macro - Assignment Essays

question

What, according to economist Donald Boudreaux in the "Last Word" section of the chapter, best explains why the market system is not a random, chaotic mess?

answer

Private property rights encourage mutual accommodation that leads to an arrangement of resources that is productive

question

Chronic budget deficits can lead to all of the following, except:

answer

"Smaller government" in the economy

question

In a competitive market illustrated by the diagram above, for a price floor to be effective and alter the market situation, it must be set:

answer

Above $15

question

An increase in the demand for a product and a reduction in its costs of production would:

answer

Encourage firms to enter an industry

question

The table below shows the weekly demand for hamburger in a market where there are just three buyers.
Refer to the above table. At a price of $6, the weekly market quantity demanded for hamburger is:

answer

question

If the production of a product or service involves external benefits, then the government can improve efficiency in the market by:

answer

Providing a subsidy to correct for an underallocation of resources

question

The term dollar votes in a market system means:

answer

Consumers "vote" for certain products to be produced by how they spend their incomes

question

If the production possibilities curve is a straight line, then:

answer

The law of increasing opportunity costs does not apply

question

Use the following graph of the demand for coffee:

answer

A decrease in the price of tea

question

Which is of the following statements is correct?

answer

If demand decreases, then price will decrease

question

Which of the following would best be classified as a complement for new houses/homes?

answer

Mortgage loans

question

A result of a fall in the price of gasoline, consumers can afford to buy more gasoline for more driving trips. This is an illustration of:

answer

The income effect

question

Suppose that a nation can only make two products: defense goods and civilian goods. In a graph of the marginal benefit (MB) and marginal cost (MC) of defense goods, a leftward shift of the MB curve will cause the optimal quantity of:

answer

Defense goods to decrease

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Refer to the above supply and demand graph of Product X. What would happen if the government taxed the producers of this product because it has negative externalities in production?

answer

Supply would decrease

question

Deregulation can solve the problem of regulatory capture and increase economic efficiency:

answer

If the deregulated industry becomes more competitive

question

The provision of loan guarantees can improve economic efficiency when:

answer

The project supported has significant external benefits

question

Which of the following would be an example of government intervention to correct a market failure caused by buyers having inadequate information about sellers?

answer

Licensing of medical doctors and surgeons

question

The difference between the maximum price a consumer is willing to pay for a product and the actual price the consumer pays is called:

answer

Consumer Surplus

question

Which is one of the five fundamental questions that need to be dealt with in any economic system?

answer

How will goods and services be produced?

question

Lauren makes $150 a day as a bank clerk. She takes two days off work without pay, to fly to another city to attend the concert of her favorite band. The cost of transportation and lodging for the trip is $250. The cost of the concert ticket is $50. The opportunity cost of Lauren's decision to attend the concert is:

answer

$600

question

In a market economy, the government's ability to coerce is beneficial in the following cases, except in:

answer

Fixing resource prices

question

Which is most likely to be observed in a community where legal ceilings are imposed on residential rents?

answer

People moving into the community will have difficulty locating residential space to rent

question

In a market system, as one industry expands while another contracts, resources will flow:

answer

From one industry due to the changes in resource prices paid by firms

question

Economic efficiency is the primary guide in answering which of the fundamental questions in a market economy?

answer

How is the output to be produced?

question

One consequence of the asymmetric-information problem in the used car market, if left unresolved, is the higher probability of:

answer

A declining quality of used cars in the market

question

Which of the following statements is an explanation for the law of increasing opportunity costs?

answer

Many economic resources are better at producing one product rather than another

question

Answer the question based on the following information. Normal University has found it necessary to institute a crime-control program on its campus to deal with the high costs of theft and vandalism. The university is now considering several alternative levels of crime control. This table shows the expected annual costs and benefits of these alternatives.
Refer to the above information. Based on cost-benefit analysis, Normal University should undertake Level:

answer

Four

question

A nation can produce two products: tanks and autos. The table below is the nation's production possibilities:
Refer to the above table. If the nation produces more and more tanks, the opportunity cost of each additional tank in terms of autos:

answer

Increases

question

Refer to the above supply and demand graph. In the graph, line S is the current supply of this product, while line S1 is the optimal supply from the society's perspective. If government corrects this externality problem and shifts production to the socially optimal level, then the product price will be equal to:

answer

question

The equilibrium point in the market is where S and D curve intersect.
Refer to the graph above. At equilibrium, the minimum acceptable revenue that sellers would have been willing to receive is represented by the area:

answer

question

Refer to the above table. If the government introduced a guaranteed price floor of $40 and agreed to purchase surplus output, then the government's total support payments to producers would be:

answer

$4,000 per week

question

One primary reason why regulatory capture may occur in an industry is that

answer

People who are qualified to supervise and regulate the industry often come from the industry itself

question

Which of the following does not illustrate the idea of creative destruction?

answer

A firm has to destroy some of the expired products in its inventory

question

Where there is spillover (or external) benefits from having a particular product in a society, the government can make the quantity of the product approach the socially optimal level by doing the following except:

answer

Taxing the sellers of the product

question

In a market system, resources will move away from an industry when:

answer

Demand for the industry's product is decreasing

question

The distribution of income in a market system is a primary factor that resolves which of the following fundamental economic questions?

