Mac Econ FINAL

Refer to Figure above. What is the value of the deadweight loss at a price of $18? A) $100 B) $180 C) $660 D) $1,040

$100

Suppose a bank has $100 million in checking account deposits with no excess reserves and the required reserve ratio is 10 percent. If the Federal Reserve reduces the required reserve ratio to 8 percent, then the bank can make a maximum loan of A) $0. B) $2 million. C) $8 million. D) $10 million.

$2 million

Refer to Figure above. What is the value of consumer surplus after the imposition of the ceiling? a. $120,000 b. $230,000 c. $270,000 d. $430,000

$230,000

Refer to Table above. What is Lydia's marginal benefit if she decides to stay open for two hours instead of one hour? A) $25 B) $50 C) $75 D) $125

$25

Lucinda buys a new GPS system for $250. She receives consumer surplus of $75 from the purchase. How much does Lucinda value her GPS system? a. $75 b. $175 c. $250 d. $325

$325

Refer to Figure above. How much of the tax is paid by buyers? A) $2 B) $5 C) $7 D) $12

$5

Refer to Figure above. What is the value of the Producer Surplus transferred to the consumer at a price of $13? A) $120 B) $80 C) $160 D) $200

$80

Figure above shows the production possibilities frontier for Mendonca, an agrarian nation that produces two goods, meat and vegetables. Refer to Figure above. What is the opportunity cost of one pound of meat? a. ¾ pound of vegetables b. 1.3 pounds of vegetables c. 1.6 pounds of vegetables d. 16 pounds of vegetables

1.3 pounds of vegetables

If government increases the tax credit for firms if they invest, then the __________ for loanable funds will ____________.

Demand; Increase

________ is maximized in a competitive market when marginal benefit equals marginal cost. a. Deadweight loss b. Marginal profit c. Economic surplus d. Selling price

Economic surplus

At the 45 degree line, all points represent macroeconomic ___________ points.

Equilibrium

Net Export is calculated as _____________.

Export - Import

True or False: If Sanjaya can shuck more oysters in one hour than Tatiana, then Sanjaya has a comparative advantage in shucking oysters

False

True or False: Market equilibrium occurs where supply equals demand.

False

True or False: On a diagram of a production possibility frontier, opportunity cost is represented by the production possibility frontier shifting outward

False

True or False: The division of the burden of a tax between buyers and sellers in a market is called tax allocation.

False

True or False: The government makes all economic decisions in a mixed economy

False

True or False: The total amount of consumer surplus in a market is equal to the area below the demand curve

False

When calculating the CPI, the BLS uses a ______________ basket of goods and services bought by a typical consumer.

Fixed

When Boeing produces a 777 airplane and sells it to American Airlines, the ________________ will change.

GDP Deflator

According to the quantity theory of money, deflation will occur if the A) money supply is less than real GDP. B) money supply is more than real GDP. C) money supply grows at a slower rate than real GDP. D) money supply grows at a faster rate than real GDP.

Money supply grows at a slower rate than real GDP

The quantity equation states that the A) money supply divided by the velocity of money equals the price level divided by real output. B) money supply times the velocity of money equals the price level times real output. C) money supply times the price level equals real output divided by the velocity of money. D) money supply times the price level equals real output times the velocity of money.

Money supply times the velocity of money equals the price level times real output

Which of the following is not a consequence of hyperinflation? A) Money's function as a medium of exchange is enhanced. B) Money loses value so rapidly that firms and individuals stop holding it. C) It causes an economy to suffer slow growth. D) The price level grows in excess of hundreds of percentage points per year.

Money's function as a medium of exchange is enhanced

In the circular flow diagram, ______________ flows in the market.

Money, Inputs, and Outputs

To affect the market outcome, a price ceiling a. must be set below the black market price. b. must be set below the legal price. c. must be set below the price floor. d. must be set below the equilibrium price.

Must be set below the equilibrium price

The GNP is the market value of goods and services produced by ____________ of a country.

Nationals

We like to see the equilibrium point at the ___________________ value of the GDP.

