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MacroEconFinal
| Question | Answer |
|---|---|
| Economics is the study of | Choice |
| Economics is not a | Natural science |
| Adam Smith wrote "The Wealth of Nations", which was published in | 1776 |
| Karl Marx wrote "Capital" published in | 1867 |
| Economic resources in America are | limited |
| The cost of capital is | interest |
| The U.S. does not have a | trade surplus |
| Comparative advantage is not | the basic rational for trade |
| NAFTA has | - increased trade between Mexico and U.S. - Resulted in small loss of U.S. jobs - North American Free Trade Agreement |
| Which one of the following expressions best states the idea of opportunity cost? | "There is no such thing as a free lunch" |
| The four factors of production are | Land, labor, capital, and entrepreneurial ability |
| Which of the following is a land resource? | Natural Gas |
| Refer to the above table. If the economy is producing at production alternative D, the opportunity cost of the fourth unit of consumer goods will be | 4 units of capital goods |
| Refer to the above table. As compared to production alternative D, the choice of alternative C would | tend to generate a more rapid growth rate |
| Refer to the above table. A total output of 4 units of capital goods and 4 units of consumer goods | would involve an inefficient use of the economy's scarce resources |
| Refer to table. For this economy to produce a total output of 9 units of capital goods and 3 units of consumer goods it must | Achieve the full employment of available resources |
| Refer to the table For these date the law of increasing opportunity costs is reflected in the fact that | larger and larger amounts of capital goods must be sacrificed to get additional units of consumer goods |
| Which of the following do economists consider capital | a construction crane |
| Unemployment | is illustrated by a point inside the production possibilities curve |
| The construction of a production possibilities curve assumes | technology is fixed |
| Which of the following is a distinguishing feature of a command system | central planning |
| command systems are also known as | communism |
| The division of labor means that | workers specialize in various production tasks |
| The use of money contributes to economic efficiency because | it promotes specialization by overcoming the problems with barter |
| Which of the following is one of the five fundamental questions | What goods and services will be produced? |
| The competitive market system | encourages innovation because successful innovators are rewarded with economic profits |
| Refer to above data. In view of the indicated resource prices, the economically most efficient production technique is technique | #3 |
| Refer to above data. If a new production technique is developed that enables a firm to produce 20 units of output with 3 units of land, 3 of labor, 1 of capital, and 2 of entrepreneurial ability, this technique would | be adopted because it would lower production costs and increase economic profits |
| The market system's answer to the fundamental question "What will be produced?" is essentially | "Goods and services that are profitable" |
| "Consumer sovereignty" refers to the | idea that the decisions of producers must ultimately conform to consumer demands |
| Which of the following best describes the invisible-hand concept? | The desires of resource suppliers and producers to further their own self-interest will automatically further the public interest |
| Two major virtues of the market system are that it | allocates resources efficiently and allows economic freedom |
| The above data indicate that production in | both Latalia and Trombonia is subject to constant opportunity costs |
| Refer to tables. In Latalia the domestic real cost of 1 ton of pork | is 5 tons of beans |
| Refer to tables. If these two nations specialize on the basis of comparative advantage | Latalia will produce beans and Tombonia will produce pork |
| Assume that before specialization and trade, Latalia produced combination C and Trombonia produced combination B. If these two nations now specialize completely based on comparative advantage, the total gains from specialization will be | 4 tons of beans |
| Refer to tables. Which of the following would be feasible terms for trade between Latalia and Trombonia | 4 tons of beans for 1 ton of pork |
| The simple circular flow model shows that | households are on the selling side of the resource market and on the buying side of the product market |
| The two basic markets shown by the simple circular flow model are | product and resource |
| If the price of steak decreases, the demand for hamburger (a substitute for steak) will | decrease |
| If the price of peanut butter decreases, the demand for jelly will | increase |
| Supply is not determined by the | market price of the product |
| If the price of oranges increases, the supply of orange juice will | decrease |
| If demand increases and supply remains constant, market price will ____ and market quantity will be ____ | increase, increase |
| If demand increases and supply decreases, market price will ____ but market quantity will ____ | increase, be unknown |
