Economics final review

Dr T Nuwal an economics professor, decided to take a year off from teaching to run a commercial fishing boat in alaska. that year, dr.nuwal would be officially counted as:

employed

the labor force includes

employed workers and persons who are officially enemployed

the amount that a commercial bank can lend is determined by its:

excess reserves

net export:

exports less imports

economic resources are also called:

factors of production

most modern banking systems are based on:

fractional reserves

search unemployment and wait unemployment are types of

frictional unemployment

a nation'g gross domestic product (GDP):

is the dollar value of the total output produced within the borders of the nation

which of the fallowing is not part of the m2 money supply? a) money market mutual fund balances b) money market deposit accounts c) currency d) large (100,000 or more) time deposits

large (100,000 or more) time deposits

the rate of inflation can be found by subtracting

last years price index from this years price index and dividing the difference by last years price index

ideally, value judgements are involved at the:

level of policy only

currency in circulation is part of:

m1, m2, and m3

the problems of aggregate inflation and unemployment are:

major topics of macroeconomics

the presence of discouraged workers:

may cause the official unemployment rate to understate the amount of unemployment

the transactions demand for money is most closely related to money functioning as a:

medium of exchange

the GDP is the:

monetary value of all final goods and services produced within a nation in a particular year

fiat money is:

money because the government asserts that it is

the demand for most products varies directly with changes in consumer incomes. such products are known as:

normal goods

credit card balances are:

not a component of m1, m2, and m3

when the reserve requirement is increased:

the excess reserves of member banks are reduced

in calculating GDP, governmental transfer payments, such as social security of unemployment compenstation are:

not counted

anne kasperson works in her own home as a full-time caretaker and homemaker. officially, she is:

not in the labor force

demand-pull inflation

occurs when total spending exceeds the economy's ability to provide output at the existing price level

the term "ceteris paribus" means:

other things equal

the unemployment rate is the:

percentage of the labor force which is out of work

the scarcity problem:

persists because economic wanted exceed availible productive resources

"economics is concerned with using scarce productive resources efficiently in attempting to satisfy society's material wants." this statement is:

positive and correct

the demand curve shows the relationship between:

price and quantity demanded

the law of demand states that:

price and quantity demanded are inversely related

inflation means that:

prices in the aggregate are rising, although some particular prices may be falling

tom atoe grows tomatoes for home consumption. this activity is:

productive but is excluded from GDP becuase no market transaction occurs

the primary purpose of the legal reserve requirement is to:

provide a means by which the monetary authorities can influence the lending ability of commercial banks

a $200 price tag on a cashmere sweater in a department store window is an example of money functioning as a:

unit of account

with an MPS of .4, the MPC will be..

1.0 minus .4

if the price index rises from 100 to 120, the value of the dollar will fall by:

1/6th

if the consumer price index rises from 300 to 333 in a particular year, the rate of inflation in that year is:

11 percent

the consumer price index was 166.6 in 1999 and 172.2 in 2000. therefore, the rate of inflation in 2000 was about:

3.4 percent

the paper money used in the United States is:

Federal Reserve Notes

suppose the total market value of all final goods and services produced in a partlicular country in 2001 is $500 billion and the total market value of final goods and services sold is $450 billion. we can conclude that:

GDP in 2001 is $500 billion

if you write a check on a bank to purchase a used honda civic, you are using money primarily as:

a medium of exchange

net export are negative when:

a nation's imports exceed its exports

cost-push inflation may be caused by:

a negative supply shock

a college graduate using the summer following graduation to search for a job would best be classified as:

a part of frictional unemployment

money functions as:

a store of value, a unit of account, a medium of exchange.. ect

if ben's MPC is .80, this means that he will:

spend eight-tenths of any increase in his disposable income

Which of the fallowing statesments is correct? (see picture) a) an increase in the price of C will decrease the demand for complementary product D. b) a decrease in income will decrease the demand for an inferior good c) an increase in income will reduce the demand for a normal good d) a decline in the price of X will increase the demand for substitute product Y