answer

Who will get the output?

question

Which of the following is consistent with the law of demand?

answer

An increase in the price of hamburgers causes buyers to buy fewer hamburgers

question

In a market system, which of the following will eliminate high-cost producers, and allow only the low-cost producers to survive?

answer

Competition

question

Consumer surplus arises in a market because:

answer

The market price is below what some consumers are willing to pay for the product

question

Which of the following factors will decrease the current demand for a product?

answer

A decrease in the current price of a substitute product

question

Inflation refers to the process by which

answer

Goods and services become more expensive over time.

question

Which of the following is the best example of economic investment?

answer

The University of Oklahoma builds a new residential college

question

Which of the following factors could lead to economic growth in a country?

answer

All of the above (protecting property rights, protecting patents and copyrights, widespread increases in the level of education and literacy)

question

Which of the following statements about modern economic growth is TRUE?

answer

It's most direct cause was the industrial revolution

question

In 2008, 2009, and 2010, the most severe parts of the recent Great Recession, what component of Unemployment went up the most compared to its previous rate?

answer

Cyclical unemployment

question

Under convention definitions, which of the following persons WOULD be defined as unemployed?

answer

Sally is 25 years old. She finished college 2 years ago. She has been unsuccessfully looking for work since, filling out many applications, and she still does not have a job.

question

If a countries nominal GDP goes up by 5%, while the price level increases by 2%, then real GDP:

answer

Decreases by 3%

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Which of the following purchases would NOT be formally counted when estimating GDP using the expenditures approach?

answer

An air-conditioning unit purchased by a company that builds & sells homes, that will be placed into one of their new units currently for sale.

question

Data collected by the B.E.A. that measures annual expenditures at current prices directly shows

answer

Nominal GDP

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CPI stands for _________ and this measure is used to compute_________

answer

Consumer Price Index, the inflation rate.

question

You read a report saying nominal GDP in Soonerville doubled between 2006 and 2016, but that Soonerville also experienced inflation over the same period. According to the rule of 70, Soonerville's nominal growth rate between 2006 and 2016 should be ______, and the average real growth rate over the period should be ______.

answer

approximately 7%, lower than 7%

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Inflation rates in the U.S. reached double-digits, and were relatively high compared to historical levels

answer

during the 1970's

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To an Economist, saying the Economy is at the "Natural Rate of Unemployment" means

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all of the above (Cyclical Unemployment is zero; all current unemployment comes from frictional and structural unemployment; in an economic sense, the economy is at "full employment")

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If a countries price level falls over a series of years, meaning the cost of a constant bundle of goods in cheaper and cheaper over time, we would say the economy is experiencing:

answer

Deflation

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The Industrial Revolution is generally attributed to have started in what country?

answer

Great Britain (also known as The United Kingdom)

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_________ countries are capable of higher/faster rates of growth than _______ countries, because they can simply __________ productive technologies.

answer

Follower, Leader, adopt existing

question

Which group of countries experienced the highest growth rates in real GDP between 1960 and 2010?

answer

South Korea, Singapore, Japan

question

Per capita GDP would be expected to rise as a result of increases in all of the following categories, except:

answer

Levels of governmental bribes and underground economic activity

question

Over the course of the business cycle, a product like _____ should have stable sales because it is a ______ good, while a product like _______ should have sales that are more cyclical because it is a ________ good.

answer

Toothpaste, non-durable, automobiles, durable.

question

Nominal GDP differs from real GDP because:

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Real GDP results from adjusting for changes in the price level

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Which of the following is NOT one of the 4 main components included in the calculation of GDP when one measures GDP through the expenditures approach?

answer

Corporate profits

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Labor productivity in a country would tend to fall over time if

answer

All of the above (literacy rates & technical skills training levels declined, few investments were made in new physical capital and older physical capital was not well maintained, blatant discrimination against women or minorities was allowed without legal punishment/repercussions)

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Answer the question based on the above price and output data over a five-year period for an economy that produces only one good. Assume that year 1 is the base year. In year 3, nominal GDP would be:

answer

$60

question

Answer the question based on the above price and output data over a five-year period for an economy that produces only one good. Assume that year 1 is the base year. In year 3, real GDP would be:

answer

$30

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Answer the question based on the above price and output data over a five-year period for an economy that produces only one good. Assume that year 1 is the base year. The real growth rate between years 1 and 2 is

answer

25%

question

A person's real income will increase by 3% if her nominal income:

answer

Increases by 5% while the price index rises by 2%

question

Which of the following measures the changes in the prices of a "market basket" of some 300 goods and services purchased by typical urban consumers?

answer

The Consumer Price Index

question

The majority of the increase in labor productivity over recent decades for workers in the USA is due to

answer

advancements in technology and increased levels of capital.

question

In an economy, the total expenditures for a market basket of goods in year 1 (the base year) was $5,000 billion. In year 2, the total expenditure for the same market basket of goods was $5,500 billion. What was the GDP price index for the economy in year 2?

