Economics – Flashcards with Answers

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10 Principles
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How People Make Decisions 1. People Face Trade-offs 2. The Cost of Something is What you give up to get it 3. Rational People think at the margin 4. People respond to incentives HOW PEOPLE INTERACT 5. Trade can make everyone better off 6. Markets are usually a good way to organize economic activity 7. Governments can sometimes improve market outcome HOW THE ECONOMY WORKS AS A WHOLE 8. A country’s standard of living depends on its ability to produce goods and services 9. Prices rise when the government prints too much money 10. Society faces a short-run trade-off between inflation and unemployment
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The phenomenon of scarcity stems from the fact that
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resources are limited
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MItch has $100 to spend and wants to buy either a new amplifier for his guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $100,s o he can only buy one. This illustrates the basic concept that
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people face trade-offs
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When the government redistributes income from the wealthy to the poor,
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people work less and produce fewer goods and services
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High-school athletes who skip college to become professional athletes
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understand that the opportunity cost of attending college is very high
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Mallory decides to spend three hours working overtime rather than watching a video with her friends. she earns $8 an hour. Her opportunity cost of working is
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the enjoyment she would have received had she watched the video
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The average cost per seat on the 50-passenger floating-on-air bus company’s trip from Kansas City to St. Louis, on which no refreshments are served, is $45. In advance of a particular trip, three seats remain unsold. The bus company could increase its profit only if it
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charged any ticket price above $0 for the three remaining seats
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The invisible hand refers to
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how the decisions of households and firms lead to desirable market outcomes
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A worker in Thailand can earn $2 per day making cotton cloth on a hand loom. A worker in the United States can earn $80 per day making cotton cloth with a mechanical loom. What accounts for the difference in wages?
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Labor is more productive making cotton cloth with a mechanical loom that with a hand loom.
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Which of the following is the most correct statement about the relationship between inflation and unemployment?
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In the short run, falling inflation is associated with rising employment.
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In a competitive market, the quantity of a product produced and the price of the product are determined by
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both buyers and sellers
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Which of the following is not a characteristic of a perfectly competitive market… A. sellers set the price of the product B. There are many sellers. C. Buyers must accept the price the market determines.
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Sellers set the price of the product
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The following table containes a demand schedule for a good. Price Quantity Demanded $10 100 $20 ?
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Price Audrey Bob Chuck Dottie $12 2 1 3 4 $10 4 4 4 5 $8 6 7 5 6 $6 8 8 4 7 $4 10 9 3 8 $2 12 10 2 9 -Whose Demand does not obey the law of demand? -If these are the only four buyers in the market, then the market quantity demanded at a price of $8 is? – If these are the only four buyers in the market, then when the price decreases from $6 to $4, the market quantity demanded?
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-Chuck’s -24 Units -increases by 3 units
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A decrease in demand is represented by
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a leftward shift of a demand curve
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Which of the following would not shift the demand curve for mp3 players?
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a decrease in the price of mp3 players
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Suppose the American Medical Association announces that men who shave their heads are less likely to die of heart failure. We could expect the current demand for
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razors to increase
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What will happen in the rice market now if buyers expect higher rice prices in the near future?
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The demand for rice will increase.
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Which of the following would not shift the supply curve for mp3 players?
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an increase in the price of mp3 players
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What will happen in the rice market now if sellers expect higher rice prices in the near future?
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The supply of rice will decrease
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For a good that is a necessity
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demand tends to be inelastic
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Which of the following is likely to have the most price inelastic demand? -mint-flavord toothpaste -toothpaste -Colgate mint flavored toothpaste -a generic mint-flavored toothpaste
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toothpaste
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If the price of natural gas rises, when is the price elasticity of demand likely to be the highest?
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one year after the price increase
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There are very few, if any, good substitutes for motor oil. Therefore,
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the demand for motor oil would tend to be inelastic
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For which of the following goods would demand be most elastic. – clothing – blue jeans -Tommy Hilfiger jeans – All three would have the same elasticity of demand since they are all related
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Tommy Hilfiger jeans
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Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. Price elasticity of demand for X is
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1
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If the price elasticity of demand for a good is 1.5, then a 3 percent decrease in price results in a
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4.5 percent increase in the quantity demanded
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Get Smart University is contemplating an increase in tuition to enhance revenue. If GSU fells that raising tuition would enhance revenue, it is
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assuming that the demand for university education is inelastic
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Suppose that demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good?
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Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.
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Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market?
