Macroeconomics Final Exam (official)

Barlow and Rusia own a nail salon. A manicure takes Barlow 60 minutes to complete and takes Rusia 45 minutes to complete. Completing a pedicure takes Barlow 45 minutes and takes Rusia 30 minutes. Who has a comparative advantage in pedicures?

Rusia because she has a lower opportunity cost.

Which of the following is a social insurance program in the United States?

Social Security

Which principle tells you that the true cost of something is the next best alternative you have to give up to get it?

The opportunity cost principle.

The aggregate production function is represented as:

Y = f(L, H, K).

Which of the scenarios represents consumption spending?

You eat at a fancy restaurant for Valentine's Day.

A production function is:

a method through which inputs can be turned into outputs, given the available resources.

When quantity demanded exceeds quantity supplied, _____ exists.

a shortage

An excise tax is a tax on:

a specific product.

The liquidity of an asset is defined as the:

ability to quickly and easily convert the asset to cash, with little or no loss in value.

In a market graph, consumer surplus is the area:

above the price and below the demand curve.

On a market graph, producer surplus is the area that is:

above the supply curve and below the price.

Which of the following is a source of comparative advantage?

abundant inputs

The working age population includes people who are:

age 16 or older who are not in the military or institutionalized.

Credit constraints limit the:

amount of money that people can borrow.

Future value is the:

amount that your money will grow into by a future date as a result of earning interest.

A trade cost is:

an extra cost incurred as a result of buying or selling a good abroad rather than domestically.

When a U.S. consumer buys Canadian maple syrup at the grocery store, this purchase is:

an import.

Market failure occurs when market forces lead to:

an inefficient outcome.

Sunk costs are costs that

are incurred in the past and cannot be reversed.

The consumer price index is an index that tracks the:

average price that consumers pay over time for a representative basket of goods and services.

The slope of the consumption function is the:

marginal propensity to consume.

GDP is defined as the:

market value of all final goods and services produced within a country in a given year.

Frictional unemployment is unemployment:

due to the time it takes for employers to search for workers and for workers to search for jobs.

Equilibrium in the loanable funds market determines the:

equilibrium real interest rate.

The concept of equity focuses on:

fairness.

A "final" good or service is one that is:

finished and ready for the final user.

The federal funds rate is the:

nominal interest rate that banks pay on overnight interbank loans.

Holding all else constant, if people eat out more at expensive restaurants when they earn more, then expensive restaurant meals are

normal goods.

Analysis based on value judgments is called _____ analysis.

normative

If you see that the consumer price index this year is lower than the consumer price index last year, this means that:

on average, prices went down across the economy.

The labor force participation rate is the:

percentage of the working age population that is either employed or unemployed.

The Producer Price Index is an index that tracks the:

price that businesses pay over time for the inputs used in the production process.

Forward guidance occurs when the Federal Reserve:

provides information about the future course of monetary policy in order to influence expectations about future interest rates.

An equilibrium price is a price where the

quantity supplied equals the quantity demanded.

If the price of jet fuel rises, the

quantity supplied of jet fuel increases.

A market is a

setting that brings together potential buyers and sellers.

Government-provided financial funding to households to compensate for bad outcomes such as unemployment, illness, disability, or outliving your savings is known as a:

social insurance system.

In Canada, all the provinces provide health care to all citizens and permanent residents. This is an example of:

social insurance.

Comparative advantage explains why people

specialize and trade.

Investment refers to:

spending on physical capital.

The three major pillars of the financial sector are the:

stock market, the bond market, and the banks.

Due to a decline in demand and popularity, Ford Motor Company is planning to phase out traditional sedans such as 'Fusion' and 'Taurus' to focus on SUVs and trucks. Ford's sedans and trucks/SUVs are

substitutes-in-production.

The law of supply refers to

the positive relationship between price and quantity supplied.

Menu costs are the:

marginal costs of adjusting prices.

Which of the following items is an inferior good?

Discount stores

What is quantity supplied?

It is the amount of an item that a seller is willing to sell at a particular price.

The cost-benefit principle states that a decision should be pursued only if the

benefits are greater than the costs.

A mutual fund is a fund that:

buys a portfolio of stocks and bonds on your behalf.

The "market value" of a good or service refers to the:

current dollar value of that good or service.

Depreciation refers to the:

decline in capital due to wear and tear, obsolescence, accidental damage, and aging.

Suppose that a CPI basket includes avocadoes, pineapples and oranges. Avocadoes become very expensive, and consumers substitute away from avocadoes and buy hummus instead. If the CPI basket does not change to reflect the move away from avocados, the result is:

substitution bias.

Mandatory spending is spending that:

supports programs that do not get determined annually but instead are set in law.

When a manager uses comparative advantage to assign tasks in a workplace, then each

task is assigned to the worker with the lowest opportunity cost for performing the task.

A tariff is a:

tax on imported products.

Intergenerational mobility is the extent to which:

the economic status of children is independent of the economic status of their parents.

A market's deadweight loss is calculated as:

the economic surplus at the efficient quantity minus the economic surplus at the actual quantity.

What is the Federal Reserve's mandate?

to ensure maximum employment while maintaining stable prices

The law of diminishing returns states that:

when one input is held constant, while other inputs are increased, eventually output will increase by smaller and smaller amounts.

Human capital refers to:

worker skills and knowledge.

An underemployed person is one who is:

working but whose skills are not fully utilized.

The table contains information about Pfizer's stock. How much is Pfizer, as a company, worth?

$200.33 billion.

What is social insurance?

It is government-provided financial funding to households to compensate for bad outcomes such as unemployment, illness, disability, or outliving their savings.

Which of the following is an investment?

Marios builds a new house.

What is the difference between microeconomics and macroeconomics?

Microeconomics is the study of individual decisions in specific markets, whereas macroeconomics is the study of the economy as a whole.

How is monetary policy different from fiscal policy?

Monetary policy adjusts interest rates, whereas fiscal policy adjusts government spending and taxes.

An initial public offering occurs when a company:

first sells stock directly to the public.

To maximize production, people should

focus on the task in which they have a comparative advantage.

The loanable funds market is the market for:

funds used to buy, rent, or build capital.

A bank can make money by:

giving you a particular interest return on your savings and then loaning out the same money at a higher rate of interest.

The U.S. Department of Education sponsors the i3 program (Investing in Innovation), which provides grants to educational institutions and schools that have a proven track record of high student achievement. This is an example of a government program designed to build:

human capital.

The principle that your best choice depends on your other choices, the choices others make, developments in other markets, and expectations about the future is known as the _____ principle.

interdependence

Discretionary spending is spending that:

is appropriated by Congress annually.

The person who has an absolute advantage in a task

is the one who is best at the task.

Diminishing marginal benefit:

is when buying an additional item yields a smaller marginal benefit than the previous item.

Shifts in demand

lead to price and quantity to move in the same direction.

The __________ suggests, decisions about quantities are best made incrementally.

marginal principle

A government can promote the development of human capital by:

subsidizing secondary school education.

The law of demand refers to

the inverse relationship between price and quantity demanded.