question

In China, which of the following would be a resource in the production of rice?

answer

Fertile land Labor Capital Equipment

question

If there is a tremendous natural disaster, the effect can be shown by:

answer

an inward contraction of the production possibilities frontier

question

Which fundamental economic question is most closely related to the issues of income distribution and poverty?

answer

The For Whom to Produce question

question

100 shares of stock in General Motors

answer

Not a capital resource

question

A high school graduate who gets a college degree is adding to the economy's stock of

answer

Human capital

question

The simplest circular-flow model shows the interaction between households and firms. In this model:

answer

Firms supply goods and services to households which, in turn, supply factors of production to the firms

question

The economy's factors of production are not equally suitable for producing different types of goods. This principle generates:

answer

the law of increasing opportunity cost

question

You can either spend $100 on a new economics textbook or a new CD player. If you choose to buy the new economics textbook, the opportunity cost is

answer

the new CD player

question

Specialization in production was the starting point for what book in economics that many regard as the beginning of economics

answer

The Wealth of Nations by Adam Smith

question

The basic concern of economics is:

answer

to study the choices people make

question

The study of a single firm and how it determines prices would fall under:

answer

Microeconomics

question

The branch of economics that focuses on economy-wide variables like inflation and unemployment is called:

answer

Macroeconomics

question

A key theme fundamental to all of economics is:

answer

people have unlimited wants facing limited means to satisfy them

question

In economics a resource is anything that

answer

is also called an input or factor can be used in production

question

When a chef creates a dinner plate of food for a customer, the physical capital resource is

answer

the oven

question

Margo spends $10,000 on one year's college tuition. he could have worked this year and earned some money. The opportunity cost of spending one year in college for margo is:

answer

The $10,000 and whatever she would have earned had she not been in college

question

The local Taco Hut charges the same price for everything on its menu: $3 will buy a taco, a burrito, or nachos. You buy the taco and think that if you had not purchased the taco, you would have purchased the burrito. The opportunity cost of the taco is:

answer

the burrito

question

The primary emphasis in macroeconomics is on:

answer

the national economy at the aggregated level

question

In attempt to reduce shooting deaths, some cities have offered money to people who turn in illegal guns. This program is an example of the government using________ to influence behavior

answer

Incentives

question

If the economy's resources are used efficiently, then it is guaranteed that the economy will also achieve equity

answer

FALSE

question

Specialization in production was the starting point for what book in economics that many regard as the beginning of modern economics

answer

The Wealth of Nations by Adam Smith

question

Economists usually make the assumption that production represented by a PPF is subject to increasing opportunity costs because

answer

all resources are not equally suited to produce every good

question

A high school graduate who gets a college degree is adding to the economy's stock of:

answer

human capital

question

In economics, a simplified representation that is used to study a real situation is called:

answer

a model

question

In the simplest circular-flow model, households supply _____ and demand_______

answer

Factors of production; goods and services

question

If LeRoyce trades two cookies for one of Amir's brownies, we say that they are engaging in

answer

barter

question

The circular-flow diagram illustrates how households________ goods and services and __________ factors of production

answer

buy; sell

question

Jim is being paid $7.25 an hour to work at a restaurant. In the circular-flow this is an example of a:

answer

Household selling a resource in the factor market

question

footballs is sold

answer

In the product market

question

If there is a tremendous natural disaster, the effect can be shown by:

answer

an inward contraction of the production possibilities frontier

question

Suppose you manage a corner grocery store. If peanut butter is an inferior good, what do you suppose would happen to the price and quantity of peanut butter as incomes falls during an economic recession

answer

the price and quantity would both increase (incomes=demand)

question

After graduation from college, you will receive a substantial increase in your income from a new job. If you decide that you will purchase more t-bone steak and less hamburger, then for you hamburger is considered an

answer

inferior good

question

A shift in the demand curve of textbooks to the right would be caused by

answer

an increase in college enrollment (population=demand factor)

question

If the quantity of housing supplied in a community is greater than the quantity of houses demanded, the existing price:

answer

is above the market equalibrium

question

the most likely to shift the supply of milk to the right would be caused by

answer

a decrease in the price of feed given to dairy cows

question

Raclette is a popular wintertime dish in Switzerland. It is essentially melted Raclette cheese over boiled new potatoes. If the price of Raclette cheese decreased, we would expect to see:

answer

an increase in demand for new potatoes

question

A shift of the demand curve for thin-crust pizza would NOT be caused by a change in

answer

the price of thin-crust pizza

question

The demand curve for meals at a local Applebee's will shift to the left if:

answer

The Olive Garden offers a 10 percent discount coupon in the local newpaper

question

Hugo Chávez was the president of Venezuela. Venezula is a major producer of oil products, which remain the keystone of Venezula's economy. Suppose President Chávez wanted to increase his popularity with the citizens of Venezuela and enacted a government policy to reduce theprice of gasoline sold at state-owned gas stations to 50 percent of the previous price. This policy is called a

answer

price ceiling

question

Farmers in developing countries want the United States to reduce the subsidies that it gives to U.S. farmers because subsidized agricultural products from the United States

answer

lead to agricultural surpluses and lower prices for farmers in developing countries

question

Rent controls in New York City are not caused by

answer

an increase in the quantity supplied of rent-controlled apartments

question

Consider the market for iPods. What happens if a fantastic new alternative MP2 player is developed and at the same time a boat carrying a large shipment of iPods is attacked by pirates and sunk?

answer

The change in price is indeterminate and the quantity decreases

question

In the expenditure approach used in calculation of GDP, a laptop computer purchased by an accounting firm is considered to be

answer

investment spending

question

An example of government transfer or transfer payment is a

answer

Social Security payment

question

GDP omits

answer

purchase of stocks, doing things on your own, and receiving government transfers

question

One role for government policy is

answer

to attempt to manage short-run macroeconomic fluctuations

question

Real GDP is nominal GDP adjusted for

answer

changes in prices

question

Goods that are produced domestically but sold abroad are

answer

exports

question

A cartoon shows two people watching television. On the screen are the words "Economic growth indicators are up, led by car repairs, divorce costs, open-heart surgeries, and toxic waste cleanups." The cartoon illiterates the:

answer

Difficulty in measuring social welfare

question

An intermediate good would be:

answer

lumber used in building a house

question

The three ways of measuring GDP are the __________ approach, the ______________ approach and the ____________approach

answer

Expenditure National income Value-added

question

An increase in RGDP is called

answer

economic growth

question

If the price of health services rises 13% during a period when the level of average prices rises 13%, the relative price of health services compared with other goods and services

answer

stays the same

question

Assume that the real GDP of the U.S. is approximately $12 trillion and the population of the United States is approximately 300 million. What is the per capita GDP

answer

3/12=4--> $40,000

question

Recessions are periods when

answer

output and employment are falling

question

If wages grew at 5% rate last year and the average prices grew at 3% rate, then the average worker is

answer

better off

question

Suppose the total market value of all final goods and service produced this year in economy X is $4 million. Of the 4$ million worth of goods, $3 million is sold and $1 million is held in inventory. For this year, the GDP for economy X is

answer

$4 million Investment inventory C+I+G=Y

question

Macroeconomic stabilization policies are:

answer

monetary policy and fiscal policy

question

Suppose the market basket consists of 10X, 20Y, and 30Z. Current-year prices are $1.00 for each unit of X, $0.96 for each unit of Y, and $1.13 for each unit of Z. Base-year prices are $1.00 for each unit of X,Y, and Z. What is the approximate CPI i the current year?

answer

base-year= 10(1)+20(1)+30(1)=60 {[10(1)+20(.96)+30(1.13)]/60}x 100=105.17

question

Is Sean buying a new iPhone included in GDP?

answer

YES

question

Long-run economic growth depends almost entirely on

answer

labor productivity growth

question

Human capital is

answer

the improvement in labor created by education and knowledge that is embodied in the work force

question

Physical capital is purchased through investment spending, made by _____________, which in turn is mostly financed out of __________ taking the form of financial securities such as ____________ which we call _________ an investment

answer

Businesses; domestic and foreign savings; stocks an bonds; making

question

economists say that long-run economic growth is almost entirely due to

answer

rising population

question

Diminishing returns to physical capital implies that, when human capital per worker and the state of technology remain fixed, each successive increase in physical capital leads to

answer

a smaller increase in productivity

question

Roads, telephone lines, power facilities, and schools are examples of a nation's

answer

infastructure

question

Education's effect on productivity:

answer

is an even more important determinant of growth than increases in physical capital