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Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
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Production Function
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shows the relationship between quantity of inputs used to make a good and the quantity of output of that good
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Marginal Product
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the increase in output that arises from an additional unit of that input
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Total Cost
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Fixed Cost + Variable Cost
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Average Fixed Costs
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Fixed Cost/ Quantity
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Average Variable Cost
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Variable Cost/ Quantity
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Average Total Cost
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Total Cost/Quantity
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Marginal Cost
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change in total cost/ change in quantity
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The phrases of a business cycle include
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trends
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Three key facts about economic fluctuations (business cycle)
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-Economic fluctuations are irregular and unpredictable – Most macroeconomic variables fluctuate together -As output falls, unemployment rises
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What is recession? How do you know we are in a recession?
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significant decline in economic activity over a few months
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A recession when we have two consecutive quarters of decline in real GDP?
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normally visible in real GDP, real income, employment, industrial production, and wholesale retail sales.
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___ in the US has many years had a Business Cycle Dating Committee dating the US business cycle.
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NBER
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Which of the following is most commonly used to monitor short-run changes in economic activity? – the inflation rate -real GDP -aggregate demand -aggregate supply
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real GDP
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In 1936, John Maynard Keynes published a book, The General Theory, which attempted to explain
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short-run economic fluctuations.
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What is the cause of short-run economic fluctuation?
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aggregate demand is not adequate
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Economist use the model of aggregate demand and aggregate supply
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to explain short-run fluctuations in economic activity around its long-run trend
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Most economists use the aggregate demand and aggregate supply model primarily to analyze
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short-run fluctuations in the economy
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People will spend more if the price level
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falls because falling prices increase the real value of a dollar
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Suppose a stock market crash makes people feel poorer. This decrease in wealth would induce people to desire
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decreased consumption, which shifts aggregate supply left
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Aggregate supply curve in the long run: in the short run:
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in the long run the aggregate supply curve is vertical in the short run slopes upward
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From 2001 to 2005 there was a dramatic rise in the price of houses. if this made people feel wealthier, then it would shift
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aggregate demand right
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When taxes decrease, consumption, increases, so aggregate demand shifts right
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consumption increases, so aggregate demand shifts right
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Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers, people become pessimistic regarding the future and retain that level of pessimism for some time. – Which curve shifts and in which direction? – IN the short run what happens to the price level and real GDP?
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– aggregate demand shifts left – both the price level and real GDP falls
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Two causes of economic fluctuations
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shifts in aggregate demand shifts in aggregate supply
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Policymakers may respond to a recession in 2 ways
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1. passive: do nothing and wait for economy to recover by itself 2. active: use fiscal (increase spending or cut taxes) and monetary policy (increase money supply or decrease interest aright) to fight the economic recession
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Mass unemployment had a single cause
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Keyenes inadequate demand and an easy solution, expansionary fiscal policy
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Fiscal policy
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changes in federal taxes and purchases that are intended to achieve macroeconomic policy objectives
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Economists use the term fiscal policy to refer only to the actions of the _____ government
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federal
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Expansionary fiscal policy
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increasing government purchases or decreasing taxes
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Contractionary fiscal policy
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decreasing government purchases or increasing taxes
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Monetary policy
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the actions the Fed takes to manage the money supply and interest rates to pursue its macroeconomic policy goals
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A competitive market has
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many buyers and sellers trading identical products so that each buyer and seller is a price taker.
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Total Revue for a firm
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is the selling price times the quantity sold PxQ
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Average revenue
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total revenue divided by the quantity sold
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Marginal revenue
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change in the total revenue form an additional unit sold
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Profit
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Total Revenue- Total Cost or (Price – Average Total Cost) x Q
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Profit maximization occurs
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at the quantity where marginal revenue= marginal cost
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When Marginal Revenue > Marginal Cost
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increase Q
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When Marginal Revenue< Marginal cost
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decrease Q
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The first shuts down if
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the revenue it gets from producing is less than the variable cost of production TR<VC
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The portion of the marginal cost curve that _______ is the competitive firm’s short run supply curve.
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lies above average variable cost
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In the long run, the firm exits the market if
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revenue it would get from producing is less that its total cost. TR<TC
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Which of the following statements about a production function is correct for a firm that uses labor to product output?
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The production function depicts the relationship between the quantity of labor and the quantity of output.
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On a 100 acre farm, a farmer is able to product 3000 bushels of wheat when he hires 2 workers. He is able to produce 4400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product
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The farmer is able to product 5600 bushels of wheat when he hires 4 workers
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When marginal cost is less than average total cost
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average total cost is falling
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A certain firm produces and sells staplers. Last year, it produced 7000 staplers and sold each stapler for $6. In producing the 7000 staplers, it incurred variable costs of $28000 and a total cost of $45000. -In producing the 7000 staplers, the firm’s average total cost…? – The firms accounting profit for the year was…?
