Kamillah Williams - Final Exam Study Set

The unemployment rate may underestimate the true extent of unemployment if: there are a large number of people working in the underground economy. many people become discouraged and cease looking for work. employees increase the number of hours they work overtime. many people have a part time as well as a full time job.

Many people become discouraged and cease looking for work.

In 2010, Tara used $50,000.00 from funds she had invested in certificates of deposit as a down payment to buy a house. What function did this portion of her investments serve when she made the down payment? unit of exchange medium of exchange store of value unit of account

Medium of exchange

Inflation can be calculated in terms of how the overall cost of ___________________ changes over time. all goods all goods and services all services the market basket of goods

The market basket of goods

Assume that Susan deposits $3,000 into her bank and the reserve ratio is 8%. If her bank loans out $1,200 from this amount to another customer, what would be the amount of excess reserves that remain? $96 $240 $1,104 $1,560 $2,904

$1,560

If Jason deposits $2,500 into his bank and the reserve ratio is 11%, what would be the amount of excess reserves that are immediately created? $30.25 $244.75 $275 $1,980.25 $2,225

$2,225

"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is: $4 $40 $0 $44

$44

Assume that a hypothetical economy with an MPC of 0.8 is experiencing severe recession. By how much would government spending have to rise to shift the aggregate demand curve rightward by $25 billion? $5 billion $6 billion $125 billion It cannot be determined from the information given.

$5 billion

Assume that Cheryl deposits $1,000 into her bank and the reserve ratio is 10%. If her bank loans out $400 from this amount to another customer, what would be the amount of excess reserves that remain? $90 $100 $500 $900 $910

$500

If Sean deposits $550 into his bank and the reserve ratio is 12%, what would be the amount of required reserves that are immediately created? $66 $484 $491.92 $550 none of the above

$66

Assume that a "leader country" has real GDP per capita of $40,000, whereas a "follower country" has real GDP per capita of $20,000. Next suppose that the growth of real GDP per capita falls to zero percent in the leader country and rises to 7 percent in the follower country. If these rates continue for long periods of time, how many years will it take for the follower country to catch up to the living standard of the leader country? Just enter the numbers, do not include words.

10

Assume a base year of 2000. Using the information below, compute the value of the CPI in 2006 assuming that consumers typically purchase 5 cups of coffee and 3 donuts in the average week. Price of a cup of coffee year 2000 and 2006 - $1.25, $1.50 Price of a donut year 2000 and 2006 - $0.69, $0.89 107.57 115.58 120.00 122.24 128.99

122.24

An increase in international oil prices would lead to which of the following? an increase in both prices and output an increase in prices and a decrease in output a decrease in prices and an increase in output a decrease in both prices and output

An increase in prices and a decrease in output

If the nominal interest rate is 5.5% and the inflationary premium is 2.8%, what would be the real rate of interest? 2.7% 2.8% 5.5% 8.3% none of the above

2.7%

Mark has a weekly income of $40, which he plans to spend on coffee and subway tickets. If the price of a cup of coffee is $4 and the price of a subway ticket is $2, what is the maximum number of subway tickets he could buy in a week? 20 2 4 10

20

Suppose that out of the original 100 increase in government spending, 60 will be recycled back into purchases of domestically produced goods and services. Following this multiplier effect, what value will be recycled in the next round in the cycle? 3.6 16.66 36 42

36

If real GDP grows at 1.6 percent per year, then real GDP will double in approximately how many years? Round your answer to 1 decimal place.

43.8

If the CPI at the end of 2002 was 145 and the CPI at the end of 2003 was 155, what was the rate of inflation for 2003? 6.5% 6.9% 10.0% 93.5% 106.9%

6.9%

Use the figure below. Assume that the combined market value of consumer goods + capital goods for points a and b are $20 billion and $40 billion, respectively. If the economy moves from point a to point b over a 10-year period, what must have been its annual rate of economic growth? Do not include the percentage sign.

7

An appreciation of the exchange rate would lead to an increase in AD. an increase in SRAS. a decrease in AD . a decrease in SRAS. an increase in AD, SRAS, and LRAS.

A decrease in AD

Which of the following would not cause an increase in demand for tickets to a college football game? The two teams are tied for first place with one game remaining. An increased number of fans in the area A significant increase in the price of tickets for other sporting events like professional football A decrease in the price of tickets for this game All of the above would lead to an increase in demand.

