Macro Economics Final

Refer to Figure above (Guatemala's coffee market). When trade in coffee is allowed, consumer surplus in Guatemala

decreases by the area B + D.

When a tax is levied on a good, the buyers and sellers of the good share the burden,

regardless of how the tax is levied.

The overriding reason why households and societies face many decisions is that

resources are scarce

According to the quantity equation, the price level would change less than proportionately with a rise in the money supply if there were also either a

rise in output or a fall in velocity.

Marcus says that he would smoke one pack of cigarettes each day regardless of the price. If he is telling the truth, Marcus's

demand for cigarettes is perfectly inelastic.

Refer to Figure above (Guatemala's coffee market). With trade, Guatemala will

export 22 units of coffee.

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the

flatter the demand curve will be.

Refer to Figure above (Guatemala's coffee market). When trade in coffee is allowed, producer surplus in Guatemala

increases by the area B + D + G.

Which of the following statement is correct? Inflation .....

increases savers' tax burdens

When the price of petroleum goes up, the demand for solar power ______, and the demand for cars ______.

increases; decreases

The federal funds rate is the

interest rate at which banks lend reserves to each other overnight.

Goods with many close substitutes tend to have

more elastic demands.

According to the assumptions of the quantity theory of money, if the money supply increases by 5 percent, then

nominal GDP would rise by 5 percent; real GDP would be unchanged.

Refer to Figure above. The amount of deadweight loss caused by the tariff equals

$100

A bank's reserve ratio is 8 percent and the bank has $1,000 in deposits. Its reserves amount to

$80

If real GDP is $15 trillion and nominal GDP is $16 trillion what is the GDP deflator?

($16 trillion /$15 trillion)*100

The US and Brazil has following opportunity costS. Which of the following terms of trade will benefit both the US and Brazil? US : opportunity cost of a large jet = 3.5 small jet Brazil : opportunity cost of a large jet = 5 small jet

1 large jet = 4 small jets

Which of the following terms of trade benefits both countries in trade?

10 apple for 7 tomatoes

Given the scenario above, suppose technology progress causes Y to increase to 824 bushels in 2015. What is the inflation rate in 2015? (select the closest number)

2%

If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a

20 percent decrease in the quantity demanded.

Based on the Figure above, if the production possibilities frontier shown is for two months of production, then which of the following combinations of peanuts and cashews could Brazil produce in two months?

3 pounds of peanuts and 150 pounds of cashews

Refer to above Table. What is the opportunity cost to Footville of increasing the production of shoes from 400 to 600?

300 socks

The nominal interest rate is 6 percent and the real interest rate is 1 percent. What is the inflation rate?

5 percent

The economy produces only one product. The economy has enough resources to produce Y = 800 bushels of corn. Velocity is constant. In 2014, Money Supply (MS) is $2000, Price (P) is $5 per bushel. In 2015, the Fed increases MS by 5%, to $2100. Given the scenario above, what is the inflation rate in 2015?

5%

Refer to Figure above. In the graph, MS represents the money supply and MD represents money demand. The vertical axis is the value of money measured as 1/P and the horizontal axis is the quantity of money Suppose the relevant money-demand curve is the one labeled MD1; also suppose the velocity of money is 2. If the money market is in equilibrium, then the economy's real GDP amounts to

5,000

The fixed basket of goods contains 500 cans of soda and 100 pizzas. The base year is 2014, and the prices for soda and pizza are given below. Refer to the table above. The values for the CPI in 2015 and 2016 are, respectively:

90, 115

For which of the following individuals would the opportunity cost of going to college be highest?

A famous, highly paid actor who wants to take time away from show business to finish college and earn a degree

Refer to Figure above. Which of the following events could explain a shift of the money-supply curve from MS1 to MS2?

An open-market purchase of bonds by the Federal Reserve

Refer to the graph. Which of the following is correct?

At P3, producer surplus is smaller than at P1.