answer

110

question

Since consumer spending generally falls during recessions, inventories held by firms:

answer

would tend to grow/increase during recessions in cases where prices are sticky

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Assuming no migration into or out of a country occurs, and that life expectancy is somewhat stable, we could say that to keep the population of an economy stable, the total fertility rate (average number of births per woman in her lifetime) should be about:

answer

2.1

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In the US and many other industrialized economies, growth rates in real GDP averaged higher levels over the period of 1995 through 2010 than they had averaged during 25 years leading up to that point. Most Economists think the biggest factor driving this acceleration of growth and Economic prosperity was

answer

that innovation based on the microchip led to the formation (or rapid growth) of successful Information Technology companies like Google, Apple, Dell, Amazon, Yahoo, and eBay among others.

question

Which of the following is the best example of a financial investment that economists would say should NOT be placed into the calculation of GDP?

answer

Joe purchases a share of Google stock

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Which of the following factors do economists believe contribute to business cycles occurring?

answer

All of the above (Factors related to monetary policy and Political Events (wars, trade deals, and so on); Irregular Innovation; Demand shocks in the presence of "sticky" prices)

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Which of the following would NOT be included in the calculation of GDP using the income approach?

answer

The money spent by the government to buy helicopters & airplanes for the military in a given year.

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As is the case in the United States and many other high income nations, which component of the Expenditures approach is often a negative number?

answer

Net Exports

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Which of the following has been identified as a "shortcoming" of GDP in terms of its use as an aggregate indicator of the well being of a society?

answer

GDP ignores nonmarket activities including valuable services provided by stay-at-home parents

question

The antigrowth view accurately reflects that extremely high rates of economic growth

answer

all of the above (do not cause problems including homelessness, discrimination, and poverty to go away; may be accompanied by higher levels of pollution and degradation of the environment; may not be sustainable in the long run)

question

The expression C + Ig + G + Xn could be used to most effectively/directly accomplish what task?

answer

calculate nominal GDP using the expenditures approach

question

Assume the government of a small developing country has a large public debt. They issued a large number of bonds to domestic investors, and they are coming due soon. To handle the situation, the government decides to print a large amount of new currency that it will use to pay back those bond debts. This should lead to

answer

Demand-Pull inflation

question

An economy characterized by high unemployment is likely to be:

answer

Experiencing a recessionary expenditure gap

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An investment demand curve shows the varying amounts of investment that would be undertaken at various levels of:

answer

The real interest rate

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Which of the following is the best example of an automatic stabilizer for the economy?

answer

Unemployment benefits paid to laid off workers

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Given the expected rate of return on all possible investment opportunities in the economy, a _______ in the real interest rate will tend to _________ the level of overall investment.

answer

Decrease, increase

question

Which of the following would cause the multiplier for consumer income shocks to increase?

answer

All of the above (An increase in the MPC, a decrease in the MPS)

question

Net exports are negative when:

answer

Imports exceed exports

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One major flaw with Say's Law, and a reason why it does not work perfectly in application is that

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Say's law ignores savings

question

Answer the following questions based on the table below which illustrates the multiplier process resulting from an autonomous increase in investment by $5.
Refer to the above table. The marginal propensity to consume is:

answer

0.75

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Answer the following questions based on the table below which illustrates the multiplier process resulting from an autonomous increase in investment by $5.
Refer to the same above table. The marginal propensity to save is:

answer

0.25

question

answer

4.0

question

Assume the MPS in an economy went from 0.25 to a new value of 0.15. In this case, the multiplier effect associated with initial changes in consumer spending will

answer

Rise to a higher value

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If the real interest rate increases:

answer

There will be a movement upward along the investment demand curve

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The long-run aggregate supply curve is:

answer

Vertical

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Without a change in discretionary fiscal policy, if the economy goes into recession, then the:

answer

Cyclically-adjusted deficit would stay the same while the actual deficit would increase

question

Holding other things constant, a tax-cut is associated with which of the following?

answer

Expansionary fiscal policy

question

The cyclically-adjusted deficit as a percentage of GDP is 3 percent in Year 1. This deficit becomes a surplus of 2 percent of GDP in Year 2. It can be concluded from Year 1 to Year 2 that:

answer

Fiscal policy turned more contractionary

question

When the economy is at its equilibrium GDP level, all of the following will occur, except:

answer

Inventories will be zero

question

The cyclically-adjusted budget deficit in an economy is zero. If this economy goes into recession, then the actual government budget will be:

answer

In deficit

question

In which of the following years did the US Federal Budget experience a surplus?

answer

2001

question

Which factor explains the high variability of investment?

answer

The durability of capital goods

question

If GDP exceeds aggregate expenditures in a private closed economy:

answer

Saving will exceed planned investment

question

The investment demand curve will shift to the left as the result of:

answer

General business pessimism about future economic conditions

question

The immediate-short-run aggregate supply curve is___, while the short-run aggregate supply curve is___:

answer

Horizontal, upward-sloping

question

The upward slope of the short-run aggregate supply curve is based on the assumption that:

answer

Wages and other resource prices do not respond to price level changes

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Suppose that an economy produces 2400 units of output, employing 60 units of the input, and the price of the input is $30 per unit.