| Excludability does not apply to | the negative externalities |
| Markets, viewed from the perspective of the supply and demand model | assume many buyers and sellers of a standardized product |
| The demand curve shows the relationship between | price and quantity demanded |
| In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by | a change in buyer tastes |
| An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction assumes that | bicycles are normal goods |
| If two goods are complements | a decrease in the price of one will increase the demand for the other |
| By an "increase in demand" economists mean that | the quantity demanded at each price in a set of prices is greater |
| An increase in product price will cause | quantity demanded to decrease |
| An improvement in production technology will | shift the supply curve to the right |
| Suppose that corn prices rise significantly. If farmers expect the price of corn to continue rising relative to other crops, then we would expect | the supply to increase as farmers plant more corn |
| Refer to data. Equilibrium price will be | $2 |
| Refer to data. If the price in this market was $4 | farmers would not be able to sell all their wheat |
| Refer to data. If price was initially $4 and free to fluctuate, we would expect the | quantity of wheat supplied to decline as a result of the subsequent price change |
| Refer to diagram. The equilibrium price and quantity in this market will be | $1.00 and 200 |
| Refer to diagram. A surplus of 160 units would be encountered if the price was | $1.60 |
| Refer to diagram. A shortage of 160 units would be encountered if the price was | $0.50 |
| A market is in equilibrium | if the amount producers want to sell is equal to the amount consumers want to buy |
| If the supply and demand curves for a product both decrease, then equilibrium | quantity must decline, but equilibrium price may rise, fall, or remain unchanged |
| Since their introduction, prices of DVD players have fallen and the quantity purchased has increased. This statement | suggests that the supply of DVD players has increased |
| With a downsloping demand curve and an upsloping supply curve for a product, a decrease in resource prices will | decrease equilibrium price and increase equilibrium quantity |
| Market failure is said to occur whenever | private markets do not allocate resources in the most economically desirable way |
| The two main characteristics of a public good are | nonrivalry and nonexcludability |
| Cost-benefit analysis attempts to | compare the benefits and costs associated with any economic project or activity |
| Refer to data. For Plan D marginal costs and marginal benefits are | $28,000 and $12,000 |
| Refer to data. On the basis of cost-benefit analysis government should undertake | Plan B |
| Refer to data. Plan C entails | an overallocation of resources to flood control |
| A positive externality or spillover benefit occurs when | the benefits associated wit ha product exceed those accruing to people who consume it |
| One year after the crash ___ banks had failed | 800 |
| One year after the crash _______ families were without any means of support | 4,000,000 |
| During the depression, the ___ was the one appliance people could not live without | radio |
| Roosevelt called _____ the most dangerous man in America | Huey Long |
| The purpose of a tight money supply is to ____ the supply of money | decrease |
| If you are estimating your total expenses for school next semester, you are using money primarily as | a unit of account |
| In the U.S. the money supply is comprised of | coins, paper currency, and checkable deposits |
| Currency held in a vault is | not counted as part of the money supply |
| The basic policy-making body in the U.S. banking system is the | board of governors of the federal reserve |
| The federal reserve system was created in | 1913 |
| The goldsmith's ability to create money was based on the fact that | paper money in the form of gold receipts was rarely redeemed for gold |
| The claims of the owners of a firm against the firm's assets are called | net worth |
| Excess reserves refer to the | difference between actual reserves and required reserves |
| Refer to data. This commercial bank has required reserves of | $20,000 |
| Refer to data. This commercial bank has excess reserves of | $6,000 |
| Refer to data. This bank can safely expand its loans by a maximum of | $6,000 |
| Refer to data. This bank can safely expand the money supply by a maximum of | $6,000 |
| Refer to data. Assuming the bank loans out all of its remaining excess reserves as a checkable deposit, and has a check cleared against it for that amount, its reserves and checkable deposits will now be | $20,000 and $100,000 |
| Refer to data. If the original balance sheet was for the commercial banking system, rather than a single bank, loans and checkable deposits could have been expanded by a maximum of | $30,000 |
| A single commercial bank must meet a 25% reserve requirement. If the bank has no excess reserves initially and $5,000 of cash is deposited in the bank, it can increase its loans by a maximum of | $3,750 |
| If you deposit a $50 bill in a commercial bank that has a 10% reserve requirement the bank will | have $45 of additional excess reserves |