A decrease in the price of tickets for this game

If the Fed wanted to increase the growth rate of the economy, which of the following would it be likely to do? buy government securities decrease reserve requirements decrease the discount rate all of the above

All of the above

Which of the following statements most likely lies within the realm of microeconomics? A rapid acceleration of the supply of money may create inflation. A decrease in federal income tax rates will stimulate increased consumer spending. An increase in labor costs will increase the additional cost of producing another airplane. An increase in government spending will increase the aggregate demand for goods and services in the economy. Unemployment rises during a recession and falls during an expansion.

An increase in labor costs will increase the additional cost of producing another airplane.

According to the Crowding Out theory, if the government engages in expansionary fiscal policy, which of the following will take place? an increase in the deficit, an increase in demand for loanable funds, an increase in interest rates and a decrease in AD a decrease in the deficit, a decrease in demand for loanable funds, a decrease in interest rates and an increase in AD an increase in the deficit, a decrease in demand for loanable funds, a decrease in interest rates and a decrease in AD an increase in the deficit, a decrease in demand for loanable funds, a decrease in interest rates and an increase in AD a decrease in the deficit, an increase in demand for loanable funds, an increase in interest rates and a decrease in AD

An increase in the deficit, an increase in demand for loanable funds, an increase in interest rate and a decrease in AD.

Which of the following are most likely classified by economists as consumer durable goods? food, clothing drugs, toys, magazines, books automobiles, furniture all of the above

Automobiles, Furniture

The banking system in the United States is referred to as a fractional reserve bank system because banks keep a fraction of reserves available. banks hold a fraction of deposits in reserve. a fraction of all monetary assets are held in banks. a fraction of the money is lent out.

Banks hold a fraction of deposits in reserve.

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good. opportunity set personal preference budget constraint utility level

Budget constraint

If the state of Washington's government collects $75 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be a: decrease in proportional taxes. budget deficit. budget surplus. decrease in payroll tax.

Budget surplus

The rise in unemployment that occurs because of a recession is known as cyclical unemployment, because it is closely tied to the ______________. labor supply natural rate of unemployment supply curve business cycle

Business cycle

Assume that U.S. auto workers negotiate a new contract with higher wages for themselves. What would be the impact on the market for new cars? increase in demand increase in supply decrease in demand decrease in supply none of the above

Decrease in supply

Contractionary fiscal policy is most likely to cause which of the following? increase output, increase price levels, and increase the deficit increase output, increase price levels, and decrease the deficit decrease output, decrease price levels, and increase the deficit decrease output, decrease price level, and decrease the deficit decrease output, decrease price level, and no change in the deficit

Decrease output, decrease price level, and decrease the deficit.

Based on the graph below, what would be the appropriate fiscal policy action at point X? increase taxes decrease taxes decrease government spending decrease interest rates none of the above

Decrease taxes

If the equilibrium price of new homes decreased and the equilibrium quantity decreased also, which curve must have moved in which direction? supply increased supply decreased demand increased demand decreased

Demand decreased

With respect to measuring the money supply, which of the following terms describes a checking account? demand certificates currency deposits cash certificates demand deposits

Demand deposits

Gross Domestic Product equals $1.2 trillion. If consumption equals $690 billion, investment equals $200 billion, and government spending equals $260 billion, then: exports exceed imports by $50 billion. imports exceed exports by $50 billion. imports exceed exports by $150 billion. exports exceed imports by $150 billion.

Exports exceed imports by $50 billion

In a market economy, government officials make most production decisions in a centralized manner. True False

False

Microeconomics is the branch of economics in which you study inflation and unemployment in the economy. True False

False

The main concern of economics is to study how well the stock markets are performing. True False

False

Which of the following best describes the relationship between economic growth and literacy? Increased literacy stimulates economic growth by raising labor productivity, and as the economy grows, people consume more education. Increased literacy initially stimulates economic growth by raising labor productivity, but as the economy grows and the opportunity cost of education rises, literacy declines. There is no correlation between economic growth and literacy. As the economy grows, literacy declines because it becomes less and less useful in a developed economy.

Increased literacy stimulates economic growth by raising labor productivity, and as the economy grows, people consume more education.

