Econ 101 - Assignment Essays

question

The factor income approach to calculating GDP can be summarized as the summation of
A) consumption, investment, government purchases, and exports.
B) consumption, investment, government purchases, and net exports.
C) wages, interest, rent, and profit.
D) wages, investment, rent, and profit.

answer

wages, interest, rent, and profit

question

An increase in the rent you pay for your apartment will
A) contribute to GDP as an investment.
B) contribute to GDP as a purchase of goods and services.
C) not contribute to GDP.
D) only contribute to GDP if you are a U.S. citizen.

answer

contribute to GDP as a purchase of goods and services

question

The value of a car produced and sold in 2000, and sold again in 2008, should be included in
GDP for
A) 2000 only.
B) 2008 only.
C) both 2000 and 2008.
D) either 2000 or 2008, but not both.

answer

2000 only

question

Workers ability to use various tools is known as _____________.
A) technological knowledge
B) human capital
C) knowledge
D) experience

answer

human capital

question

What is the most proximate (or direct) cause of growth in real GDP per capita?
A) the factors of production
B) institutions
C) political system in the economy
D) incentives

answer

the factors of production

question

The most important factor that contributed to China's rapid growth at the end of the 1970s and early 1980s was
A) physical capital.
B) human capital.
C) technology.
D) property rights.

answer

property rights

question

Increasing the amount of physical capital tends to _______ output per hour of workers and _______ the value of workers.
A) increase; increase
B) increase; decrease
C) decrease; decrease
D) decrease; increase

answer

increase; increase

question

What term do economists use to describe the growth rate of GDP per capita?
A) national growth
B) aggregate growth
C) real growth
D) economic growth

answer

economic growth

question

Which of the following is NOT a reason that world GDP per capita could grow even faster than its current rate?
A) The number of scientists and engineers is increased.
B) Consumers become richer.
C) Government spending has decreased.
D) Barriers to international trade are lowered.

answer

government spending has decreased

question

Economists prefer using real GDP because, other things held constant, increases in _____ represent true increases in the standard of living.
A) production
B) prices
C) trade balances
D) consumer spending

answer

production

question

Which of the following explains why Germany and Japan experienced such high growth rates just after the Second World War?
A) Trade agreements between Germany and Japan greatly enhanced economic growth.
B) High MPK levels contributed to significant per capita output growth.
C) Their technological advances at this time were higher than those of the United States.
D) All of the answers are correct.

answer

High MPK levels contributed to significant per capita output growth.
mpk - marginal production of capital

question

If government legislation requires businesses to switch to a different method of production that generates 50 percent fewer greenhouse gas emissions, compliance to this policy (assuming no other changes) can be illustrated in the Solow model by ______ the aggregate production function that leads to a ______ level of real GDP per person.
A) a shift up of; higher
B) a shift down of; lower
C) a movement to the right on; higher
D) a movement to the left on; higher

answer

a shift down of; lower

question

When a given bond's price increases, we know that the interest rate on this bond
A) remains unchanged.
B) must increase.
C) must decrease.
D) could increase, decrease, or remain unchanged.

answer

must decrease

question

Why do ratings agencies rate bonds?
A) to indicate the chance of a bond being repaid
B) to show a bond's probable rate of return
C) to validate the amount of collateral involved
D) Each of these answers is correct.

answer

to indicate the chance of a bond being repaid

question

When real gdp decreases, cyclical unemployment _________.

answer

increases

question

For a given nominal interest rate, an increase in the inflation rate will cause real interest rates to
A) remain relatively constant.
B) increase.
C) decrease.
D) become unpredictable.

answer

decrease

question

How might changes in the money supply be non-neutral in the short run?
A) As the amount of money circulating in the economy changes before prices respond, consumers' purchases change accordingly, which leads producers to change production levels.
B) When money supply changes in the short run, it will affect nominal, but not real, variables in the short run.
C) As money growth increases at a faster rate, it will cause real GDP to grow at an equally faster rate.
D) If producers expect inflation to increase, they will increase supply in order to sell before the arrival of inflation.

answer

As the amount of money circulating in the economy changes before prices respond, consumers' purchases change accordingly, which leads producers to change production levels.

question

The Fisher effect indicates that an increase in the expected inflation rate will cause the real rate of interest to
A) remain relatively constant.
B) increase by the same amount.
C) decrease by the same amount.
D) become unpredictable.