question

Long-run growth is sustainable if:

answer

it can continue in the face of limited natural resources and the impact of growth on the environment

question

Most physical capital, except for infrastructure, is provided by

answer

investment spending by private sector firms

question

sources of funds for Facebook's investment spending are

answer

investors who purchase shares of stock in the company borrowing from savers (bonds)

question

If the interest rate in the market for loanable funds is above the equilibrium rate

answer

the quantity demanded for loanable funds exceeds the quantity supplied

question

The main role of financial systems is to

answer

channel funds from savers into investments

question

An asset that can be quickly converted to cash with relatively little loss of value is

answer

liquid

question

Financial assets with the highest risk are

answer

stocks

question

Which of the following financial assets is likely to be the most liquid?

answer

bank demand deposits

question

A financial intermediary that sets up a diversified portfolio of stocks and then resells that portfolio to individual investors is known as a

answer

mutual fund

question

Shares of stock are

answer

shares of ownership in the issuing company

question

Most of the bank's assets are

answer

loans from the federal reserves

question

An example of maturity transformation is

answer

Justin takes $10,000 from his savings account and uses it to buy some Apple stock

question

The 2008 financial crisis in Europe was caused primarily by problems with:

answer

home loans

question

Subprime mortgages

answer

are made to buyers who do not qualify for a standard mortgage

question

Before the 2008 financial crisis, shadow banks were

answer

not subject to regulations, such as capital requirements and reserve requirments

question

Recessions are periods when

answer

output and employment are falling

question

fiscal policy refers to

answer

The control of government spending and taxation

question

Suppose an economy has rising total output accompanied by increasing employment. This is generally known as

answer

expansion

question

One role for macroeconomics policy is

answer

attempt to manage macroeconomic fluctuations and the severity of their impact

question

Households in the national income accounts derive from

answer

rent from allowing firms to use their land, interest from lending, and wages or labor income

question

A share in the ownership of a company held by a share holder is considered

answer

stock

question

The market that channel the excess savings of households into investment spending by firms is known as

answer

Financial markets

question

The total income households have after paying taxes and receiving government transfers is called

answer

disposable personal income

question

Buying a new object is

answer

calculated in GDP

question

If the economy grew at a 3% rate this year and the average prices increased ___________, people would be better off this year than last year

answer

less than 3%

question

Suppose banks are issuing personal loans at an interest rate of 9%. If the expected inflation is 3% then the

answer

nominal interest rate is 6% and the real interest rate is 9%

question

The purpose of indexing Social Security payments to the CPI would be to

answer

increase corporate profits

question

Statement: "Inflation functions as a redistribution mechanism". This is because people

answer

-have income which respond differently to inflation -by different goods and services for which relative prices change during inflation -own different asses for which relative market values change with inflation

question

the following is included in the labor force

answer

A part-time store clerk who is looking or another job

question

In February of 2012, the bureau of labor statistics calculated the unemployment rate to be 8.3%. If frictional unemployment was 2% and structural unemployment was 3.2% then Cyclical unemployment would be

answer

3.2+2=5.2 8.3-5.2=3.1%

question

Anna recently moved to Boston in order for her husband Joe to begin a new job as an economics professor at Harvard. Anna is an experience surgeon who is interviewing with several hospitals in Boston, Anna is

answer

Frictionally unemployed

question

Economists frequently use GDP per capita to reflect

answer

difference in living standards across the country

question

Examples of Government Transfers are

answer

food stamps, medicare benefits paid to someone who is indigent, unemployment compensation

question

A cartoon shows two people watching television. On the screen are the words "Economic growth indicators are up, led by car repairs, divorce costs, open-hear surgeries, and toxic waste cleanups". The cartoon illustrates

answer

difficulty measuring social welfare and overall well-being

question

Example of an intermediate good

answer

tires purchased from Goodyear by General Motors for newly produced electric cars

question

The rate of unemployment that exists when the economy is at full employment is

answer

the natural rate of unemployment

question

The theory of long-run 'self-adjustment' was proposed by the

answer

Classicals

question

The Keynesians and Classicals disagreed on

answer

the way the economy worked and how to solve macroeconomic problems

question

The short-run aggregate supply curve is positively sloped because

answer

higher prices lead to higher profit and higher output

question

A decrease in energy prices will

answer

increase short-run aggregate supply

question

A natural disaster that destroys part of the country's infastructure is a type of ___________ and therefor shifts that ____________ to the _________