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$6.43 $-3000
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For Firm A, when four unites of output are produced, the total cost is $175 and the average variable cost is $33.75. What would the average fixed cost be if ten units were produced?
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$4
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The competitive firm’s _______________ is the portion of its marginal-cost curve that ________________.
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long run supply curve lies above average total cost
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For a firm in a perfectly competitive market, the price of the good is always
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equal to marginal revenue
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Suppose a firm in a competitive market produces and sells 8 units of output and has a marginal revenue of $8. What would be the firm’s total revenue if it instead produced and sold 4 units of output?
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$32
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When a perfectly competitive firm decides to shut down, it is most likely that
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price is below the firm’s average variable cost
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A profit-maximizing firm in a competitive market is able to sell its product for $7. At its current level of output, the firm’s average total cost is $10. The firm’s marginal cost curve crosses its marginal revenue curve at an output level of 9 units. The firm experiences a
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loss of exactly $27
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Smith Tire Company has a total fixed cost of $300,000 per year. The firm’s average variable cost is $80 for 10,000 tires. At that level of output, the firm’s average total costs equal …
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$110
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Jennifer is a junior in college. Her current cumulative grade point average is 3.5 out of a 4.0 scale. Jennifer is hoping that by the time she graduates, she can raise her cumulative GPA to a 3.7.What must she earn to raise her cumulative GPA to a 3.7?
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Jennifer must earn above a 3.7 GPA in her senior year in order to raise her cumulative GPA to a 3.7
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Which of the following is NOT a characteristic of a perfectly competitive market? – firms are price takers – firms can freely enter the market – many firms have market power – goods offered for sale are largely the same
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Many firms have market power.
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Smith Technologies has average variable costs of $1 and average total costs of $3 when it produces 500 units of output. The firm’s total fixed costs equal
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$1,000
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Laura is gourmet chef who runs a small catering business in a competitive industry. Laura specializes in making wedding cakes. Laura sells 20 wedding cakes per month. Her monthly total revenue is $4500. The marginal cost of producing the 101st unit of output is $300. What is the total cost of producing 101 units?
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$4800
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Assume a certain firm is producing Q=1,000 units of output. At Q=1000, the firm’s marginal cost = $15 and its average total cost = $11. The firm sells its output for $12 per unit. At q=1000 the firm’s profit equals
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1,000
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Assume a certain firm is producing Q=1,000 units of output. At Q=1000, the firm’s marginal cost = $15 and its average total cost = $11. The firm sells its output for $12 per unit. At q=999 what is the firm’s total cost?
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10985
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Bob Edwards owns a bagel shop. Bob hires an economist who assesses the shape of the bagel shops ATC curve as a function of the # of bagels produced. The results indicate a Ushaped ATC curve. Bob’s economist explains that ATC is U-shaped for 2 reason. The first is the existence of diminishing marginal product which causes it to rise. What would be the second reason?
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the average fixed cost is becoming smaller and smaller
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GDP
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the total market value of final goods and services produced within a country in a given period of time
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Yoda switches from going to Speedy Lube for an oil change to changing the oil in his car himself, then GDP
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falls
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A barber charges $10 for a haircut. In turn, the barber pays his assistant $2 per haircut in return for sweeping the floor, sharpening the scissors, and other chores. For each haircut given, the total contribution of the barber and his assistant, taken together, to GDP is
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10.
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Which of the following examples of production of goods and services would be included in US GDP? – Loony, a Canadian citizen, grows sweet corn in Minnesota and sells it to a grocery store in Canada. – Uncle Sam, an American citizen, grows peaches for his family in the back yard of their Atlanta home.
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Loony, a Canadian citizen grows sweet corn in Minnesota and sells it to a grocery store in Canada.
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Amy’s card shop receives a shipment of Valentine’s Day cards in December 2008. Amy pays the wholesale distributor of the cards a total of $500. In February 2009 she sells the cards for a total of $700. The contribution of theses transactions to GDP in the year 2009 is
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200
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Production GDP
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total market value of all final goods and services produced
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Expenditure GDP
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consumption + investment + government spending + (exports-imports)
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Consumption (C)
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the spending by households on goods and services with the expiation of purchases of new housing (food, clothing, CD, DVD, air ticket)
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Investment (I)
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The spending capital equipment, inventories, and structures, including new housing
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Government Purchases (G)
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The spending on goods and services by local state and federal governments
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Net Exports (NX)
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Net purchase by foreigners exports minus imports
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Nominal GDP
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values the production of goods and services at current prices
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Real GDP
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values the production of gods and services at constant prices
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Ralph pays someone to mow his lawn, while Mike mows his own law. Regarding these two practices, which of the following statements is correct? -Only Ralph’s payments are included in GDP. – Ralph’s payments as well as the estimated value of Mike’s mowing services are included in GDP. – Neither Ralph’s payments now the estimated value of Mike’s mowing services is included in GDP.