Nominal Potential

We should privatize the Medicare system in Kansas is a ____________ statement.

Normative

All of the following are part of an economic model except A) assumptions. B) hypotheses. C) data. D) opinions.

Opinions

The highest valued alternative that must be given up to engage in an activity is the definition of A) economic equity. B) marginal benefit. C) opportunity cost. D) marginal cost.

Opportunity cost

The opportunity cost of a good is measured by the slope of the _________.

PPF

Inflation rate is measured as percentages change in prices from one period to the ___________ period.

Past

The mechanism of the free market is _______.

Price

Specializing in the production of a good or service in which one has a comparative advantage enables a country to do all of the following except A) engage in mutually beneficial trade with other nations. B) increase the variety of products that it can consume with no increase in resources. C) consume a combination of goods that lies outside its own production possibilities frontier. D) produce a combination of goods that lies outside its own production possibilities frontier.

Produce a combination of goods that lies outside its own production possibilities frontier

When people use all the resources and information they have to make decisions they are considered ____________.

Rational

If AE is below Real GDP, then we are at the ______________ phase of the business cycle.

Recession

In economics, choices must be made because we live in a world of a. unemployment. b. scarcity. c. greed. d. unlimited resources.

Scarcity

The Financial ____________ are traded in financial markets.

Securities

The GDP is not a perfect measure of standard of living because it does not take into account _______________.

Social Problems

The AE is representing total _____________ in the economy.

Spending

The Federal Reserve was established in 1913 to A) prevent inflation by decreasing the money supply. B) stimulate the economy by increasing bank reserves. C) stop bank panics by acting as a lender of last resort. D) prevent bad loans by requiring banks to hold reserves.

Stop bank panics by acting as a lender of last resort

One of the problems with calculating the Consumer Price Index is the _____________ bias.

Substitution

Allocative efficiency is achieved when firms produce goods and services A) at the lowest possible cost. B) that consumers value most. C) at the lowest opportunity cost. D) at a marginal cost of zero.

That consumers value most

Society faces a trade-off in all of the following situations except A) when deciding who will receive the goods and services produced. B) when deciding what goods and services will be produced. C) when deciding how goods and services will be produced. D) when some previously unemployed workers find jobs.

When some previously unemployed workers find jobs

In a closed economy, Saving is equal to _______________.

Y-C-G

Refer to Figure above. If the economy is currently producing at point Y, what is the opportunity cost of moving to point W? a. 2 million tons of steel b. zero c. 9 million tons of paper d. 16 million tons of paper

Zero

The GDP deflator is a ratio of _________ to ___________ prices.

Current to Fixed

MPC is defined as the change in ______________ because of change in ____________.

Consumption; Income

Using the quantity equation, if the velocity of money grows at 5 percent, the money supply grows at 10 percent, and real GDP grows at 4 percent, then the inflation rate will be A) 19 percent. B) 15 percent. C) 11 percent. D) 6 percent.

11 percent

Last year, the Pottery Palace supplied 8,000 ceramic pots at $40 each. This year, the company supplied the same quantity of ceramic pots at $55 each. Based on this evidence, The Pottery Palace has experienced a. a decrease in supply. b. an increase in supply. c. an increase in the quantity supplied. d. a decrease in the quantity supplied

A decrease in supply

An inward shift of a nation's production possibilities frontier can occur due to a. a reduction in unemployment. b. a natural disaster like a hurricane or bad earthquake. c. a change in the amounts of one good desired. d. an increase in the labor force.

A natural disaster like a hurricane or bad earthquake

Refer to Figure above. If the current market price is $10, the market will achieve equilibrium by a. a price increase, increasing the supply and decreasing the demand. b. a price decrease, decreasing the supply and increasing the demand. c. a price decrease, decreasing the quantity supplied and increasing the quantity demanded. d. a price increase, increasing the quantity supplied and decreasing the quantity demanded.

A price increase, increasing the quantity supplied and decreasing the quantity demanded

Macroeconomic Equilibrium represents the case where _____________.