answer

Negative supply shock; short-run aggregate supply curve; left

question

Suppose that the stock market crashes. What is most likely to occur

answer

the aggregate demand curve shifts to the left

question

suppose that a presidential candidate who promised large personal income tax cuts is elected. What is most likely to occur

answer

an increase in aggregate demand

question

The AD curve represents a negative relationship between price levels and real GDP in the economy. This can be justified because the following hold

answer

-as inflation occurs, my purchasing power falls -as inflation occurs consumers rush to banks for credit and thus raises interest rates and thus reduces quantity demand of real GDP in the economy -as price levels in the U.S. rise, we buy cheaper imported goods and thus reduce quantity demand of real GDP in the economy

question

The international trade effect helps justify the downward slope of the AD curve but the exchange rate effect will shift the AD curve at a given price level

answer

TRUE

question

Government purchases of goods and services (the term C+I+G+NX) differ from changes in taxes and transfer payments because government purchases of goods and services

answer

influence aggregate demand directly while changes in taxes and transfer payments influence aggregate demand indirectly

question

Education and training contributes to the accumulation of human capital thus helping to increase productivity of labor. How does such increase in productivity help the macro economy?

answer

-increase in AS, both short-run and long-run -increase in equilibrium level of real GDP and fall in price levels -long-term growth

question

Suppose $1=115 Japanese Yen. The exchange rate then changes to $1=105 Japanese Yen. The dollar has_________, making Japanese goods_______ expensive to Americans

answer

Depreciated; more

question

The long-run level of output is known as:

answer

potential output or full employment level of output

question

The marginal propensity to save plus the marginal propensity to consume must equal

answer

1

question

If the marginal propensity to consume is 0.5, individual autonomous consumption is $10,000, and disposable income is $40,000, the individual consumption spending is

answer

c=a+by c=a+.5y c=10,000+.5(40,000)

question

"income-expenditure equilibrium" can be defined as a situation in which

answer

there is no unplanned inventory investment

question

An unplanned fall in inventories leads to

answer

production increasing

question

Human capital is

answer

the improvement in labor created by education, knowledge and health care that is then embodied in the work force

question

Physical capital is purchased through investment spending, which in turn is mostly financed out of

answer

domestic and foreign savings

question

Economists say that long-run economic growth is almost entirely due to

answer

rising productivtiy

question

The supply of loanable funds is________ sloping because ____________ respond to lower interest rtes by_______ their quantity supplied of loanable funds

answer

upward; savers; decreasing

question

An example of infrastructure is

answer

New York City's public transportation system

question

Shares of stock represent

answer

shares of ownership in the issuing company

question

The main role of financial systems is to

answer

channel funds from savers into investment spending/ borrowing

question

The short-run aggregate supply curve is positively sloped becasue

answer

higher prices lead to higher profit and higher output

question

This is intended t prevent bank runs

answer

deposit insurence

question

Investment banks differ from commercial banks because commercial banks__________, but investment banks_________

answer

accept deposits from costumers; do not accept deposits

question

Suppose that the stock market crashes. What is most likely to occur?

answer

the aggregate demand curve shifts to the left

question

Suppose that a presidential candidate who promised large personal tax cuts is elected. What is most likely to occur?

answer

an increase in aggregate demand

question

A natural disaster that destroys part of a country's infrastructure is a type of _________ and therefor shifts the ______________ to the ___________(classical model)

answer

negative supply shock; short-run aggregate supply curve; left

question

Suppose the real exchange rate of 115 Japanese yen to dollar moves to 105 yen to the dollar. The dollar has _________, making Japanese goods___________ expensive for Americans

answer

depreciated; more

question

The two economists, Smith and Jones, are discussing the currently high unemployment rate. Smith says that something ought to be done quickly because the economy may not be able to restore itself to full employment. Jones says that it is better to take a "hands-off" approach. What is most likely true?