answer

remain relatively constant

question

The velocity of money is
A) how fast the price level is rising.
B) how fast the inflation rate is rising.
C) the average number of times a dollar is spent on consumer goods and services.
D) the average number of times a dollar is spent on final goods and services.

answer

the average number of times a dollar is spent on final goods and services.

question

An investment tax credit will cause the interest rate to _____ and the quantity of borrowing to _____.
A) increase; increase
B) increase; decrease
C) decrease; decrease
D) decrease; increase

answer

increase; increase

question

Diminishing returns to capital implies that _____ diminishes as more capital is added.
A) the marginal product of capital
B) technological knowledge
C) the cost of producing goods and services
D) output

answer

the marginal product of capital

question

If U.S. per capita GDP is $50,000 and grows at 2% per year, what will U.S. per capita GDP be in 70 years?
A) $200,000
B) $100,000
C) $150,000
D) $400,000

answer

$200,000

question

Gross Domestic Product uses __________ to account for differences in the ________ final goods and services.
A) market prices; value of
B) market prices; demand for
C) quality measures; value of
D) quality measures; demand for

answer

market prices; value of

question

What is the term for GDP when price changes are not included in its calculation?
A) annual GDP
B) nominal GDP
C) real GDP
D) aggregate GDP

answer

real GDP

question

Why is real GDP not seen as a perfect measure of production in an economy?
A) because it is only an estimate and contains accounting errors
B) because it does not count the underground economy or nonmarket production
C) because it is negatively adjusted for leisure, but not for environmental impacts
D) All of the answers are correct.

answer

because it does not count the underground economy or nonmarket production

question

Suppose a country has real GDP of $10,000 at the beginning of the year 2005. Each year the economy grows by 5 percent. By how much will GDP rise by the end of 2007?
A) $500
B) $1,576.25
C) $1,500
D) $1,025

answer

$1,576.25

question

Why does South Korea have a higher level of real GDP per capita than North Korea?
A) South Korea has more human capital than North Korea.
B) South Korea has more physical capital than North Korea.
C) South Korea has a better system of incentives for producers than North Korea does.
D) Each of these answers is correct.

answer

Each of these answers is correct.

question

Trading in the market for loanable funds determines the equilibrium
A) level of savings.
B) amount of borrowing.
C) interest rate.
D) It determines all three of these.

answer

it determines all of these

question

Which of the following would be the most likely to cause an 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

answer

an increase in government borrowing

question

The costs of inflation include
I. wasted resources in association with price confusion.
II. higher tax burdens.
III. wealth redistribution from private citizens to the government.
A) I and II only
B) II and III only
C) I and III only
D) I, II, and III

answer

I, II, and III

question

The argument that "inflation is always and everywhere a monetary phenomenon" is consistent with
A) the theory of price confusion.
B) the quantity theory of money.
C) the theory of money illusion.
D) the Fisher effect.

answer

the quantity theory of money.

question

Approximately how many prices of goods and services are measured by the CPI?
A) 800,000
B) 80,000
C) 800
D) 80

answer

80,000

question

What is true about a recession?
A) It can be concentrated only in a single geographic area, but must be widespread across many sectors of the economy.
B) It must be a significant decline in economic activity for at least three years in a row.
C) It is a significant decline in economic activity lasting more than a few months and must be widespread geographically.
D) None of these answers is correct.

answer

It is a significant decline in economic activity lasting more than a few months and must be
widespread geographically.

question

The production function expresses a relationship between
A) capital stock and risk.
B) output and growth.
C) inflation and growth.
D) output and the factors of production.

answer

output and the factors of production.

question

The economy's production function relates __________ to output.
A) real GDP
B) the inflation rate
C) the unemployment rate
D) the factors of production

answer

the factors of production

question

Problems in the banking and financial systems can remove the bridge between lenders and borrowers. Which of the following would be a consequence?
A) Banking fees and other costs of intermediation rise.
B) Consumers decide to become savers.
C) There is decreased insider trading.
D) Each of these answers is correct.

answer

Banking fees and other costs of intermediation rise.

question

production function

answer

relationship between factors of production and output - SOLOW

question

11. What are some of the economic effects of a tariff?
A) Wealth is redistributed from wealthy nations to poor nations and taxes fall.
B) Unemployment and inflation rates both fall.
C) Capital and labor are used less efficiently.
D) Trade remains the same in the long run and GDP rises in the nation that enacts the tariff.