AE = Real GDP

"An Inquiry into the Nature and Causes of the Wealth of Nations" published in 1776 was written by a. John Maynard Keynes. b. Karl Marx. c. Alfred Marshall. d. Adam Smith.

Adam Smith

Which of the following would cause both the equilibrium price and equilibrium quantity of cotton (assume that cotton is a normal good) to increase? A) an increase in consumer income B) a drought that sharply reduces cotton output C) a decrease in consumer income D) unusually good weather that results in a bumper crop of cotton

An increase in consumer income

If an increase in income leads to a decrease in the demand for popcorn, then popcorn is A) an inferior good. B) a neutral good. C) a necessity. D) a normal good.

An inferior good

Building models using the scientific method follows the steps of __________________.

Assumptions, Hypothesis, Test

Assume that both the demand curve and the supply curve for MP3 players shift to the right but the demand curve shifts more than the supply curve. As a result a. both the equilibrium price and quantity of MP3 players will increase. b. the equilibrium price of MP3 players will increase; the equilibrium quantity may increase or decrease. c. the equilibrium price of MP3 players may increase or decrease; the equilibrium quantity will increase. d. the equilibrium price of MP3 players will decrease; the equilibrium quantity may increase or decrease.

Both the equilibrium price and quantity of MP3

In trade, ____________ must win.

Buyer and seller

The measure used for comparison of dollar figures over time is ___________.

CPI

Net Cash Flow equals to _______________.

Cash Revenue - Cash Spending

Multiplier equals to ___________________.

Change in Y/Change in AE

Which of the following is not a consequence of the Fed changing the reserve requirement? A) Changes in the ratio are easily incorporated into banks' routine management. B) Decreasing the ratio will increase excess reserves. C) Increasing the ratio will decrease the amount of reserves banks have to loan. D) Changes in the ratio effectively places a tax on banks' deposit taking and lending activities.

Changes in the ratio are easily incorporated into banks' routine management

The ________ demonstrates the roles played by households and firms in the market system. a. production possibilities frontier b. circular flow model c. theory of comparative advantage d. business cycle

Circular flow model

Which of the following generates productive efficiency? a. competition among sellers b. competition among buyers c. government inspectors d. government production rules and regulations

Competition among sellers

The sale of Treasury securities by the Federal Reserve will, in general, A) not change the money supply. B) not change the quantity of reserves held by banks. C) increase the quantity of reserves held by banks. D) decrease the quantity of reserves held by banks.

Decrease the quantity of reserves held by banks

Crowding out refers to _________ in private investment when the government runs a budget _______.

Decrease; deficit

If more insurance companies decide to cover part of the price of voluntary laser eye surgery and more doctors decide to enter the field of laser eye surgery, what will happen in the market for laser eye surgery as a result of these two factors? A) Demand will increase, but these two factors will not shift the supply curve. B) Supply will increase, but these two factors will not shift the demand curve. C) Demand and supply will both increase. D) Demand will increase and supply will decrease.

Demand and supply will both increase

Which of the following is a positive economic statement? a. The standard of living in the United States should be higher. b. If the price of iPhones falls, a larger quantity of iPhones will be purchased. c. The government should revamp the health care system. d. The U.S. government should not have bailed out U.S. auto manufacturers.

If the price of iPhones falls, a larger quantity of iPhones will be purchased.

There is a strong link between changes in the money supply and inflation A) in both the short run and the long run. B) in neither the short run nor the long run. C) in the short run, but not in the long run. D) in the long run, but not in the short run.

In the long run, but not in the short run

Refer to Figure above. Which country has a comparative advantage in the production of cotton? A) Indonesia B) They have equal productive abilities. C) Pakistan D) Neither country

Indonesia

Which of the following is not a function of the Federal Reserve System, or the "Fed"? A) acting as a lender of last resort B) acting as a banker's bank C) performing check clearing services D) insuring deposits in the banking system E) taking actions to control the money supply

Insuring deposits in the banking system

Banks and mutual funds are examples of financial ________________.

Intermediaries

New houses are included in the ____________ component of the GDP.

