Final Exam Study Guide (ECO 2013)

When Mexico suffered from capital flight in 1994, Mexico's NCO

and net exports decreased

Aggregate demand shifts left when the government

decreases tax

Which of the following events must cause equilibrium price to rise

demand and supply both increase

An appreciation of the US real exchange rate induces US consumers to buy

fewer domestic goods and more foreign goods

Consider the expressions T-G and Y-T-C. Which of the following statements is correct?

The first one of these is pubic savings and the second is private savings

If the nominal exchange rate is e is foreign currency per dollar, the domestic price is P and the foreign price is P*, then the real exchange rate is defined as

e(P/P*)

Large or persistent inflation is almost always caused by

excessive growth in the quantity of money

The mainstream view among economists is that

a society faces a trade off between unemployment and inflation, but only in the short run

Which of the following would cause price to decrease?

a surplus of the good

Minimum wages create unemployment in markets where they create a

surplus of labor, unemployment of this type is called frictional

Recessions in China and India would cause

the US price level and read GDP fall

Economic expansions in Germany and Japan would cause

the US price level and real GDP to rise

The discount rate is

the interest rate Feds charge banks

In the open economy macroeconomic model, if there is a surplus in the market for foreign currency exchange, which of the following will move the market to equilibrium

the real exchange rate depreciates and net export rises

As the price level rises

people will want to hold more money so the interest rates falls

In economics, the cost of something is

what you give up to get it

If in one year real GDP was $5 trillion and the GDP delator was 200, what is the nominal GDP

$100 Trillion

Assume that the opportunity cost of each hut is 200 bowls. Then which of these pairs of points could be on Namibia's PPF?

(300 huts, 60,000 bowls) and (200 huts, 30,000 bowls)

In the base year, the GDP deflator is always

100

Nancy would like to double the money in her retirement account in 5 years. According to the rule of the 70, what rate of interest would she need to earn to obtain her objective?

14%

In 1970, Professor Plum earned $12,000; in 1980, he earned $24,000, and in 1990, he earned $36,000. If the CPI was 40 in 1970, 70 in 1980, and 130 in 1990, then in real terms, Professor Plum's salary was highest in

1980 and lowest in 1970

If a country had a trade surplus of $50 Billion and then its exports rose by $50 Billion and its imports rose by 20 billion, its net exports would be

60 billion

If the CPI was 100 in the base year and 107 in the following year, then the inflation rate was

7 percent

Which of the following is a function of money

ALL of the above (Unit of Account, Store of Value, and Medium of Exchange)

Which of the following is a correct statement about Production Possibilities Frontiers?

An economy can produce at any point on or inside the PPF, but not out

In purchasing power parity holds, a dollar will buy

As many goods in foreign countries as it does in the US

Which of the following units is included in what economists call money

Cash

The basic principles of economics suggest that

Governments should become involved in markets when those markets fail to produce efficient or fair outcomes

A circular-flow diagram is a model that

Helps to explain how participants in the economy interact with one another AND helps to explain how the economy is organized (BOTH A&B)

Economists are particularly adept at understanding that people respond to

Incentives

If the money multiplier is 2 and the Feds buy $50,000 worth of bonds, what happens to the money supply?

Increases by $100,000

Diversification of a portfolio

Increases the portfolio standard deviation

A band has 10% reserve requirements, $4,000 deposits, and has loaned out all it can, given the reserve requirement

It has $400 in reserves and $3600 in loans

Human Capital is

Knowledge and skills that workers acquire through education, training, and experience.

Which of the following is a principle concerning how people interact?

Markets are usually a good way to organize economic activity

If a country raises its budget deficit, then its

NCO and net export fall

The saying "there is no such thing as free lunch" means

People face tradeoffs

The law of demand states that, other things equal an increase in

Price causes quantity demand to decrease

There is a

Short-run trade off between inflation and unemployment

Unemployment that results because the number of jobs available in some labor markets may be insufficient to give a job to everyone who wants one, is called

Structural unemployment

Suppose Susan can wash 3 windows per hour or she irons 6 shirts per hour. Paul can wash two windows per hour or he can iron 5 shirts per hour

Susan has a competitive advantage over Paul in washing hours

Which of the following is correct?

The CPI is better than the GDP delflator at reflecting the goods and services bought by consumers

The primary determinant of a country's standard of living is

The country's ability to produce goods and services

Which is the most accurate statement about trade?

Trade can make everyone better off

If US residents purchase $500 and then its exports rose by $30 billion and its imports are $20 billion, its net exports would

US NCO is -$800 billion, capital flowing into the US

The demand curve for textbooks shifts

When a determinant of demand for textbooks other than the price of textbooks changes

Which of the following shifts short-run aggregate supply to the right

a decrease in the price of oil

Which of the following would cause prices to fall and output to rise in the short-run

aggregate demand to shift left

Which of the following items plays a role in determining productivity

all of the above

College-age athletes who drop out of college to play professional sports

are well aware that their opportunity cost of attending is very high

The economy's two most important financial markets are

bond and stock markets

If the Federal Open Market Committee decided to increase the money supply then the federal reserve

creates dollars and uses them to purchase government bonds from the public

If the natural rate of unemployment is 5.2 percent and the actual rate of unemployment is 5.7 percent, then by deflation there is

frictional unemployment accounting for 0.5% of the labor force

GDP measures

income and expenditures

A country's trade balance

is greater than 0 if exports are greater than imports

Hydro Grow is considering building a new greenhouse in which to grow tomatoes. The board meets and decides that this is the right thing to do. Before they can put their plan to action, the interest rate increases. The present value of the returns from this investment project

is now higher than it was before, so Hydro Grow is more likely to build the building

When the dollar depreciates, each dollar buys

less foreign currency and so buys fewer foreign goods

Compared to stocks, bonds offer holders

lower risks and lower potential return

A decrease in quantity demanded

results in movement upward and to the left along the demand curve

An increase in quantity supplied

results in movement upward and to the right along a fixed supply curve

An increase in demand is represented by

rightward shift of a demand curve

If the price level falls, the real value of a dollar

rises so people will buy more

The law of supply states that, other things equal when the price of a good

rises the quantity supplied for a good rises

a decrease in supply is represented by a

shifts the supply curve to the left

If there is a surplus of loanable funds then

the quantity supplied is greater than the quantity demand and the interest rate will rise