Given 10 hours, Australi and Brazil can produce tomatoes and apples as follows: Suppose that in Australia, it takes 10 hours to harvest 50 bushels of apples and 10 hours to harvest 25 bushels of tomatoes. Suppose a worker in Brazil can harvest 25 bushels of apples in 10 hours or 20 bushels of tomatoes in 10 hours. Which country has the absolute advantage in producing apples?

Australia

Which country has the absolute advantage in producing tomatoes?

Australia

Which country has the comparative advantage in producing apples?

Australia

Refer to above figure, It is not possible for this economy to produce at point

C

The decrease in total surplus that results from a market distortion, such as a tax, is called a

Deadweight Loss

Refer to above figure. the rate of trade-off between producing chairs and producing couches is constant in

Graph (b) only.

Refer to Figure above (Guatemala's coffee market). Relative to the no-trade situation, trade with the rest of the world results in a. Guatemalan consumers paying a higher price for coffee. b. a decrease in producer surplus in Guatemala. c. a decrease in total surplus in Guatemala. d. an increase in consumer surplus.

Guatemalan consumers paying a higher price for coffee.

Refer to Figure above. Suppose the government imposes a tax of P'-P'''. The loss in total surplus due to tax is measured by the area

I + Y

If Korea is capable of producing either shoes or soccer balls or some combination of the two, then

Korea's opportunity cost of shoes is the inverse of its opportunity cost of soccer balls.

Refer to Figure above. Which of the following combinations will maximize the deadweight loss from a tax?

Supply2 and Demand2

Suppose the government imposes a tax of P'-P'''. The area measured by K + L represents

Tax Revenue

Which of the following is NOT an example of monetary policy?

The Federal Reserve facilitates bank transactions by clearing checks.

You go to the movieplex where movies ordinarily cost $9. You are intending to see a movie for which you have a $3-off coupon good for only that movie at that time. However, when you get there you see a friend who asks if you would rather see a new release. Both movies start and end at the same time. If you decide to see the new release with your friend, what is your opportunity cost?

The amount you value the first movie + $3

You bought some shares of stock and, over the next year, the price per share increased by 5 percent, as did the price level. Before taxes, you experienced

a nominal gain, but no real gain, and you paid taxes on the nominal gain.

CASE 1: inflation rate = 0%, nominal interest rate = 10% CASE 2: inflation rate = 10%, nominal interest rate = 20% What is the real interest rate after-tax for CASE 1 and CASE 2?

a. 7.5%, 5%

If the demand for a good falls when income increases, then the good is called

an inferior goods

Refer to Figure above. When the price rises from P1 to P2, consumer surplus

decreases by an amount equal to B+C.

A likely example of complementary goods for most people would be

cellphones and phone apps.

The idea that nominal variables are heavily influenced by the quantity of money and that money is largely irrelevant for understanding the determinants of real variables is explained by the

classical dichotomy

The most obvious benefit of specialization and trade is that they allow us to

consume more goods than we otherwise would be able to consume.

According to the law of demand, an increase in the price of a good will

decrease quantity demanded.

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should

sell the ticket because the marginal benefit exceeds the marginal cost.

When conducting an open-market sale, the Fed

sells government bonds, and in so doing decreases the money supply.

The economy of Mainland uses gold as its money. If the government discovers a large reserve of gold on their land the

supply of money increases, the value of money falls, and prices rise.

Refer to above Figure. In this market, a minimum wage of $7.00 creates a labor

surplus of 4,000 worker hours.

The velocity of money is

the average number of times per year a dollar is spent.

Refer to Figure above. When the money supply curve shifts from MS1 to MS2,

the equilibrium value of money decreases.

Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that

the nation is not using all available resources or is using inferior technology or both.

Taxes on labor may distort labor markets greatly if

the number of hours many part-time workers want to work is very sensitive to the wage rate.

If a price ceiling is not binding, then

there will be no effect on the market price or quantity sold.

Suppose Brazil has an absolute advantage over other countries in producing almonds, but other countries have a comparative advantage over Brazil in producing almonds. If trade in almonds is allowed, Brazil

will import almonds