| When a bank has a check drawn and cleared against it | the amount of required reserves the bank must have will fall |
| The multiple by which the commercial banking system can expand the supply of money on the basis of excess reserves | is larger the smaller the required reserve ratio |
| The transactions demand for money is most closely related to money functioning as a | medium of exchange |
| The equilibrium rate of interest in the market for money is determined by the intersection of the | supply of money curve and the total demand for money curve |
| Federal Reserve Notes in circulation are | A liability as viewed by the Federal Reserve Banks |
| The four main tools of monetary policy are | the discount rate, the reserve ratio, the term auction facility, and open-market operations |
| An increase in the legal reserve ratio | decreases the money supply by decreasing excess reserves and decreasing the monetary multiplier |
| The discount rate is the interest | rate at which the Federal Reserve Banks lend to commercial banks |
| The purpose of a restrictive monetary policy is to | raise interest rates and restrict the availability of bank credit |
| An increase in the money supply will | Lower interest rates and increase the equilibrium GDP |
| The purpose of a tight money policy is to | raise interest rates and restrict the availability of bank credit |
| Which of the following actions by the Fed would cause the money supply to increase | Purchases of government bonds from banks |
| Which of the following actions by the Fed would cause the money supply to decrease | Sales of government bonds to the public |
| Henry Ford saw a direct relationship between the ____ people were paid and the ____ of cars he could sell | wages, number |
| Alfred P. Sloan did not make capital funds available for | expanding businesses |
| The labor union movement tried to institutionalize the concept behind | the $5.00 a day wage |
| The growth of the Sun Belt was made possible by the invention of | air conditioning |
| Real GDP has _____ in the past 50 years | increased |
| Nominal GDP has ____ in the past 50 years | increased |
| Real GDP minus nominal GDP does not equal the | GDP gap |
| The business cycle is not | an outdated concept |
| _____ and _____ are the two major problems associated with the business cycle | Unemployment, inflation |
| Inflation is | the general rise in prices |
| Inflation causes the dollar to | decrease in value |
| The system that measures the economy's overall performance is formally known as | National income accounting |
| A nation's GDP | is the dollar value of all final output produced within the borders of the nation |
| A nation's GDP | can be found by summing C+Ig+G+Xn |
| GDP measures and reports output | in dollar amounts |
| If intermediate goods and services were included in GDP | the GDP would be overstated |
| Tom Atoe grows fruits and veggies for home consumption. This activity is | productive but is excluded from GDP because no market transaction occurs |
| Net exports are | exports less imports |
| Which of the following do national income accountants consider to be investment | purchase of a new house |
| In calculating GDP, governmental transfer payments, such as social security or unemployment compensation are | not counted |
| Which of the following best defines disposable income | income received by households less personal taxes |
| Recurring upswings and downswings in an economy's real GDP over time are called | business cycles |
| The phase of the business cycle in which real GDP declines is called | a recession |
| In the U.S. the rate of unemployment is highest for | African-American teenagers |
| According to the Bureau of Labor Statistics, to be officially unemployed a person must | be in the labor force |
| The labor force includes | employed workers and persons who are officially unemployed |
| Official unemployment statistics | understate unemployment because discouraged workers are not counted as unemployed |
| Part-time workers are counted as | fully employed and therefore the official unemployment rate may understate the level of unemployment |
| The unemployment rate is the | percentage of the labor force that is unemployed |
| Which of the following constitute the types of unemployment ocurring at the natural rate of unemployment | Structural and frictional unemployment |
| Rising per-unit production costs are most directly associated with | cost-push inflation |
| The most important determinant of consumer spending is | The level of income |
| the APC is calculated as | consumption/income |
| As disposable income increases, consumption | and saving both decrease |
| Dissaving means | that households are spending more than their current incomes |
| Refer to data. At the $250 level of disposable income, savings is | $5 |
| Refer to data. At the $200 level of disposable income, average propensity to consume is | 1.025 |
| Refer to data. At the $275 level of disposable income, average propensity to save is | 0.036 |
| Refer to data. The marginal propensity to consume is | 0.80 |
| Refer to data. The marginal propensity to save is | 0.20 |
| Refer to data. If disposable income was $325, we would expect consumption to be | $305 |
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