answer

$0.75

question

In the flow of income and spending, saving and investment are, respectively:

answer

A leakage and an injection

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The long-run aggregate supply analysis assumes that:

answer

Both input and product prices are variable

question

Say's law in classical economics suggests that, over a period of time:

answer

Aggregate spending would tend to equal total output and income

question

Refer to the graph above. Which of the following factors will shift AS1 to AS3?

answer

An increase in input prices

question

If businesses feel more optimistic about the state of the economy, then this change is likely to:

answer

Shift the investment demand curve to the right

question

The American Recovery and Reinvestment Act of 2009 included mostly:

answer

Increases in government spending and decreases in taxes

question

In the Great Recession of 2007-2009, the aggregate expenditures schedule in the U.S. economy dropped, due in large part to a decline in:

answer

Investment expenditures

question

Other things constant, if domestic consumers purchase fewer foreign goods and more domestically produced goods at each level of GDP in the short run:

answer

GDP will rise

question

During the spring of 2016, prior to the "Brexit" vote taken in Great Britain, one British Pound cost roughly $1.50 in US dollars, whereas just a few months later the same British Pound cost about $1.20. This means that relative to the British Pound, the US dollar ___________ over these months, making it __________ for US businesses to sell their products to households living in Great Britain, but also making it __________ for US consumers to buy goods imported from Great Britain.

answer

appreciated, harder, easier

question

The short-run version of aggregate supply assumes:

answer

that product prices are flexible, but that resource prices are fixed

question

The "rockets and feathers" phenomenon we discussed in class refers to what economic tendency?

answer

the idea that prices in general tend to rise more rapidly than they tend to fall

question

If the cyclically-adjusted budget deficit and the actual budget deficit were the same, we could assume that:

answer

The economy was at full employment

question

If the MPS is 0.10, the multiplier will be:

answer

question

In general, economic research suggests that economies tend to

answer

All of the above (consume more when GDP increases, save more when GDP increases, experience declines in the APS when GDP falls)

question

If aggregate consumption in an economy was always equal to disposable income, then

answer

the income-consumption graph would be the same as the 45% reference line

question

Which of the following is a popular type of financial investment?

answer

Mutual funds

question

The Federal Reserve System performs many function but its most important one is:

answer

Controlling the money supply

question

By volume, which of the following nations is NOT currently one of the top 3 trading partners with the U.S.?

answer

Germany

question

Assume Econville and Socburg have identical populations, but differ in terms of their productive capacities over food and clothing. Econville can produce 20 units of food and 10 units of clothing each day. Socburg can produce 30 units of food and 20 units of clothing each day. Which is the TRUE statement?

answer

Econville has the comparative advantage in producing food.

question

The Federal Open Market Committee (FOMC) of the Federal Reserve System is primarily for:

answer

Setting the Fed's monetary policy and directing the purchase and sale of government securities

question

Economic Trade Theory suggests that countries should generally _____ goods for which they hold a comparative advantage and _____ goods for which they do not hold a comparative advantage.

answer

export, import

question

Wanda purchased a non-maturing bond for $10,000 that pays out semi-annual coupons (i.e., twice per year), at a rate of $350 each payout. Her expected annual rate of return on the bond is:

answer

7 percent

question

By volume, which of the following nations is NOT currently one of the top 3 overall world exporters?

answer

Canada

question

Which of the following countries exports the least, when measured as a fraction of overall GDP?

answer

United States

question

Which of the following Fed actions increases the U.S. money supply?

answer

Lower the reserve ratio

question

Terri invests $200,000 in an asset that she believes carries little to no risk, and that she expects will provide an annual rate of return of 5% each year. If Terri is right, in 5 years her asset will be worth approximately:

answer

$255,256

question

If the purchasing power of the dollar is failing then we also know that:

answer

The price index is rising

question

Members of the Federal Reserve of Governors are:

answer

Appointed by the President to staggered 14-year terms

question

The use of tariffs and quotas for trade protection results in:

answer

Less overall efficiency in the global economy

question

If the Board of Governors of the Federal Reserve System decides to sell off some of their holdings of securities to commercial U.S. banks, this decision will:

answer

Decrease the excess reserves of member banks and thus decrease the money supply

question

Which of the following topics refers to the reason tariffs are common but quotas are not?

answer

Government Tax Revenues

question

Equal shares of a firm's profit are paid out to stockholders as:

answer

Dividends

question

What "backs" the money supply of the U.S.?

answer

The fact that the intrinsic value of coins in circulation is greater than their face value

question

If the required reserve ratio were 15 percent, the value of the monetary multiplier would be:

answer

6.67

question

The M1 definition of the money supply does NOT include which of the following?

answer

money market investment accounts help by individuals

question

Which of the following is a likely result of a country imposing tariffs on automobiles?