a) an increase in the price of C will decrease the demand for complementary product D

if the unemployment rate is 9 percent and the natural rate of unemployment is 5 percent, then the:

cyclical unemployment rate is 4 percent

which of the fallowing statements is correct? a) utility and usefulness are synonymous b) the marginal utility derived from successive units of a product tends to be similar for all consumers c) because utility is not measurable, the utility-maximizing rule provides no useful insights as to consumer behavior d) a product may yield utility, but not be functionally useful

d) a product may yield utility, but not be functionally useful

the three main tools of monetary policy are:

the discount rate, the reserve ratio, and open-market operations

if two goods are complements:

a decrease in the price of one will increase the demand for the other

refer to the above table. the value of the dollar in year 2 is:

$.80

refer to the above diagram. the break-even level of GDP (=income) is:

$150

a reserve requirement of 20% means a bank must have a $1000 of reserves if its checkable deposits are:

$5000, 1000 is 20% of 5000

Refer to the diagram. the highest price that buyers will be willing and able to pay for 100 units of this product is:

$60

If L and M are complementary goods, an increase in the price of L will result in:

A decrease in the sales of M

suppose a family's consumption exceeds of its disposable income. this means that its:

APC is greater than 1

GDP is equal to:

C + Ig + G + Xn

Refer to the above diagram. this economy will experience unemployment if it produces at point: see picture

D

A normative statement is one of which:

Is based on value of judgements

which of the fallowing is correct?

MPC + MPS = APC + APS

in the aggregate expenditures model, the:

MPC is greater than zero, but less than one

At the point where the demand and supply curves intersect:

There is neither a surplus nor a shortage of the product

which of the fallowing is a tool of monetary policy? a) open market operations b) changes in banking laws c) changes in tax rates d) changes in government spending

a) open market operations

the 45-degree line on a chart relating consumption and income shows:

all the points at which consumption and income are equal

to be officially unemployed a person must:

be in the labor force

a recent study found that an increase in the Federal tax on beer ( and thus an increase in price of beer) would reduce the demand for marijuana. we can conclude that:

beer and marijuana are complementary goods

the law of diminishing marginal utility states that:

beyond some point additional units of a product will yield less and less extra satisfaction to a consumer

an economist for a bicylcle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. this prediction is based on the assumption that:

bicycles are normal goods

in the united states monetary policy is the responsiblity of the:

board of governors of the federal reserve system

which of the fallowing relations is not correct? a) 1-MPC = MPS b) APS + APC = 1 c) MPS = MPC +1 d) MPC + MPS = 1

c) MPS = MPC +1

A decrease in demand is depicted by a: (see picture) a) move from point x to point y b) a shift from d1 to d2 c) shift from d2 to d1 d) move from point y to point x

c) shift from d2 to d1

Which of the fallowing is a positive statement? a) the humidity is too high today b) it is too hot to jog today c) the temperature is 92 degrees today d) i enjoy summer evenings when it cools off

c) temperature is 92 degrees today

the MPC can be defined as that fraction of a:

change in income that is spent

the fed can change the money supply by:

changing bank reserves through the sale or purchase of government securites, changing the quantities of required and excess reserves by altering the legal reserve ratio, changing the discount rate so as to encourage or discourage commercial banks in borrowing from the central banks

checkable deposits are also called:

checking accounts

the study of economics is primarily concerned with:

choices that are made in seeking to use scarce resources effieiently

in the united states, the money supply 1, is compromised of:

coins, paper currency, and checkable deposits

video cassette recorders and video cassettes are:

complementary goods

the law of increasing opportunity costs is reflected in a production possibilities curve that is:

concave to the origin

a shift to the right in the demand curve for product A can be most reasonably explained by saying that:

consumer preferences have changed in favor A so that they now want to buy more at each possible price