answer

Smith is probably a Keynesian economist, and Jones a classical economists

question

According to classical economists, in the long-run, inflationary and recessionary gaps are self-correcting because, eventually

answer

nominal wages rise and fall in order to close an inflationary or recessionary gap, repectivly

question

The inflation is sometimes referred to as tax on money holding because it is

answer

the decrease in the real value of money held by the public caused by inflation

question

In the income-expenditure model, inventories are

answer

constantly changing and provide insight into the future of the economy

question

The AD curve represents a negative relationship between price levels and real GDP in the economy. This can be justified because the following hold

answer

-As inflation occurs, my purchasing power falls -As inflation occurs, consumers rush to banks for credit and thus raises interest rates and thus reduces quantity demanded for real GDP in the economy -As price levels in the U.S. rise, we buy cheaper imported goods and thus reduce quantity demand of RGDP in the economy

question

During the Great Depression

answer

both consumption and investment decreased

question

The current level of RGDP lies above potential GDP. An appropriate fiscal policy would be to _________, which will shift the _________ curve to the ____________.

answer

decrease government purchases; AD; left

question

When we keep part of our wealth in a savings account, money is playing the role of:

answer

store of value

question

All of the following are responsibilities of the FED

answer

-Control the monetary base -Oversee and regulate the banking system -Set the interest (referred to as the discount) rate

question

The most liquid asset is

answer

a $50 bill

question

A bond is considered

answer

an asset that is not part of M1 and M2

question

In the U.S., the institution that is charged with fiscal policy is the

answer

Treasury Department

question

The banking crisis of 1907 the preceded the Great Depression and the recent one in 2008 were both caused by

answer

risky speculation in real estate and in the stock market

question

If the state government allocates additional spending on education, the opportunity cost is

answer

measured in terms of the alternative uses for that money

question

If the economy grew at a 3% rate this year and average prices grew______, people would be better off this year compared with last year

answer

slower than 3%

question

When the FED is acting as a fiscal agent for the treasure it will

answer

receive and process bids for the treasury securities in preparation for the treasury's auction of securities

question

Reserve requirements

answer

set the minimum amount of reserves a bank must hold

question

If the government spends more than it earns it runs a ________________. In order to finance its excess spending it can ______________ from the public by selling______________.

answer

budget deficit; borrow; treasury securites

question

The following are sources of federal tax revenue

answer

-the personal income tax -social insurance taxes -the corporate profits tax

question

The effect of automatic stabilizers is to increase the size of the multiplier

answer

FALSE

question

A contractionary fiscal policy__________ government spending or ___________ taxes.

answer

decreases; increases

question

If the economy is at equilibrium above potential output, there is a(n)______________ gap, and __________ fiscal policy is appropriate

answer

inflationary; contractionary

question

In order to fight the recession the began in December 2007, FED policy in late 2008 involved:

answer

cutting its target interest rate (discount rate or prime rate) to near zero followed by a massive surge in buying bonds called quantitative easing

question

Open market operations are the:

answer

buying and selling of treasury securities by the FED

question

A decrease in money supply will occur if

answer

-an increase in the discount rate(relative to federal funds rate) -an increase in the required-reserve ratio

question

When the federal government incurs a budget deficit, it will:

answer

borrow money from the public by issuing securities

question

Debit cards

answer

are considered part of the money supply, since they allow access to a part of the money supply.

question

Example of liquid asset:

answer

cash and coin

question

Suppose the reserve ratio is 20%. If Sam deposits $500 into his checking account, his bank can increase loans by

answer

.2x500=100 500-100=400 $400

question

If the required reserve ratio is 10%, and the FED conducts an open market purchase of $100, what is the maximum possible change in the money supply created by the commercial banking system?

answer

1/r x 100=1,000 1,000-100=900 $900

question

Consider a Texaco gas station. If it introduces a new technology where customers pay at the pump, thus decreasing production costs, there will be:

answer

a shift to the right in the station's supply curve and lower gas prices

question

If the quantity of housing supplied in a community is greater than the quantity of houses demanded, the existing price:

answer

is above the market equilibrium price

question

Sam, who is 55 years old and has been a steel worker for 30 years, is unemployed because the steel plant in his town closed and moved to Mexico. Sam is experiencing

answer

structural unemployment

question

To close a recessionary gap using monetary policy, the Fed should ________ the money supply to ________ investment and consumer spending, and shift the aggregate demand curve to the ________.

answer

increase; increase; right

question

The 2009 U.S. stimulus was a(n) _____ fiscal policy that _____ aggregate demand.

answer

expansionary; increased

question

When a bank borrows from the federal reserve, it pays the

answer

discount rate

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