answer

An increase in the price of automobiles in the foreign/producing country

question

If stockholders sell their shares for more than they paid for those shares, the stockholders:

answer

Realize a capital gain

question

Investments that are designed to match exactly the performance of a group of stocks like the Dow Jones Industrial Average or the S&P-500 are called:

answer

Index funds

question

Using the Taylor Rule, for each 1% increase in the inflation rate above its 2% target, the Fed should:

answer

increase the real federal funds rate by 0.5%

question

The Federal funds rate is the rate the U.S. banks pay for loans from:

answer

Other banks

question

A mutual fund company uses the funds of its investors to:

answer

Buy stocks and bonds

question

If the U.S. government passes legislation limiting the number of automobiles that can be imported into the U.S., capping that number at 300,000 cards per year, they have adopted a(n):

answer

Quota

question

When people withdraw money from their deposits in the banking system, the:

answer

Excess reserves of the banking system will decrease

question

Which of the following "backs" the value of money in the United States?

answer

The acceptability of it as a medium of exchange

question

Open-market operations and adjustments to the discount rate are ____ tools of monetary policy that are used ____, whereas changes in the required reserve ratio is a relatively _____ tool of monetary policy that is used ________.

answer

important, frequently, unimportant, infrequently

question

If a nation agrees to limit the quantity of a product that it exports to another, it has adopted:

answer

A voluntary exports restriction

question

If the Fed (Central Bank) buys government securities from commercial banks in the open market:

answer

Commercial banks give the securities to the Fed, and the Fed increases the banks' reserves

question

An excise tax that is applied to an imported product, but not to products produced domestically, is a(n):

answer

tariff

question

Burt bought a house for $200,000 and then rents it out for $1,500 per month. His expected annual rate of return from renting the house is approximately

answer

9 percent

question

Assume that there are two investments similar in all respects, including the risk associated with the likely payoff, but that Investment X carries a higher rate of return than does Investment Y. As a result of the arbitrage process, the price of Investment in:

answer

Y will rise and its rate of return will fall

question

The limited liability rule means that if a corporation goes bankrupt:

answer

Shareholders can only lose the amount they invested

question

Which one of the following is a feature of all investments?

answer

The future payments earned, or value of the asset itself, carries uncertainty

question

If the required reserve ratio is 20 percent and commercial bankers decide to hold additional excess reserves equal to 5 percent of any newly acquired checkable deposits, then the effective monetary multiplier for the banking system will be:

answer

question

Alma recently purchased a Mexican restaurant for $450,000 from which expects to earn a monthly profit of $1,500. Her expected annual rate of return in:

answer

1 of 159

question

What, according to economist Donald Boudreaux in the "Last Word" section of the chapter, best explains why the market system is not a random, chaotic mess?

answer

Private property rights encourage mutual accommodation that leads to an arrangement of resources that is productive

question

Chronic budget deficits can lead to all of the following, except:

answer

"Smaller government" in the economy

question

In a competitive market illustrated by the diagram above, for a price floor to be effective and alter the market situation, it must be set:

answer

Above $15

question

An increase in the demand for a product and a reduction in its costs of production would:

answer

Encourage firms to enter an industry

question

The table below shows the weekly demand for hamburger in a market where there are just three buyers.
Refer to the above table. At a price of $6, the weekly market quantity demanded for hamburger is:

answer

question

If the production of a product or service involves external benefits, then the government can improve efficiency in the market by:

answer

Providing a subsidy to correct for an underallocation of resources

question

The term dollar votes in a market system means:

answer

Consumers "vote" for certain products to be produced by how they spend their incomes

question

If the production possibilities curve is a straight line, then:

answer

The law of increasing opportunity costs does not apply

question

Use the following graph of the demand for coffee:

answer

A decrease in the price of tea

question

Which is of the following statements is correct?

answer

If demand decreases, then price will decrease

question

Which of the following would best be classified as a complement for new houses/homes?

answer

Mortgage loans

question

A result of a fall in the price of gasoline, consumers can afford to buy more gasoline for more driving trips. This is an illustration of:

answer

The income effect

question

answer

Defense goods to decrease

question

Refer to the above supply and demand graph of Product X. What would happen if the government taxed the producers of this product because it has negative externalities in production?

answer

Supply would decrease

question

Deregulation can solve the problem of regulatory capture and increase economic efficiency:

answer

If the deregulated industry becomes more competitive

question

The provision of loan guarantees can improve economic efficiency when:

answer

The project supported has significant external benefits

question

Which of the following would be an example of government intervention to correct a market failure caused by buyers having inadequate information about sellers?

answer

Licensing of medical doctors and surgeons

question

The difference between the maximum price a consumer is willing to pay for a product and the actual price the consumer pays is called:

answer

Consumer Surplus

question

Which is one of the five fundamental questions that need to be dealt with in any economic system?

answer

How will goods and services be produced?

question

answer

$600

question

In a market economy, the government's ability to coerce is beneficial in the following cases, except in:

answer

Fixing resource prices

question

Which is most likely to be observed in a community where legal ceilings are imposed on residential rents?

