MIDTERM ECON202
Goods that are produced this year, stored in inventories, and then sold to consumers next year ______.
count in this year's GDP.
In 2012, consumers in Dexter consumed only books and pens. The prices and quantities for 2012 and 2013 are listed in the table above. The reference base period for Dexter's CPI is 2012. What is the inflation rate in 2013?
69 percent
In an economy, 23 million people are employed and 2 million are unemployed, but 5 million part-time workers would prefer full-time work. What is the unemployment rate?
8 percent
Entrepreneurs do all of the following EXCEPT _____.
own all the other resources.
Possessing a comparative advantage in the production of a particular good _____.
permits gains from trade.
Refer to the production possibilities frontier in the figure above. Which production point indicates that resources are NOT fully utilized or are misallocated?
point c
Employment and (total) potential GDP increase if the _______.
labor supply curve shifts rightward and the labor demand curve does not shift.
The real wage rate will fall if the ______.
labor supply curve shifts rightward and the labor demand curve does not shift.
Which of the following is not a component of the incomes approach to GDP?
net exports
The labor force is defined as _______.
workers with jobs and unemployed workers.
Real GDP can be criticized as a measure of economic welfare because it _________.
• does not take account of the degradation of environmental quality. • does not include the value of products produced in the household. • does not include leisure time available to a society.
Full employment exists when ______.
• the economy is operating at the natural rate of unemployment. • there is no cyclical unemployment. • there is only frictional and structural unemployment.
When a textile company keeps track of its inventory using a computer and its competitor uses a spreadsheet and pencil, they are both answering the ________ question.
"how"
The tables above show the labor market and the production function schedule for the country of Pickett. Potential GDP is ________.
$14 trillion
Using the information in the table above, calculate the value of GDP.
$140 million
In the above figure, what is the full-employment real wage rate and quantity of hours per year?
$40 and 60 billion hours per year
The above table shows production combinations on a country's production possibilities frontier. Which of the following points signifies efficient production?
0 units of good X and 40 units of good Y
Agnes can produce either 1 unit of X or 1 unit of Y in an hour, while Brenda can produce either 2 units of X or 4 units of Y in an hour. The opportunity cost of producing a unit of X is ________.
1 unit of Y for Agnes and 2 units of Y for Brenda.
Based on the following data for the country of Tiny Town, the unemployment rate equals Population = 100 Labor force = 80 Number of employed persons = 70 Number of discouraged workers = 5
10/80 × 100.
The information in the table above gives the 2012 reference base period CPI basket and prices used to construct the CPI for a small nation. It also has the 2013 prices. What is the value of the CPI for the reference base period, 2012?
100
Suppose the price level this year is 150 and the price level last year was 125. The inflation rate between last year and this year was _______.
20 percent.
In the figure above, the allocatively efficient output of computers is _________.
3 million per year
At one point along a PPF, 10 pizzas and 7 sandwiches can be produced. At another point along the same PPF, 9 pizzas and 10 sandwiches can be produced. The opportunity cost of a pizza between these points is ________ per pizza.
3 sandwiches
The economic growth rate in China between 2000 and 2003 was ________ percent.
30
In the table above, the number of marginally attached workers is ________.
4 million
Which of the following is a microeconomic topic?
A. The cause of why total employment may decrease. B. The reasons for a decline in average prices. C. The effect of the government budget deficit on inflation. D. The reasons why Kathy buys less orange juice. D
Which of the following is CORRECT?
Aggregate income, aggregate expenditure and GDP are all equal.
When the central bank buys government securities, it leads to ______.
an increase in lending by banks
In the above figure, consumption expenditure is shown by flow ____?
B
Which of the following is NOT an example of an opportunity cost?
Because Mary is now being paid a higher wage, she can afford to buy a new car even though she is moving into a bigger apartment.
The main policy-making organ of the Federal Reserve System is the ______.
Federal Open Market Committee
The U.S. central bank is formally called the ______.
Federal Reserve System.
Which of the following CORRECTLY describes "frictional unemployment"?
Frictional unemployment is a normal occurrence in a growing economy.
Which of the following expenditures is for an intermediate good?
General Motors buys new tires to put on the cars it's building.
As a "central bank," which of the following is true regarding the Fed? I.The Fed is a public authority that regulates the nation's banks. II.The Fed is not allowed to provide services to commercial banks like Citibank. III.The Fed is required to provide banking services to private citizens.
I
Which of the following statements concerning commercial banks is true?
Most banks maintain cash reserves equal to a fraction of deposits.
Which Federal Reserve bank president is always on the Federal Open Market Committee?
New York
The above table shows production points on Sweet-Tooth Land's production possibilities frontier. Which of the following statements is TRUE?
Producing 0 chocolate bars and 100 cans of cola is both attainable and efficient.
