Macro-Economics Final Exam Review
A steel company sells some steel to a bicycle company for $100. The bicycle company uses the steel to produce a bicycle, which it sells for $150. Taken together, these two transactions contribute
$150 to GDP
If the interest rate is 7.5% , calculate the present value of $4,000 to be received in 6 years.
$2,597.40
Suppose you put $350 into a bank account today. Interest is paid annually and the annual interest rate is 6%. Calculate the future value of the $350 after 4 years
$441.87
Arlo is offered a job in Des Moines, where the CPI is 80, and a job in New York, where the CPI is 125. Arlo's job offer in Des Moines is for $42,000. How much does the New York job have to pay in order for the two salaries to represent te same purchasing power?
$65,625
Suppose you put $500 into a bank account today. Interest is paid annually and the annual interest rate is 5.5%. The future value of the $500 is
$653.48 after 5 years and $854.07 after 10 years
Ruben earned a salary of $60,000 in 2001 and $80,000 in 2006. The consumer price index was 177 in 2001 and 221.25 in 2006. Ruben's salary in 2006 dolalrs is
$75,000; thus, Ruben's buying power increased between 2001 and 2006.
If a 20% increase in price for a good results in a 15% decrease in quantity demanded, the price elasticity of demand is
.75
If a 20% change in price results in a 15% change in quantity supplied, then the price elasticity of supply is about
.75, and the supply is inelastic
If the price elasticity of supply is 1.5, and a price increase led to a 1.8% increase in quantity supplied, then the price increase is about
1.20%
Suppose the price of potato chips decreases from $1.45 to $1.25 and, as a result, the quantity of potato chips demanded increases from 2000 to 2400. Using the midpoint method, the price elasticity of demand for potato chips in the given price range is
1.23
If a 25% change in price results in a 40% change in quantity supplied, then the price elasticity of supply is about
1.60, and the supply is elastic
Over the last century, U.S. real GDP per person grew at a rate of about
2 percent per year, so that is now 8 times as high as it was a century ago.
Just after WWII, the labor-force participation rate of women was
33%
During the past century the average growth rate of U.S. real GDP per person implies that is doubled, on average, about every
35 years
If the nominal interest rate is 8% and the real interest rate is 3.5%, calculate the inflation rate.
4.5%
The slope of a line that passes through the points (10,15) and (20,7) is
4/5
If the price elasticity of demand for a good is 4.0, then a 10 percent increase in price results in
40% decrease in the quantity demanded
Which department measures unemployment?
Bureau of Labor Statistics
Robert Fogel focused on which of the following factors as one determinant of long-run economic growth
Health and Nutrition
Which of the following statements is correct about the relationship between inflation and interest rates?
In order to fully understand interest rates, we need to know how to correct for the effects of inflation
In the circular flow diagram, what are the factors of production
Land, labor, capital
The inputs into production of goods and services that are provided by nature, such as land, rivers, and mineral deposits are called?
Natural resources
What is an example of a nonrenewable resource?
Oil
Economics deals with primarily with the concept of:
Scarcity
In the equation, Y=C+I+G+NX, Y represents the economy's total income
True
Suppose the interest rate is 7%. 3 years from today it would be worth $600. Is this the lowest present value today?
True
On which of these bonds is the prospect of default least likely?
a bond issued by the federal government
Which of the following changes would not shift the supply curve for a good or service
a change in the price of the good or service
Elasticity is
a measure of how much buyers and sellers respond to changes in market conditions
Minimum wage laws dictate
a minimum wage that firms may pay workers
The primary purpose of measuring the overall level of prices in the economy is to
allow for the comparison of dollar figures from different points in time.
The primary advantage of mutual funds is that they
allow people with small amounts of money to diversify
Productivity is defined as the
amount of goods and services produced from each unit of labor input
The circular flow diagram is an example of
an economic model
If the demand for a product decreases, then we would expect equilibrium price
and equilibirum quantity both to decrease
The price elasticity of demand measures
buyer responsiveness to price changes.
