Macroeconomics

If entrepreneurs suddenly become pessimistic, A) AD will fall and the Fed should counter it with expansionary monetary policy B) SRAS will fall and the Fed should counter it with expansionary fiscal policy C) AD will rise and the Fed should counter it with contractionary monetary policy D) AD will rise and the Fed should counter it with contractionary fiscal policy

A) AD will fall and the Fe should counter it with expansionary monetary policy

The Structure of Production shows the relationship between A) Capital, Time, Natural Resources and Labor B) Goods-in-process, Money and Inflation C) GDP, Inflation and Unemployment D) Labor and Management

A) Capital, Time, Natural Resources and Labor

Which of the following is not a characteristic of good money? A) Intangible B) Durable C) Portable D) Homogenous E) Divisible

A) Intangible

Which of the following is NOT true about Sticky Prices(Wages)? A) When inflation is higher then expected, profits will decrease and business will contract B) People will adjust to new rates of inflation, but it takes them awhile to realize the difference C) The SRAS is flatter to the left of the Solow Growth Curve because people resist cuts to their nominal wages D) The SRAS is steeper to the right of the Solow Growth Curve because people more readily accept wage increases, even if they don't keep pace with inflation. E) All of the above are true

A) When inflation is higher then expected, profits will decrease and business will contract

Which of the following choices can represent the sources of growth identified by the Solow growth model Y=F(A,K,eL)? A) capital stock, education and labor, knowledge and ideas B) capital stock, technology, and skilled labor only C) capital stock, depreciation, and human capital D) all of these answers are correct E) none of the above.

A) capital stock, educational and labor, knowledge and ideas

Despite the fact most economic activity does not occur at the retail level, GDP only measures final goods and services because A) economists want to avoid double-counting B) measuring partially completed time s is too difficult for the government workers C) final goods are the only things that have market value D) there is no such thing as a "non-final" service E) Actually, this premise is wrong because GDP does add in Intermediate Capital (Goods-in-process)

A) economists want to avoid double-counting

All else constant, time preference is the desire to A) have goods and services sooner rather than later B) delay the purchase of goods and services C) have goods and services in retirement years D) have goods and services that are made in the current year E) prefer to have the time to do all the things we want in retirement.

A) have goods and services sooner rather than later

All else equal, an increase in savings will cause capital stock to A) increase B) decrease C) remain unchanged D) increase and then decrease E) decrease and then increase

A) increase

Opportunity Cost A) is the cost of the next best option not taken. B) is the cost of trying to find a job or other similar opportunity. C) is the cost of all the alternatives of a decision. D) is the second most important cost in economic reasoning. E) is no different that the average cost of a business decision.

A) is the cost of the next best option not taken.

Which of the following chains of logic explain the functions of banks in the process of economic growth? A) savers deposit their savings in banks. Banks direct these funds to firms that invest and engage in capital accumulation that furthers economic growth B) savers deposit their savings into banks. Banks directly accumulate capital equipment, which plays an important role in economic growth C) savers borrow money to buy houses, cars, boats, and other large ticket items. This increase in consumption stimulates economy into future growth D) firms borrow the stock market. These funds are used for investment, which leads to the capital accumulation that furthers economic growth E) the demand for loanable funds shows a direct relationship between the real interest rate that banks charge and the quantity of loans demanded

A) savers deposit their savings in banks. Banks direct theses funds to firms that invest and engage in capital accumulation that furthers economic growth

The average number of times a dollar is spent on final goods and services during a year is A) the velocity of money B) the money supply C) the consumption rate D) the quantity theory of money E) money illusion

A) the velocity of money

Price controls such as price ceilings have what characteristics? A) they contribute to wasteful changes in quality B) they make market competition fairer. C) they distribute resources in the most equitable method. D) they are needed to correct the demands of an overly crowded world E) none of the above.