answer

capital and labor are used less efficiently

question

2. If the Fed wants short-term interest rates to rise, it could
A) carry out open market purchases.
B) engage in a monetary contraction.
C) buy T-bills.
D) issue a directive for banks to raise interest rates.

answer

engage in a monetary contraction.

question

4. Which of the following is TRUE of the structure of the Fed?
I. All seven members of the Board of Governors are appointed by the President.
II. The Fed is an agency of the federal government.
III. The Secretary of the Treasury chairs the Federal Open Market Committee.
A) I only
B) I and II only
C) II and III only
D) I, II, and III

answer

I and II only

question

14. An increase in money growth will cause inflation to increase in
A) the short run only.
B) the long run only.
C) both the short run and the long run.
D) neither the short run nor the long run.

answer

both the short run and the long run.

question

13. The reserve ratio is the ratio of bank reserves to
A) currency demand.
B) bank loans.
C) bank deposits.
D) the monetary base

answer

bank deposits.

question

5. An increase in government spending growth will cause inflation to fall in
A) the short run only.
B) the long run only.
C) both the short run and the long run.
D) neither the short run nor the long run.

answer

neither the short run nor the long run.

question

For an economy in a recession, what will happen in the long run in the absence of any government action to counter the recession?
A) Wages will become flexible, and the economy will return to the long-run growth rate.
B) Wages will remain sticky and aggregate demand will fall further.
C) Aggregate demand will rise above the long-run Solow growth curve.
D) The economy will remain in a recession.

answer

Wages will become flexible, and the economy will return to the long-run growth rate.

question

13. Fiscal policy is a good option to stimulate an economy when
A) unemployment is very high.
B) the economy is very close to the long-run Solow growth curve.
C) a real shock occurs.
D) Each of these answers is correct.

answer

unemployment is very high.

question

14. Which of the following is NOT an automatic stabilizer?
A) greater access to credit
B) defense spending
C) progressive tax system
D) welfare program

answer

defense spending

question

14. To maximize profit firms should keep producing as long as marginal revenue is:
A) greater than marginal cost.
B) equal to marginal cost.
C) less than marginal cost.
D) greater than total cost.

answer

greater than marginal cost.

question

6. Which of the following statements is correct?
A) When the marginal cost curve is above the average cost curve, the average cost curve must be rising.
B) When the marginal cost curve is below the average cost curve, the average cost curve must be rising.
C) When MR = MC, the average cost curve is at its minimum point.
D) When MR = P, the average cost curve is at its minimum point.

answer

When the marginal cost curve is above the average cost curve, the average cost curve
must be rising.

question

9. When the level of production is relatively low, the average cost per unit of output would ________ if output increased.
A) increase
B) decrease
C) either increase or decrease depending on marginal cost
D) remain constant

answer

decrease

question

3. Which of the following statements is TRUE?
A) Consumer surplus under competition is greater than consumer surplus under monopoly.
B) Producer surplus under competition is greater than producer surplus under monopoly.
C) Total surplus under monopoly is greater than total surplus under competition.
D) Deadweight loss is greater in markets where monopoly power is less significant.

answer

Consumer surplus under competition is greater than consumer surplus under monopoly.

question

8. When a monopolist maximizes social surplus, it produces at an optimal Q where:
A) AR = MC.
B) MR = MC.
C) D = AC.
D) AR = AC.

answer

AR = MC.

question

9. Which of the following is NOT a source of monopoly power?
A) innovation
B) patents
C) economies of scale
D) marketing

answer

marketing

question

11. A firm would prefer that its product demand curve is:
A) perfectly elastic.
B) elastic.
C) inelastic.
D) horizontal.

answer

inelastic.

1 of 53

question

answer

wages, interest, rent, and profit

question

answer

contribute to GDP as a purchase of goods and services

question

The value of a car produced and sold in 2000, and sold again in 2008, should be included in
GDP for
A) 2000 only.
B) 2008 only.
C) both 2000 and 2008.
D) either 2000 or 2008, but not both.

answer

2000 only

question

Workers ability to use various tools is known as _____________.
A) technological knowledge
B) human capital
C) knowledge
D) experience

answer

human capital

question

What is the most proximate (or direct) cause of growth in real GDP per capita?
A) the factors of production
B) institutions
C) political system in the economy
D) incentives

answer

the factors of production

question

The most important factor that contributed to China's rapid growth at the end of the 1970s and early 1980s was
A) physical capital.
B) human capital.
C) technology.
D) property rights.