answer

People moving into the community will have difficulty locating residential space to rent

question

In a market system, as one industry expands while another contracts, resources will flow:

answer

From one industry due to the changes in resource prices paid by firms

question

Economic efficiency is the primary guide in answering which of the fundamental questions in a market economy?

answer

How is the output to be produced?

question

One consequence of the asymmetric-information problem in the used car market, if left unresolved, is the higher probability of:

answer

A declining quality of used cars in the market

question

Which of the following statements is an explanation for the law of increasing opportunity costs?

answer

Many economic resources are better at producing one product rather than another

question

answer

Four

question

answer

Increases

question

answer

question

answer

question

Refer to the above table. If the government introduced a guaranteed price floor of $40 and agreed to purchase surplus output, then the government's total support payments to producers would be:

answer

$4,000 per week

question

One primary reason why regulatory capture may occur in an industry is that

answer

People who are qualified to supervise and regulate the industry often come from the industry itself

question

Which of the following does not illustrate the idea of creative destruction?

answer

A firm has to destroy some of the expired products in its inventory

question

answer

Taxing the sellers of the product

question

In a market system, resources will move away from an industry when:

answer

Demand for the industry's product is decreasing

question

The distribution of income in a market system is a primary factor that resolves which of the following fundamental economic questions?

answer

Who will get the output?

question

Which of the following is consistent with the law of demand?

answer

An increase in the price of hamburgers causes buyers to buy fewer hamburgers

question

In a market system, which of the following will eliminate high-cost producers, and allow only the low-cost producers to survive?

answer

Competition

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Consumer surplus arises in a market because:

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The market price is below what some consumers are willing to pay for the product

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Which of the following factors will decrease the current demand for a product?

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A decrease in the current price of a substitute product

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Inflation refers to the process by which

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Goods and services become more expensive over time.

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Which of the following is the best example of economic investment?

answer

The University of Oklahoma builds a new residential college

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Which of the following factors could lead to economic growth in a country?

answer

All of the above (protecting property rights, protecting patents and copyrights, widespread increases in the level of education and literacy)

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Which of the following statements about modern economic growth is TRUE?

answer

It's most direct cause was the industrial revolution

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In 2008, 2009, and 2010, the most severe parts of the recent Great Recession, what component of Unemployment went up the most compared to its previous rate?

answer

Cyclical unemployment

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Under convention definitions, which of the following persons WOULD be defined as unemployed?

answer

Sally is 25 years old. She finished college 2 years ago. She has been unsuccessfully looking for work since, filling out many applications, and she still does not have a job.

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If a countries nominal GDP goes up by 5%, while the price level increases by 2%, then real GDP:

answer

Decreases by 3%

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Which of the following purchases would NOT be formally counted when estimating GDP using the expenditures approach?

answer

An air-conditioning unit purchased by a company that builds & sells homes, that will be placed into one of their new units currently for sale.

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Data collected by the B.E.A. that measures annual expenditures at current prices directly shows

answer

Nominal GDP

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CPI stands for _________ and this measure is used to compute_________

answer

Consumer Price Index, the inflation rate.

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answer

approximately 7%, lower than 7%

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Inflation rates in the U.S. reached double-digits, and were relatively high compared to historical levels

answer

during the 1970's

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To an Economist, saying the Economy is at the "Natural Rate of Unemployment" means

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all of the above (Cyclical Unemployment is zero; all current unemployment comes from frictional and structural unemployment; in an economic sense, the economy is at "full employment")

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If a countries price level falls over a series of years, meaning the cost of a constant bundle of goods in cheaper and cheaper over time, we would say the economy is experiencing:

answer

Deflation

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The Industrial Revolution is generally attributed to have started in what country?

answer

Great Britain (also known as The United Kingdom)

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_________ countries are capable of higher/faster rates of growth than _______ countries, because they can simply __________ productive technologies.

answer

Follower, Leader, adopt existing

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Which group of countries experienced the highest growth rates in real GDP between 1960 and 2010?

answer

South Korea, Singapore, Japan

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Per capita GDP would be expected to rise as a result of increases in all of the following categories, except:

answer

Levels of governmental bribes and underground economic activity

question

answer

Toothpaste, non-durable, automobiles, durable.

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Nominal GDP differs from real GDP because:

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Real GDP results from adjusting for changes in the price level

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Which of the following is NOT one of the 4 main components included in the calculation of GDP when one measures GDP through the expenditures approach?

answer

Corporate profits

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Labor productivity in a country would tend to fall over time if

answer

question

Answer the question based on the above price and output data over a five-year period for an economy that produces only one good. Assume that year 1 is the base year. In year 3, nominal GDP would be:

answer

$60

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Answer the question based on the above price and output data over a five-year period for an economy that produces only one good. Assume that year 1 is the base year. In year 3, real GDP would be:

answer

$30

question

answer

25%

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A person's real income will increase by 3% if her nominal income:

answer

Increases by 5% while the price index rises by 2%

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Which of the following measures the changes in the prices of a "market basket" of some 300 goods and services purchased by typical urban consumers?

answer

The Consumer Price Index

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The majority of the increase in labor productivity over recent decades for workers in the USA is due to

answer

advancements in technology and increased levels of capital.

question

answer

110

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Since consumer spending generally falls during recessions, inventories held by firms:

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would tend to grow/increase during recessions in cases where prices are sticky

question

answer

2.1

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answer

that innovation based on the microchip led to the formation (or rapid growth) of successful Information Technology companies like Google, Apple, Dell, Amazon, Yahoo, and eBay among others.