Which of the following people would be counted as is employed in the Current Population Survey?
Rich, who is working 20 hours a week but wants a full-time job
What is true about production of goods and services in the United States?
The United States produces more services than goods.
Suppose a scientific breakthrough made free solar power available in unlimited quantities in the United States. The effect of this invention would be to move the _________.
U.S. production possibilities frontier outward.
One of the largest categories of exports from the United States is now pop culture: movies, music, TV programming, and videos. A direct conclusion from this information is that, compared to other countries, the United States has _______.
a comparative advantage in producing pop culture.
A common definition of a recession is a time with ______.
a decrease in real GDP for two or more successive quarters.
Which of the following does NOT describe a function of money?
a hedge against inflation
An increase in a nation's population results in _______.
a movement along the nation's production function.
The statement "The unemployment rate for teens is higher than that for adults" is ___________.
a positive statement
A point outside a production possibilities frontier indicates __________.
an output combination that society cannot attain given its current level of resources and technology.
Checks are NOT money because they _____.
are merely instructions to transfer money.
Nominal GDP is the value of final goods and services _________.
at the prices of that year.
The figure above shows Roger's production possibilities frontier. Point a is an ________ point and at that point production is ________.
attainable; inefficient
The banking system in the United States creates money through the combination of excess reserves and _________.
banks loaning excess reserves
An U.S. firm buys a new industrial sewing machine from a company located in France. Which of the following is TRUE? I. U.S. net exports decrease. II. U.S. investment increases.
both I and II
Economists point out that scarcity confronts __________.
both the poor and the rich
The fact of increasing opportunity costs means that a production possibilities frontier will _\\\\\\?
bow outward.
In an eight-hour day, Andy can produce either 24 loaves of bread or 8 pounds of butter. In an eight-hour day, Bob can produce either 8 loaves of bread or 8 pounds of butter. We know that Andy has a comparative advantage in the production of ________.
bread, while Bob has a comparative advantage in the production of butter.
Whenever actual reserves exceed required reserves, the bank ________.
can lend out additional funds.
By specialization and trade, two individuals can ________.
consume at a point beyond their individual production possibilities frontiers.
If the economy enters an expansion _______.
cyclical unemployment decreases.
By raising the required reserve ratio, the Fed can _______.
decrease the quantity of money
In order to combat inflation, the Fed will ________ the quantity of money and ________ the interest rate.
decrease; raise
Liquidity is the ______.
ease with which an asset can be converted into money.
Full employment corresponds to _______.
equilibrium in the labor market, with actual GDP being equal to potential GDP.
Which of the following is a final good?
flour purchased at the store to bake cookies.
When the economy is operating at full employment, the natural unemployment rate consists of only _____.
frictional and structural unemployment.
A person quits her job in order to spend time looking for a better-paying job. This type of unemployment is an example of _________.
frictional unemployment
Marginal benefit is the benefit ________ one more unit of the good and ________ of the good increases.
from consuming; decreases as consumption
Gross Domestic Product is equal to the sum of consumption expenditure, investment, net exports, and ________.
government expenditures on goods and services
Individuals A and B both produce good X. We say that A has a comparative advantage in the production of good X if A _______.
has a lower opportunity cost of producing good X than has B.
The largest influence on the Fed's monetary policy actions is _______.
held by the chairman of the Board of Governors, who sets the policy agenda.
According to the figure above, the opportunity cost of producing another computer is ________.
higher at B
We are interested in long-term growth primarily because it brings _______.
higher standards of living.
Which of the following is a macroeconomic issue?
how federal government budget deficits affect interest rates.
________ is the knowledge and skill that people have obtained from education and on-the-job training.
human capital
Agnes can produce either 1 unit of X or 1 unit of Y in an hour, while Brenda can produce either 2 units of X or 4 units of Y in an hour. There can be gains from exchange ________.
if Agnes specializes in the production of X and Brenda specializes in the production of Y.
George and Michael can gain from exchange ______.
if each specializes in the production of the good for which he has the lower opportunity cost.
An increase in exports of goods or services with no change in imports of goods or services ________.
increases GDP
Labor productivity increases with ______.
increases in capital.
During an economic expansion, real GDP ________ and unemployment ________.
increases, decreases.
As a result of the rightward shift in the demand curve for labor from LD0 to LD1, the equilibrium level of employment ________ and potential GDP ________.
increases, increases
When the population increases with no change in labor productivity, employment ________ and potential GDP ________.
increases, increases
The Federal Deposit Insurance Corporation (FDIC) does what?
insures depositors against bank failure
During the next hour John can play basketball, watch television, or read a book. The opportunity cost of reading a book is ________.
is the value of playing basketball if John prefers that to watching television.
An asset category that is a major source of profits for banks is _______.
loans
Scarcity requires that people must _______.
make choices
The benefit that arises from an increase in an activity is called __________.
marginal benefit
Potential GDP ________.
measures the maximum amount of production that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation.