answer

property rights

question

answer

increase; increase

question

What term do economists use to describe the growth rate of GDP per capita?
A) national growth
B) aggregate growth
C) real growth
D) economic growth

answer

economic growth

question

answer

government spending has decreased

question

answer

production

question

answer

High MPK levels contributed to significant per capita output growth.
mpk - marginal production of capital

question

answer

a shift down of; lower

question

When a given bond's price increases, we know that the interest rate on this bond
A) remains unchanged.
B) must increase.
C) must decrease.
D) could increase, decrease, or remain unchanged.

answer

must decrease

question

answer

to indicate the chance of a bond being repaid

question

When real gdp decreases, cyclical unemployment _________.

answer

increases

question

For a given nominal interest rate, an increase in the inflation rate will cause real interest rates to
A) remain relatively constant.
B) increase.
C) decrease.
D) become unpredictable.

answer

decrease

question

answer

As the amount of money circulating in the economy changes before prices respond, consumers' purchases change accordingly, which leads producers to change production levels.

question

answer

remain relatively constant

question

answer

the average number of times a dollar is spent on final goods and services.

question

An investment tax credit will cause the interest rate to _____ and the quantity of borrowing to _____.
A) increase; increase
B) increase; decrease
C) decrease; decrease
D) decrease; increase

answer

increase; increase

question

answer

the marginal product of capital

question

If U.S. per capita GDP is $50,000 and grows at 2% per year, what will U.S. per capita GDP be in 70 years?
A) $200,000
B) $100,000
C) $150,000
D) $400,000

answer

$200,000

question

answer

market prices; value of

question

What is the term for GDP when price changes are not included in its calculation?
A) annual GDP
B) nominal GDP
C) real GDP
D) aggregate GDP

answer

real GDP

question

answer

because it does not count the underground economy or nonmarket production

question

answer

$1,576.25

question

answer

Each of these answers is correct.

question

Trading in the market for loanable funds determines the equilibrium
A) level of savings.
B) amount of borrowing.
C) interest rate.
D) It determines all three of these.

answer

it determines all of these

question

answer

an increase in government borrowing

question

answer

I, II, and III

question

answer

the quantity theory of money.

question

Approximately how many prices of goods and services are measured by the CPI?
A) 800,000
B) 80,000
C) 800
D) 80

answer

80,000

question

answer

It is a significant decline in economic activity lasting more than a few months and must be
widespread geographically.

question

The production function expresses a relationship between
A) capital stock and risk.
B) output and growth.
C) inflation and growth.
D) output and the factors of production.

answer

output and the factors of production.

question

The economy's production function relates __________ to output.
A) real GDP
B) the inflation rate
C) the unemployment rate
D) the factors of production

answer

the factors of production

question

answer

Banking fees and other costs of intermediation rise.

question

production function

answer

relationship between factors of production and output - SOLOW

question

answer

capital and labor are used less efficiently

question

answer

engage in a monetary contraction.

question

answer

I and II only

question

14. An increase in money growth will cause inflation to increase in
A) the short run only.
B) the long run only.
C) both the short run and the long run.
D) neither the short run nor the long run.

answer

both the short run and the long run.

question

13. The reserve ratio is the ratio of bank reserves to
A) currency demand.
B) bank loans.
C) bank deposits.
D) the monetary base

answer

bank deposits.

question

answer

neither the short run nor the long run.

question

answer

Wages will become flexible, and the economy will return to the long-run growth rate.

question

answer

unemployment is very high.

question

14. Which of the following is NOT an automatic stabilizer?
A) greater access to credit
B) defense spending
C) progressive tax system
D) welfare program

answer

defense spending

question

14. To maximize profit firms should keep producing as long as marginal revenue is:
A) greater than marginal cost.
B) equal to marginal cost.
C) less than marginal cost.
D) greater than total cost.

answer

greater than marginal cost.

question

answer

When the marginal cost curve is above the average cost curve, the average cost curve
must be rising.

question

answer

decrease

question

answer

Consumer surplus under competition is greater than consumer surplus under monopoly.

question

8. When a monopolist maximizes social surplus, it produces at an optimal Q where:
A) AR = MC.
B) MR = MC.
C) D = AC.
D) AR = AC.

answer

AR = MC.

question

9. Which of the following is NOT a source of monopoly power?
A) innovation
B) patents
C) economies of scale
D) marketing

answer

marketing

question

11. A firm would prefer that its product demand curve is:
A) perfectly elastic.
B) elastic.
C) inelastic.
D) horizontal.

answer

inelastic.

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