Investment

At a price of $15, the quantity bought A) is 2 units. B) is 4 units. C) is 6 units. D) cannot be determined.

Is 2 units

Refer to Figure above. One segment of the circular flow diagram in the figure shows the flow of labor services from market K to economic agents J. What is market K and who are economic agents J? a. K = factor markets; J = households b. K = product markets; J = households c. K = factor markets; J = firms d. K = product markets; J = firms

K=factor markets; J=firms

In a city with rent-controlled apartments, all of the following are true except a. apartments usually rent for rates lower than the market rate. b. apartments are often in shorter supply than they would be without rent control. c. it usually takes more time to find an apartment than it would without rent control. d. landlords have an incentive to rent more apartments than they would without rent control

Landlords have an incentive to rent more apartments than they would without rent control

If the production possibilities frontier is ________, then opportunity costs are constant as more of one good is produced. a. bowed out b. bowed in c. non-linear d. linear

Linear

The financial system provides us with ____________ type of service.

Liquidity

People make decisions based on _______ and ___________.

MB; MC

MPS is related to MPC in this way: ___________________.

MPS = 1 - MPC

Economists reason that the optimal decision is to continue any activity up to the point where the a. marginal benefit is zero. b. marginal benefit is greater than the marginal cost. c. marginal cost is zero. d. marginal benefit equals the marginal cost.

Marginal benefit equals the marginal cost

The production possibilities frontier shows the ________ combinations of two products that may be produced in a particular time period with available resources. A) minimum attainable B) maximum attainable C) only D) equitable

Maximum attainable

Marginal cost is A) the total cost of producing one unit of a good or service. B) the average cost of producing a good or service. C) the difference between the lowest price a firm would have been willing to accept and the price it actually receives. D) the additional cost to a firm of producing one more unit of a good or service.

The additional cost to a firm of producing one more unit of a good or service

Consumer surplus in a market for a product would be equal to ________ if the market price was zero. A) zero B) the area between the supply curve and the demand curve C) the area above the supply curve D) the area under the demand curve

The area under the demand curve

If the price of automobiles was to increase, then a. the demand for gasoline would decrease. b. the demand for gasoline would increase. c. the supply of gasoline would increase. d. the quantity demanded of gasoline would decrease.

The demand for gasoline would decrease

The income effect of a price change refers to the impact of a change in a. income on the price of a good. b. demand when income changes. c. the quantity demanded when income changes. d. the price of a good on a consumer's purchasing power.

The price of a good on a consumer's purchasing power

A change in all of the following variables will change the market demand for a product except a. the price of the product. b. population and demographics. c. income. d. tastes.

The price of the product

Who receives the most of what is produced in a market economy? a. lawmakers and other politically favored groups b. those who are willing and able to buy them c. everyone receives an equal amount d. people who earn the highest incomes

Those who are willing and able to buy them

The debate about whether increase in saving or consumption better for economic growth in the long run is referred to as The Paradox of ________.

Thrift

Scarcity is the base of __________ every society faces

Trade off

True or False: An economic model is a simplified version of reality used to analyze real-world economic situations

True

True or False: An economic model is a simplified version of reality used to analyze real-world economic situations.

True

True or False: An increase in the quantity of a product supplied is caused by an increase in the price of the product

True

True or False: Chips and salsa are complements. If the price of salsa decreases, the demand for chips will increase.

True

True or False: If the demand curve for a product is vertical, any tax increase on the product is paid for entirely by the consumer

True

True or False: If the demand curve for a product is vertical, any tax increase on the product is paid for entirely by the consumer.

True

Open market operations refer to the purchase or sale of ________ to control the money supply. A) corporate bonds and stocks by the Federal Reserve B) U.S. Treasury securities by the Federal Reserve C) corporate bonds and stocks by the U.S. Treasury D) U.S. Treasury securities by the U.S. Treasury

U.S. Treasury securities by the Federal Reserve

A point outside the PPF is considered to be _________.

Unattainable

One of the determinants of consumption is ________.

Wealth