A) they contribute to wasteful changes in quality

Suppose the Fed expands the money supply by $160,000. If the Require Reserve Ratio is 10%, by how much will the total money supply be expected to change? A) $160,000 B) $1.6 million C) $16 million D) $1.76 million

B) $1.6 million

What was the major cause of the Housing Boom and Crash in 2007-2008 A) too few federal regulations did not do enough to stop banks B) expansionary monetary policy by the Fed lowered interest rates C) taxes were too low causing too many people people to have too much money D) Unrestricted Capitalism always produces business cycles

B) Expansionary monetary policy by the Fed lowered interest rates

Who knows how to make a pencil? A) Anyone who has access to YouTube can learn to make a pencil. B) No one, it is far too complex. C) The President of the pencil company D) The Director of the Bureau of Printing and Engraving E) None of the above.

B) No one, it is far too complex.

Which presents the most difficult problem for the Fed to correct? A) a positive monetary shock B) a negative real shock C) a negative monetary shock D) The shock that comes from learning about who the election

B) a negative real shock

In "Credit Expansion and the Trade Cycle" Ludwig von Mises argues that we should not engage in policy of inflation because A) inflation only helps the government B) at first the inflation gives a sense of euphoria and then it is very costly to undo C) inflation leads to international conflict and wart D) at first the inflation creates food shortages and then it creates a zombie apocalypse

B) at first inflation gives a sense of euphoria and then it is very costly to undo

If we adopted Senator Bernie Sander's proposal of making college education free for all, then we would expect to see A) many people finish their degrees in shorter periods of time. B) college tuition increases at a rate that is even faster that today's rate C) more people get into Harvard and Yale D) the quality of education increase E) all of the will happen

B) college tuition increase at a rate that is even faster tan today's rate

What scenario can force the demand curve to shift to the right? A) there is an increase of the tax on oil B) consumer income increases and the good in the market is normal good, C) consumer income falls and the good in the market is a normal good D) consumer income rises and the good in the market is an inferior good E) consumer income falls and the good in the market is a luxury good

B) consumer income increases and the good in the market is a normal good

The reason that the United States has experienced sustained economic growth for over 200 years is mostly due to which of the following? A) timely replacement of physical capital B) continued advances in technological knowledge C) steady increase in population D) strategic government planning E) our natural resources

B) continued advances in technological knowledge

The quantity theory of money describes the relationship between A) prices, employment, money, and production B) velocity, money, real output, and prices C) GDP, money, consumption, and savings D) consumption, investment, government spending and net exports. E) none of the answers is correct

B) velocity, money, real output, and prices

Who is typically regarded as the founder of Modern Economic Theory? A) Karl Marx B) David Hume C) Adam Smith D) David Ricardo E) None of the above.

C) Adam Smith

What is the difference between an exogenous factor and an endogenous factor? A) an exogenous factor is something that comes form within the model B) an endogenous factor is something that is found next to the model C) Exogenous factors influence the model from the outside D) Endogenous factors come from outer space

C) Exogenous factors influence the model from the outside

Which of the following is a negative shock to the Aggregate Demand Curve? A) An increase in consumer and investor confidence. B) Lower taxes on business and consumer goods C) Fear of an oncoming recession. D) The discovery of new oil reserves causing oil prices to fall E) A decrease in the amount of governmental regulations

C) Fear of an oncoming recession.

According to the Austrian Business Cycle Theory, the cause of the Boom/Bust Cycle is A) an increase in the price of crude oil B) an increase in the wages paid labor C) an increase in amount of labor D) an expansion of artificial credit E) None of the above

D) an expansion of artificial credit

What is a quota? A) It is the maximum legal price above the equilibrium price B) it is the maximum legal price below the equilibrium price C) it is the maximum legal quantity that is allowed into the country D) it is a maximum legal quantity that is allowed into the country E) it is when you are only partially quoting someone

C) It is the maximum legal quantity that is allowed into the country

In the market for fertilizer, an A) increase in the wage rate will increase the demand for fertilizer. B) increase in the wage rate will increase the supply of fertilizer C) advance in technology will increase the supply of fertilizer. D) increase in the cost of equipment will increase the supply of fertilizer E) addition of new suppliers will increase the demand for fertilizers.