Holly's break-even level of income is $10,000 and her MPC is .75. If her actual disposable income is $16,000, her level of:

consumption spending will be $14, 500

the APC is calculated as:

consumption/ income

inflation initiated by increases in wages of other resource prices is labled:

cost-push inflation

suppose there are 5 million unemployment workers seeking jobs. after a period of time, 1 million of them become discouraged over their job prospects and cease to look for work. as a result of this, the official unemployment rate would:

decline

real income can be determined by:

deflating nominal income for inflation

if the consumer price index falls from 120 to 116 in a particular year, the economy has experienced:

deflation of 3.33 percent

"too much money chasing too few goods" best describes:

demand-pull inflation

excess reserves refer to the:

difference between actual reserves and required reserves

the interest rate at which the Federal Reserve banks lend to commercial banks is called the:

discount rate

kimberly voluntarily quit her job as an insurance agent to return to school full-time to earn an MBA degree. with degree in hand she is now searching for a position in management. kimberly presently is:

frictionally unemployed

part-time workers are counted as:

fully employed and therefore the offical unemployment rate may understate the level of unemployment

in national income accounting, G stands for:

government purchases

for all levels of income to the left of the intersection of the 45-degree line and the consumption schedule, the APC is:

greater than 100 percent

GDP differs from NDP in that

gross investment is used in calculating GDP and net investment is used in calculating NDP

the production possibilites 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

gross domestic product (GDP) measures and reports output:

in dollar amounts

checkable deposits are:

included in m1

the value of money varies

inversely with the price level

GDP can be calculated by summing

investment, government purchases, consumption, and net exports

the idea of opportunity cost:

is relevant to economies of all ideological persuastions

the term "quantity demanded":

refers to the amount of a product that will be purchased at some specific price

the law of supply

reflects the amounts that producers will want to offer at each price in a series of prices

the money payments made to owners of land, labor, capital and entrepreneurial ability are:

rent, wages, interest, and profits respectively

suppose that a person's nominal income rises by 5 percent and the price level rises from 125 to 130. the person's real income will:

rise by about 1 percent

a product has utility if it:

satisfies consumer wants

at the point where the consumption schedule intersects the 45-degree line:

saving is zero

if the consumption schedule is linear, then the:

saving schedule will also be linear

if the price of product L increases, the demand curve for close-substitue product J will:

shift to the right

unemployment involving a mishmatch of the skills of unemployed workers and the skills required for available jobs is called:

structural unemployment

macroeconomics can best be described as the:

study of the large aggregates of the economy or the economy as a whole

value added can be determined by:

subtraccting the purchase of intermediate products from the value of the sales of final products

consumption of fixed capital (depreciation) can be determined by:

subtracting NDP from GDP

in the aggregate expenditures model, dissaving means

that the households are spending in excess of their current incomes

at the point where the consumption schedule intersects the 45-degree line:

the APC is 1.00

opportunity cost is best defined as:

the amount of one product that must be given up to produce one more unit of another product

"value added" refers to:

the difference between the value of a firm's output and the value of the inputs it has purchased from others

the difference between m1 and m2 is that:

the latter includes small time deposits, noncheckable savings accounts, money market deposit accounts, and money market mutual fund balances

real GDP is:

the nominal value of all goods and services produced in the domestic economy corrected for inflation or deflation

if the demand for a normal good (for example, steak) shifts to the left, the most likely reason is that:

the price of cattle feed has gone up

in presenting the idea of a demand curve economists presume that the most important variable in determining the quantity demanded is:

the price of the product itself

open-market operations refer to:

the purchase or sale of government securities by the Fed

economics may be defined as:

the social science cancerned with the efficient use of scarce resources to achieve maximum satisfaction

suppose you have a limited money income and you are purchasing products a and b whose prices happen to be the same. to maximize your utility you should purchase a and b in such amounts that:

their marginal utilities are the same

at the equilibrium price:

there are no pressures on price to either rise or fall

in defining money as m1 economists exclude time deposits because:

they are not directly or immediately a medium of exchange

checkable deposits are classified as money because:

they can be readily used in purchasing goods and paying debts

cost-of-living adjustment clauses (COLAs):

tie wage increases to changes in the price level