A market includes
buyers and sellers
Macroeconomics is the study of
economy-wide phenomena
Demand is elastic if the price elasticity of demand is
greater than 1
Which of the following statistics is usually regarded as the best single measure of a society's economic well-being?
gross domestic product (GDP)
In the circular flow diagram, the participants in the economy are
households and firms
Which of the following are residents of rich countries likely to have, rather than residents of poor countries?
housing, healthcare, life expectancy
In the CPI, goods and services are weighted according to
how much consumers buy of each good or service
Gross domestic product measures
income and expenditures
If the supply of a product decreases, then we would expect equilibrium price to
increase and equilibrium quantity to decrease
If muffins and bagels are substitutes, a higher price for bagels would result in an
increase in demand for the muffins
An increase in input costs to firms in a market will result in a
increase in equilibrium price and a decrease in equilibrium quantity
When the overall level of prices in the economy is increasing, economists say that the economy is in a state of
inflation
When the overall level of prices in the economy is increasing, economists say the economy is experiencing
inflation
Risk aversion helps to explain various things we observe in the economy including
insurance, "dont put all your eggs in one basket", and the risk-return trade-off.
Oil is considered to be a non-renewable energy source. Oil
is a scarce resource
The market demand curve
is the sum of all individual demand curves
Human capital is
knowledge and skills that workers have acquired
Compared to stocks, bonds offer the holder
lower risk and lower potential return
A group of buyers and sellers of a particular good or service is called a
market
In computing GDP, market prices are used to value final goods and services because
market prices reflect the values of goods and services
The sum of all the individuals supply curves for a product is called
market supply
What you give up to obtain an item is called your
opportunity cost
Economists compute the price elasticity of demand as the
percentage change in the quantity demanded divided by the percentage change in price
The supply curve for a good is a line that relates
price and quantity supplied
A legal maximum on the price at which a good can be sold is called a
price ceiling
A legal minimum on the price at which a good can be sold is called a
price floor
Productivity is the amount of goods and services
produced for each hour of a worker's time. It is linked to a nation's economic policies.
Which of the following terms is used to refer to the ability of people to exercise authority over the resources they own?
property right
A nation's standard of living is best measured by its
real GDP per person
The overriding reason why households and societies face many decisions it that...
resources are scarce
A decrease in quantity demanded
results in a movement upward and to the left along a demand curve
The law of supple states that, other things equal, when the price of a good
rises, the quantity supplied of the good rises
If the tax revenue of the federal government exceeds spending, then the government necessarily
runs a budget surplus
In a market economy, economic activity is guided by
self interest and prices
Suppose there is a decrease in the price level of steel. We would expect the supply curve for steel beams to
shift rightward
Who is not included in the labor force according to the BLS?
someone who is retired and not looking for work.
The forces that make market economies work are
supply and demand
A table that shows the relationship between the price of a good and the quantity supplied of that good is called a
supply schedule
Suppose chocolate dipped strawberries are currently selling for $30 a dozen, but the equilibrium price is $20 per dozen. We would expect a
surplus to exist and the market price of the strawberries to decrease
A COLA (cost of living allowance) automatically raises the wage when
the CPI increases
Which government entity computes U.S. GDP every three months?
the Department of Commerce
Which entity within the U.S. government is responsible for computing and reporting the CPI?
the Department of Labor
A surplus exists in a market if
the current price is above its equilibrium price
Suppose that over the past year, the real interest rate was 5% and the inflation rate was 3%. It follows that
the dollar value of savings increased at 8% and the purchasing power of savings increased at 5%
Who accepts all the risk associated with a mutual fund's portfolio of stocks and/or bonds?
the fund's shareholders
"Other things equal, when the price of a good rises, the quantity demanded of the good falls, and when the price falls, the quantity demanded rises." This relationship between prices and quantity demanded is referred to as
the law of demand
A movement along the supply curve might be caused by a change in
the price of the good or service that is being supplied
Which of the following items is the one type of household expenditure that is categorized as investment rather than consumption when calculating GDP?
the purchase of a new house
The price elasticity of supply measures how much
the quantity supplied responds to changes in the price of the good
The demand for a good or service is determined by
those who buy the good or service
Unemployment data are collected
through a regular survey of about 60,000 households.
GDP is defined as the
value of all final goods and services produced within a country in a given period of time
The quantity demanded of a good is the amount that buyers are
willing and ale to purchase