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Which of the following is the best example of a financial investment that economists would say should NOT be placed into the calculation of GDP?

answer

Joe purchases a share of Google stock

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Which of the following factors do economists believe contribute to business cycles occurring?

answer

All of the above (Factors related to monetary policy and Political Events (wars, trade deals, and so on); Irregular Innovation; Demand shocks in the presence of "sticky" prices)

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Which of the following would NOT be included in the calculation of GDP using the income approach?

answer

The money spent by the government to buy helicopters & airplanes for the military in a given year.

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As is the case in the United States and many other high income nations, which component of the Expenditures approach is often a negative number?

answer

Net Exports

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Which of the following has been identified as a "shortcoming" of GDP in terms of its use as an aggregate indicator of the well being of a society?

answer

GDP ignores nonmarket activities including valuable services provided by stay-at-home parents

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The antigrowth view accurately reflects that extremely high rates of economic growth

answer

question

The expression C + Ig + G + Xn could be used to most effectively/directly accomplish what task?

answer

calculate nominal GDP using the expenditures approach

question

answer

Demand-Pull inflation

question

An economy characterized by high unemployment is likely to be:

answer

Experiencing a recessionary expenditure gap

question

An investment demand curve shows the varying amounts of investment that would be undertaken at various levels of:

answer

The real interest rate

question

Which of the following is the best example of an automatic stabilizer for the economy?

answer

Unemployment benefits paid to laid off workers

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Given the expected rate of return on all possible investment opportunities in the economy, a _______ in the real interest rate will tend to _________ the level of overall investment.

answer

Decrease, increase

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Which of the following would cause the multiplier for consumer income shocks to increase?

answer

All of the above (An increase in the MPC, a decrease in the MPS)

question

Net exports are negative when:

answer

Imports exceed exports

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One major flaw with Say's Law, and a reason why it does not work perfectly in application is that

answer

Say's law ignores savings

question

answer

0.75

question

answer

0.25

question

answer

4.0

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Assume the MPS in an economy went from 0.25 to a new value of 0.15. In this case, the multiplier effect associated with initial changes in consumer spending will

answer

Rise to a higher value

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If the real interest rate increases:

answer

There will be a movement upward along the investment demand curve

question

The long-run aggregate supply curve is:

answer

Vertical

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Without a change in discretionary fiscal policy, if the economy goes into recession, then the:

answer

Cyclically-adjusted deficit would stay the same while the actual deficit would increase

question

Holding other things constant, a tax-cut is associated with which of the following?

answer

Expansionary fiscal policy

question

The cyclically-adjusted deficit as a percentage of GDP is 3 percent in Year 1. This deficit becomes a surplus of 2 percent of GDP in Year 2. It can be concluded from Year 1 to Year 2 that:

answer

Fiscal policy turned more contractionary

question

When the economy is at its equilibrium GDP level, all of the following will occur, except:

answer

Inventories will be zero

question

The cyclically-adjusted budget deficit in an economy is zero. If this economy goes into recession, then the actual government budget will be:

answer

In deficit

question

In which of the following years did the US Federal Budget experience a surplus?

answer

2001

question

Which factor explains the high variability of investment?

answer

The durability of capital goods

question

If GDP exceeds aggregate expenditures in a private closed economy:

answer

Saving will exceed planned investment

question

The investment demand curve will shift to the left as the result of:

answer

General business pessimism about future economic conditions

question

The immediate-short-run aggregate supply curve is___, while the short-run aggregate supply curve is___:

answer

Horizontal, upward-sloping

question

The upward slope of the short-run aggregate supply curve is based on the assumption that:

answer

Wages and other resource prices do not respond to price level changes

question

Suppose that an economy produces 2400 units of output, employing 60 units of the input, and the price of the input is $30 per unit.

answer

$0.75

question

In the flow of income and spending, saving and investment are, respectively:

answer

A leakage and an injection

question

The long-run aggregate supply analysis assumes that:

answer

Both input and product prices are variable

question

Say's law in classical economics suggests that, over a period of time:

answer

Aggregate spending would tend to equal total output and income

question

Refer to the graph above. Which of the following factors will shift AS1 to AS3?

answer

An increase in input prices

question

If businesses feel more optimistic about the state of the economy, then this change is likely to:

answer

Shift the investment demand curve to the right

question

The American Recovery and Reinvestment Act of 2009 included mostly:

answer

Increases in government spending and decreases in taxes

question

In the Great Recession of 2007-2009, the aggregate expenditures schedule in the U.S. economy dropped, due in large part to a decline in:

answer

Investment expenditures

question

Other things constant, if domestic consumers purchase fewer foreign goods and more domestically produced goods at each level of GDP in the short run:

answer

GDP will rise

question

answer

appreciated, harder, easier

question

The short-run version of aggregate supply assumes:

answer

that product prices are flexible, but that resource prices are fixed

question

The "rockets and feathers" phenomenon we discussed in class refers to what economic tendency?