C) advance in technology will increase the supply of fertilizer.

Which of the following are factors that shift the demand curve? A) price of substitutes, tastes, price of complements B) costs of production, price of the product, and subsidies C) income, population, tastes, and input prices D) expectations, opportunity costs, price of the product E) technology, input costs, taxes and subsidies

C) income, population tastes, and intput prices

As we see in the Solow model, as more units of capital are added, output A) increases at an increasing rate B) increases at a constant rate C) increases at a decreasing rate D) remains constant E) decreases

C) increases at a decreasing rate

Solow Growth Curve A) is also called the "Short-Run Aggregate Supply Curve" B) shows the growth rate of inflation C) is set at the rate of the historic average GDP growth D) shifts with every change in monetary policy E) got its name from each country having to operate on its own

C) is set at the rate of the historic average GDP growth

Throughout human history we know that A) all countries were able to establish periods of high levels of a real GDP per capita. B) most countries were only able to establish a few decades of high levels of real GDP per capita C) not until the early 19th century few countries able to establish sustained long-run economic growth D) all countries will eventually return to very low levels of real GDP per capita E) all countries are poor and remain so regardless of their institutions

C) not until the early 19th century were a few countries able to establish sustained long-run economic growth

According to the Austrian macroeconomic model, when people become more patient A) the economy falls into a recession B) the economy experiences massive inflation C) the amount consumed, saved and invested changes, but the economy remains at full employment. D) all of the above occur

C) the amount consumed, saved and invested changes, but the economy remains at full employment.

What is it meant by the steady state level of capital? A) all of the nation's capital is reinvested back into that country B) positive net capital investments continues to drive growth at a steady rate C) the amount invested is completely offset by the amount worn out and depreciated D) investment eventually exceeds depreciation E) it is when a country puts its capital away from earthquake prone areas

C) the amount invested is completely offset by the amount worn out and depreciated

Why do some economists think that GDP may overestimate the actual level of activity in an economy? A) because of accounting errors B) there is no positive adjustment for the underground economy C) there is no negative adjustment for pollution D) it does not account for the distribution of income in an economy E) there is no positive adjustment for leisure and well-being

C) there is no negative adjustment for pollution

Everyday we rely on the work of millions of other people to provide us with food, clothing, and shelter. People work for our benefit because A) trade-offs B) people think at the margin C) we appeal to others' self-intrest. D) institutions require them to do so. E) of the importance of wealth

C) we appeal to others' self-interest.

Conducting stabilizing monetary policy is difficult because, A) the Fed uses data that is old B) monetary policy takes 6-18 months to have an effect C) people might not trust the Fed's credibility D) All of the above are reasons why monetary policy is difficult.

D) All of the above are reasons why monetary policy is difficult

When we trade which of the following happens? A) Each side gains exactly the same amount B) We trade EQUAL values C) One side wins while the other side might or might not win. D) Both sides win, but we don't know by how much E) We have to look at the specifics of each trade to see of anyone gains.

D) Both sides win, but we don't know by how much.

Which of the following is NOT a question that economist ask about Business Cycles A) why do business cycles exist? B) why do entrepreneurs commit a cluster of errors at roughly the same time C) Why does the economy fluctuate and not steadily grow along a smooth trend D) why are baby boomers tending to be net consumers today? E) why do consumer goods markets fluctuate less than fluctuations found in the earlier stages of production

D) Why are baby-boomers tending to be net consumers today?