Suppose that you are a member of the Board of Governors of the Federal Reserve System. The post COVID economy is experiencing a sharp rise in aggregate demand that pushes the economy above potential GDP. You recommend decreasing the reserve ratio, increasing the discount rate, or buying bonds decreasing the reserve ratio or discount rate, or buying bonds increasing the reserve ratio, decreasing the discount rate, or selling bonds increasing the reserve ratio or discount rate, or selling bonds

Increasing the reserve ratio or discount rate, or selling bonds

The difference in economic growth in North and South Korea is likely explained by differences in resource availibility institutions population technological challenges

Institutions

_________ is calculated by taking _________ and then subtracting the value of how much physical capital is worn out, or reduced in value because of aging, over the course of a year. NNP; GNP GDP; NNP NNP; GDP GNP; NNP

NNP; GNP

Which of the following is an example of a pure market economy? Russia United States Switzerland Singapore No nation has a pure market economy

No nation has a pure market economy

Which of the following are arguments that explain the downward slope of the SRAS curve? the foreign price effect the interest rate effect the real balance effect all of the above none of the above

None of the above

The effect of substitution bias is that the rise in the price of a fixed basket of goods over time tends to ___ the rise in a consumer's true cost of living, because it doesn't take into account that the person can substitute between goods according to changes in their relative prices. stabilize understate overstate reduce

Overstate

The maximum quantity that an economy can produce, given its existing levels of labor, physical capital, technology, and institutions, is called: real GDP. potential GDP. aggregate supply. aggregate demand.

Potential GDP

The downward slope of the demand curve again illustrates the pattern that as _____________ rises, ______________ decreases. price, quantity supplied price, quantity demanded quantity supplied, quantity demanded quantity demanded, price

Price, quantity demanded

Over the long run, ___ per hour is the most important determinant of the average wage level in any economy. supply demand productivity dollars

Productivity

A __________________________ system will cause a greater share of income to be collected from those with high incomes than from those with lower incomes. progressive tax proportional tax regressive tax excise tax

Progressive tax

If government tax policy requires Peter to pay $15,000 in tax on annual income of $200,000 and Paul to pay $10,000 in tax on annual income of $100,000, then the tax policy is: proportional regressive progressive optional

Regressive

If Scott deposits $400 into his bank and the reserve ratio is 12%, what would be the amount of required reserves and excess reserves that are immediately created? Required reserves would equal $42.24 and excess reserves would equal $357.76. Required reserves would equal $357.76 and excess reserves would equal $42.24. Required reserves would equal $352 and excess reserves would equal zero. Required reserves would equal zero and excess reserves would equal $352.00. Required reserves would equal $48 and excess reserves would equal $352.

Required reserves would equal $48 and excuses reserves would equal $352.

___ are now the largest single component of the supply side of GDP, representing over half of GDP. Durable goods Nondurable goods Services Structures

Services

Aggregate demand is more likely to _________________ than aggregate supply in the short run. shift substantially decrease substantially remain unchanged increase slightly

Shift substantially

The ___ in an AD/AS diagram is most relevant to Say's Law. flat portion of the AS curve AD curve AS curve steep portion of the AS curve

Steep portion of the AS curve

One of the reasons that a rise in the price of a fixed basket of goods over time tends to overstate the rise in a consumer's true cost of living, is: complimentary bias substitution bias attribution bias preference bias

Substitution bias

If the equilibrium price of a Sony 42" television decreased and the equilibrium quantity increased, which curve must have moved in which direction? supply increased supply decreased demand increased demand decreased

Supply increased

GDP is: the value of all final good and services produced anywhere in the world by a nation's firms. the sum of all currency and coins in circulation. the value of all final goods and services produced by a government. the value of all final goods and services produced domestically.

The value of all final goods and services produced domestically.

Which of the following statements is true? The money supply is backed by Treasury notes. The gold standard applies to a small fraction of the money supply. There is no concrete backing to the money supply in the United States. Half the money supply is backed by gold. All of the above are true.

There is no concrete backing to the money supply in the United States.

Human welfare is greatly influenced by long-term changes in a nation's capacity to produce goods and services. True False

True

The general pattern that consumption of the first few units of any good tends to bring a higher level of _______ to a person than consumption of later units is a common pattern. opportunity cost sunk costs utility marginal benefit

Utility

From the standpoint of a nation's economy, which of the following is true? We would prefer to see real GDP increase but we are not as concerned about nominal GDP. We would prefer to see nominal GDP increase but we are not as concerned with an increase in real GDP. We would prefer to see real GDP increase with a large increase in nominal GDP. We would prefer to see nominal GDP increase with a large decrease in real GDP. We would prefer to see nominal GDP increase with no change in real GDP.

We would prefer to see real GDP increase but we are not as concerned about nominal GDP.