP
An increase in the value of a domestic currency will mainly affect _____.
trade deficit
Tariffs and quotas can also be referred to as _____.
trade restrictions
When there is excess demand or a shortage of goods and services, this puts _____ pressure on prices.
upward
The supply curve is _____ sloping, which means that _____ of a good will be supplied at higher prices.
upward; more
When deciding to buy a home instead of renting an apartment, you are demonstrating that the extra expense is worth the amount of _____.
utility
The rate at which money is moved around an economy is known as the _____.
velocity of money
Which of the following would NOT be included in consumption?
welfare checks received