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Only Ralph’s payments are included in GDP.
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In the economy of Wrexington in 2008, exports were $500, GDP was $6400, government purchases were $1500, imports were $600, and investment was $2000. What was Wrexington’s consumption in 2008?
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$3000
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In 2012, US GDP was almost
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16 trillion
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In the United States in 2012, consumption represented approximately
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70 percent of GDP
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Consumer Price Index
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a measure of the overall costs of the goods and services bought by a typical consumer. It is used to monitor changes in the cost of livinig over time
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Compute Inflation
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(Current CPI- Previous CPI)/ Previous CPI
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Nominal interest rate
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the interest rate usually reported and not corrected for inflation (never below 0)
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Real interest rate
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the interest rate that is corrected for the effects of inflation Nominal interest rate – inflation
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You borrowed $100 for one year. Nominal interest was 5%. During the year inflation was 2%. What was the real interest rate?
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3%
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How do you know what the real interest rate is next month or next year?
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you don’t know, have to do forecasting/projection
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When the consumer price index rises, the typical family
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has to spend more dollars to maintain the same standard of living
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The inflation rate you are likely to hear on the nightly news is calculated from
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the CPI
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The CPI is more commonly used as a gauge of inflation than the GDP deflator is because
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the CPI better reflects the goods an services bought by consumers
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Suppose a basket of goods and services has been deleted calculate the CPI and 2002 has been selected as the base year. In 2002, the basket’s cost was $50; in 2004 , the basket’s cost was $52; and in 2006, the baskets cost was $54.60. The value of the CPI in 2004 was
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104
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If the nominal interest rate is 8 percent and the rate of inflation is 3 percent, then the real interest rate is
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5 percent
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Most recent monthly Unemployment rate in the U.S
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6.7 % (march)
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Historical HI and Low of unemployment
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1933: 24.9% 1944: 1.2%
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Unemployment is measured by the
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Bureau of Labor Statistics
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The BLS considers a person an adult if
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he or she is over 16
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A person is considered employed if
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he or she has spent some of the previous week working at a paid job
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A person is unemployed if
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he or she is on temporary layoff, is looking for a job, or is waiting for the start date of a new job
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A person who fits neither of these categories
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a full-time student, homemaker, or retiree, is not in the labor force
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Labor force
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the total number of workers the sum of the employees and the unemployed
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Unemployment rate
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is calculated as the percentage of the labor force that is unemployed unemployed/labor force
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To maintain their standard of living, most people rely on
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their labor earnings
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Cyclical unemployment is closely associate with
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short-run ups and downs of the economy
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Who of the following would be included in the Bureau of Labor Statistics’ “unemployed” category? – Tuuli, who is waiting for her new job to start – Jyri, who worked only 15 hours last week – Panu, who neither has a job now is looking for one – ALL
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Tuuli, who is waiting for her new job to start
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What are some countries rich and some are poor?
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A country’s standard of living depends on its ability to produce goods and services.
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Growth (size of economy)
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(GDPt-GDPt-1)/GDPt-1
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Growth (standard of living)
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Real Per Captia GDP (PCGDPt-PCGDPt-1)/ PCGDPt-1
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What is the relation ship between size of the economy growth and standard of living growth?
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PCGDP = GDP/population growth of PCGDP = growth of GDP – growth of population
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Growth Miracles
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over last 50 years delivered impressive growth Chile Singapore, Batswana
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Why is the standard of living is higher in some countries but not in others?
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PRODUCTIVIITY
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Productive
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plays a key role in determining living standards for all nations in the world
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Growth in productivity
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the key determinant of growth in living standards
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Real GDP per capita
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average labor productivity * share of population employed
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Real GDP per person depends on
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how much each worker can produce how many people are working
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Over the past century in the US, real GDP per person has grown, on average, by about
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2 percent per year
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In which of the following countries has economic growth been sufficiently strong in recent history to propel that country from being among the poorest i nthe world to being among the reaches in the world? India, Mexico , Nigeria, or Singapore?
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Singapore
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Average income has been stagnant for many years in
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Ethiopia
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Which of the following countries had the lowest level of real GDP per person in 2010?