Price ceilings cause losses in product quality because A) producers may opt for cheaper inputs in order to keep producing at the ceiling price B) although there is excess demand for the product, since producers cannot raise price, they do not have an incentive to produce a quality product C) producers lower product quality in an attempt to raise profits even when selling at the ceiling price. D) All the answers are correct E) None of the answers are correct

D) all of theses answers are correct

Which of the following would be the most likely reason for the increase in the demand for loanable funds? A) a decrease in the interest rate B) an increase in savings C) a decrease in consumption D) an increase in government borrowing E) the economy is projected to fall into deep recession

D) an increase in government borrowing

What do we call an increase in the average level of prices in an economy? A) recession B) stagflation C) defaltion D) inflation E) disinflaiton

D) inflation

Which of the following is NOT a function of money? A) It acts as a store of value. B) It is the medium of exchange C) It is a unit of account D) It is a measure of use value

D) it is a measure of use value

The economic problem that all societies must address is A) how to make the rich wealthier B) one where there are few raw materials and how to acquire more C) how to make sure that wealth is evenly distributed to all its members D) one in which there are resources and how to not just transformed into goods, but goods that can satisfy the most intense wants and desires. E) how to transform a losing team into a national champion

D) one in which there are resources and how not to just transformed into goods but goods that can satisfy the most intense wants and desires.

The key component to Comparative Advantage is that A) people have different dreams and goals B) different areas have different monetary units C) some countries have lower trade barriers than the U.S. D) people have different opportunity costs. E) large countries can take advantage of smaller companies.

D) people have different opportunity cost.

Which of the following is NOT a function a function of the Federal Reserve? A) serving as the lender of last resort banks B) regulation the U.S. financial system C) regulating the money supply D)providing loans to small businesses

D) providing loans to small businesses

Which of the following is NOT a tool of the Federal reserve? A) Setting the required reserve ratio B) Open marktet operations C) Setting the discount rate D) Setting the federal funds rate

D) setting the federal funds rate

Which of the following is TRUE about the production of ideas? A) Ideas are non-rivalrous B) Ideas are not subject to diminishing returns C) Ideas are not produced by any single group of people D) Ideas have spillover effects that produce benefits that extend beyond the range of the market. E) All of the above are true. F) None of the above are true

E) All of the above are true

Thinking "at the margin" A) shows how to solves the Water/Diamonds Paradox. B) means looking at the decision in one-unit increments. C) is the basis of the Marginalist Revolution. D) means not to look at all of one thing versus all of the other thing E) All of the above.

E) All of the above.

Which of the following is NOT a type of capital? A) Financial Capital B) Capital Equipment C) Intermediate Capital D) Goods-in-process E) Each is a type of capital.

E) Each is a type of capital.

Who controls the Fed? A) Powerful, foreign bank interests B) The U.S. Treasury C) A coalition of think tanks D) The Bilderbergers E) None of the above

E) None of the above

According to the Austrian model, which of the following will help an economy recover form a recession. A) a cut in the capital gains tax B) the streamlining of mergers and acquisition laws C) a move from an income tax to consumption tax D) balancing the federal budget by reducing government spending E) All of the above

E) all of the above

Which of the following can increase the amount of structural unemployment? A) an increase in the number of weeks a person can receive unemployment benefits B) the introduction of the automobile to the horse and buggy economy C) an increase in the amount paid to unemployment benefit recipients D) the invention of the new textile machines that can do the work of ten people E) all of the above

E) all of the above

The key difference between monetary policy and a non-monetary policy theory of the business cycle is A) the monetary theory only looks at money B) the non monetary theory never looks at money C) The non monetary theory starts with looking at money and then looks at price signals D) the monetary theory looks at exogenous shocks and then looks at psychological factors E) None of the above is correct

E) none of the above

Axiomatic-Deductivism is A) the system where all analysis takes place at the level of the individual. B) a cool Latin Phrase that means everything else is held constant C) A great way for natural scientists to engage in the scientific method. D) a dependable legal system. E) None of the above.

E) none of the above.

India has a good deal of both physical and human capital. However, it is still has a low GDP per capita. Which does NOT explain this outcome? A) Indian institution are more concerned with equity B) Too many regulations impede India's market C) There are too many free riders D)Business are disallowed from beginning operation quickly. E)Many people speak English

E)Many people speak English