answer

the idea that prices in general tend to rise more rapidly than they tend to fall

question

If the cyclically-adjusted budget deficit and the actual budget deficit were the same, we could assume that:

answer

The economy was at full employment

question

If the MPS is 0.10, the multiplier will be:

answer

question

In general, economic research suggests that economies tend to

answer

All of the above (consume more when GDP increases, save more when GDP increases, experience declines in the APS when GDP falls)

question

If aggregate consumption in an economy was always equal to disposable income, then

answer

the income-consumption graph would be the same as the 45% reference line

question

Which of the following is a popular type of financial investment?

answer

Mutual funds

question

The Federal Reserve System performs many function but its most important one is:

answer

Controlling the money supply

question

By volume, which of the following nations is NOT currently one of the top 3 trading partners with the U.S.?

answer

Germany

question

answer

Econville has the comparative advantage in producing food.

question

The Federal Open Market Committee (FOMC) of the Federal Reserve System is primarily for:

answer

Setting the Fed's monetary policy and directing the purchase and sale of government securities

question

Economic Trade Theory suggests that countries should generally _____ goods for which they hold a comparative advantage and _____ goods for which they do not hold a comparative advantage.

answer

export, import

question

Wanda purchased a non-maturing bond for $10,000 that pays out semi-annual coupons (i.e., twice per year), at a rate of $350 each payout. Her expected annual rate of return on the bond is:

answer

7 percent

question

By volume, which of the following nations is NOT currently one of the top 3 overall world exporters?

answer

Canada

question

Which of the following countries exports the least, when measured as a fraction of overall GDP?

answer

United States

question

Which of the following Fed actions increases the U.S. money supply?

answer

Lower the reserve ratio

question

answer

$255,256

question

If the purchasing power of the dollar is failing then we also know that:

answer

The price index is rising

question

Members of the Federal Reserve of Governors are:

answer

Appointed by the President to staggered 14-year terms

question

The use of tariffs and quotas for trade protection results in:

answer

Less overall efficiency in the global economy

question

If the Board of Governors of the Federal Reserve System decides to sell off some of their holdings of securities to commercial U.S. banks, this decision will:

answer

Decrease the excess reserves of member banks and thus decrease the money supply

question

Which of the following topics refers to the reason tariffs are common but quotas are not?

answer

Government Tax Revenues

question

Equal shares of a firm's profit are paid out to stockholders as:

answer

Dividends

question

What "backs" the money supply of the U.S.?

answer

The fact that the intrinsic value of coins in circulation is greater than their face value

question

If the required reserve ratio were 15 percent, the value of the monetary multiplier would be:

answer

6.67

question

The M1 definition of the money supply does NOT include which of the following?

answer

money market investment accounts help by individuals

question

Which of the following is a likely result of a country imposing tariffs on automobiles?

answer

An increase in the price of automobiles in the foreign/producing country

question

If stockholders sell their shares for more than they paid for those shares, the stockholders:

answer

Realize a capital gain

question

Investments that are designed to match exactly the performance of a group of stocks like the Dow Jones Industrial Average or the S&P-500 are called:

answer

Index funds

question

Using the Taylor Rule, for each 1% increase in the inflation rate above its 2% target, the Fed should:

answer

increase the real federal funds rate by 0.5%

question

The Federal funds rate is the rate the U.S. banks pay for loans from:

answer

Other banks

question

A mutual fund company uses the funds of its investors to:

answer

Buy stocks and bonds

question

If the U.S. government passes legislation limiting the number of automobiles that can be imported into the U.S., capping that number at 300,000 cards per year, they have adopted a(n):

answer

Quota

question

When people withdraw money from their deposits in the banking system, the:

answer

Excess reserves of the banking system will decrease

question

Which of the following "backs" the value of money in the United States?

answer

The acceptability of it as a medium of exchange

question

answer

important, frequently, unimportant, infrequently

question

If a nation agrees to limit the quantity of a product that it exports to another, it has adopted:

answer

A voluntary exports restriction

question

If the Fed (Central Bank) buys government securities from commercial banks in the open market:

answer

Commercial banks give the securities to the Fed, and the Fed increases the banks' reserves

question

An excise tax that is applied to an imported product, but not to products produced domestically, is a(n):

answer

tariff

question

Burt bought a house for $200,000 and then rents it out for $1,500 per month. His expected annual rate of return from renting the house is approximately

answer

9 percent

question

answer

Y will rise and its rate of return will fall

question

The limited liability rule means that if a corporation goes bankrupt:

answer

Shareholders can only lose the amount they invested

question

Which one of the following is a feature of all investments?

answer

The future payments earned, or value of the asset itself, carries uncertainty

question

answer

question

Alma recently purchased a Mexican restaurant for $450,000 from which expects to earn a monthly profit of $1,500. Her expected annual rate of return in:

answer

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