The analysis of the behavior of individual decision-making units is the definition of __________?
microeconomics
In any year, real GDP ______.
might be greater or less than potential GDP.
Controlling the quantity of money and interest rates to influence aggregate economic activity is called ______.
monetary policy
A country that must decrease production of one good in order to increase the production of another ___________.
must be producing on its production possibilities frontier.
Which of the following is TRUE regarding marginal benefit? I) The marginal benefit curve shows the benefit firms receive by producing another unit of a good. II) Marginal benefit increases as more of a good is consumed.
neither I nor II
In the figure above, suppose that Mac and Izzie trade and reach point c. Then ___________.
neither Mac nor Izzie produce outside their production possibilities frontiers.
The word "final" in the definition of GDP refers to _______.
not counting intermediate goods or services.
Checks are ______.
not money, and neither are credit cards.
Price indexes can overstate inflation because they ______.
omit some quality improvements
An economic model includes ___________.
only details considered essential
Full employment occurs ________.
only if the unemployment rate is equal to the natural rate of unemployment.
In 2013, Ozzie purchased a 2010 Ford Escort from his neighbor for his son, purchased a 2009 "one owner" Camry from Larchmont Toyota for his wife, bought a 2013 new Ford for himself, and sold his 2002 Dodge Caravan to his teenage nephew. Which, if any, of these transactions will be included in GDP in 2013?
only the purchase of the Ford.
Economic growth is the result of all of the following except ________?
opportunity cost
When an action is chosen, the highest-valued alternative NOT chosen is the ______.
opportunity cost
The opportunity cost of economic growth is _______.
present consumption that a nation gives up to accumulate capital.
When economic growth occurs, the ______.
production possibilities frontier shifts outward.
An increase in labor productivity ________ the real wage rate and an increase in population ________ the real wage rate.
raises, lowers
In the labor market, an increase in labor productivity ________ the real wage rate and ________ the level of employment.
raises; increases
The major role of a commercial bank is to _______.
receive deposits and make loans.
The minimum percentage of deposits that a depository institution must hold and cannot use for lending is known as the _______.
required reserve ratio.
Because the Fed can influence short-term interest rates, these interest rates _______.
rise and fall together
Along the aggregate production function, as the quantity of labor rises, real GDP ________.
rises
Economic growth __________.
shifts the PPF outward.
If new capital increases labor productivity, the supply of labor ________ and the demand for labor ________.
stays the same, increases
When the economy switches production toward services and away from manufacturing and workers in the manufacturing industry are permanently laid off _________.
structural unemployment increases.
According to the Economic Times (09/2012), Standard & Poor's forecast for India's GDP growth rate was cut by 1 percentage point to 5.5 percent as the entire Asia Pacific region feels the pressure of ongoing economic uncertainty. India has averaged 7 percent growth in GDP since 1997. Based on this story, it is most likely that the slowdown reflects a _______.
temporary business cycle slowdown
People have different amounts of income. This observation is most directly related to which of the big microeconomic questions?
the "for whom" question
An open market operation involves _____.
the Federal Reserve's purchase or sale of government securities.
Human capital is _____?
the accumulated skill and knowledge of workers.
Cyclical unemployment is the result of _____.
the business cycle
Holding all variables except one constant and assessing the impact of the one variable which has changed is an example of using _________.
the ceterus paribus assumption
Which is the most accurate definition of the study of economics? Economics is the study of __________?
the choices we make because of scarcity.
Which of the following correctly completes this statement? Money in the United States includes ________.
the currency and bank deposits held by the nonbanking public.
An opportunity cost of economic growth is _______.
the decrease in production of consumption goods in the present time period.
Assuming farmers can plant either corn or soybeans, as U.S. farmers plant more corn to meet rising global demand ________.
the opportunity cost of producing corn increases.
A movement along the aggregate production function is the result of a change in ______.
the quantity of labor.
Which of the following is NOT a policy tool of the Federal Reserve System?
the tax rate imposed on interest income
When cyclical unemployment is zero _______.
the unemployment rate equals the natural unemployment rate.
Which of the following is NOT a factor of production?
the wages paid to workers
In economics, normative statements are about ________.
the way things ought to be
Which of the following is NOT included in the M1 definition of money?
time deposits
The definition of M2 includes _____.
time deposits, savings deposits, M1
Banks are in business _______.
to make a profit.
To obtain the gains available from comparative advantage, individuals or countries must do more than specialize; they must also ________.
trade
In the computation of GDP, Social Security payments count as _______.
transfer payments and are not included in GDP.
In the national income accounts, government expenditure on goods and services exclude _______.
transfer payments.
Business cycles are
unpredictable, but always have two phases and two turning points.