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Madagascar
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The one variable that stands out as the most significant explanation of large variations in living standards around the world is
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productivity
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Perry accumulated a lot of mathematical skills while in high school, college, and graduate school. Economists include these skills as part of Perry’s
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human capital
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Despite its status as one of the richest countries in the world, Japan
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has few natural resources
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The saws, lathes, and drill presses that woodworkers at Cedar Valley Furniture use to produce furniture are called
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physical capital
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Which of the following best illustrates the human capital of a survivor stander on an island? – the fishing poles she has produced -the invention of a better fishing lure -the fresh fruit and fish on and around the island -her devious training in survival course
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her devious training in survival course
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The catch up effect can help explain
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the spectacular economic growth experienced by South Korea over the years 1960 to 1990
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In the long run, a higher saving rate
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increases the level of productivity
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Which of the following countries benefited significantly form the catch-up effect in the last half of the twentieth century? -Ethiopia -US -Canada -South Korea
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South Korea
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Which of the following Countries achieved higher economic growth, in part by mandating a reduction in population growth? – Great Britain -China -Australia -France
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China
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Commodity money
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takes the form of commodity with intrinsic value (Gold, silver, cigarettes)
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Fiat money
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used as money because of government decree. It does not have intrinsic value. (coins, currency, check deposits)
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Which two of the Ten Principles of Economics imply that the Fed can profoundly affect the economy?
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Society faces a short-run tradeoff between inflation and unemployment. Prices rise when the government prints too much money.
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The primary elements in the Federal Reserve System are
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The Board of Governors The Regional Federal Reserve Banks The Federal Open Market Committee
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The Fed is run by a ________ which has ____ members appointed by the _____ and confirmed by the ____
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Board of Governors seven president Senate
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The board of governors
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serve staggered 14 year terms so that one comes vacant every two years, president appoints a member as chairman to serve as a four-year term
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Regional Federal Reserve Banks
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12 Boston, New York, Philadelphia, Richmond, Atlanta, Cleveland, St. Louis, Dallas, Chicago, Minneapolis, Kansas City, and San Francisco Board of Directors in Washington
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The Federal Open Market Committee
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meets approximately every six weeks to review the economy
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Open Market Operations
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-the primary way in which the Fed changes the money supply is through open-market operation – The Fed conducts these when it buys government bonds from or sells government bonds to the public
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The Fed
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purchases and sells US government bonds
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Three Primary Functions of the Fed
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– regulate banks to ensure they follow federal laws intended to promote safe and sound banking practices (restrictions on assets, capital requirements, bank supervision) – Acts as a banker’s bank, making loans to banks and as a lender of last resort – Conducts monetary policy by controlling the money supply
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The central bank
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Federal Reserve System
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Banks
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the financial intermediaries that accept deposits and make loans
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Depositors
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individuals and institutions that hold deposits in banks
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Borrowers from banks
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individuals and institutions that borrow form the banks
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Reserves
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deposits that banks have received but have not loaned out
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Reserve ratio
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fraction of deposits that banks hold as reserves
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fractional reserve
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in a fractional-reserve banking system, banks hold a fraction of the money deposited as reserves and lend out the rest
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The Fed has 3 tools in its monetary toolbox
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-open market operations -changing the reserve requirement -changing the discount rate
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Changing the Reserve Requirement
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The reserve requirement is the amount (%) of a bank’s total reserves that may not be loaned out. Increasing the reserve requirement decreases the money supply. Decreasing the reserve requirement increases the money supply.
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Changing the Discount Rate
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The discount rate is the interest rate the Fed charges banks for loans. Increasing the discount rate decreases the money supply. Decreasing the discount rate increases the money supply.
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Which of the following is not included in M1?
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$500 in your savings account
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Which of the following best illustrates the medium of exchange function of money?
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You pay for your oil change using currency
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Fiat money
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has no intrinsic value
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The Federal Reserve
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was created in 1913 has more than one specific job to perform is an example of a central bank
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At any given time, the voting members of the Federal Open Market Committee include -five of the 12 presidents of the regional Federal Reserve banks – the president of the Federal Reserve Bank of New York – the seven members of the Board of Governors
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All of the above
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The Federal Reserve does all except which of the following? – It controls the supply of money -it acts as a lender of last resort to banks – it makes loans to large business firms – it tries to ensure the health of the banking system
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It makes loans to large business firms
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The New York Federal Reserve Bank -president always gets to vote at the FOMC meetings – conducts open market transactions – is one of 12 regional Federal Reserve Banks – all of the above
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all of the above
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Which of the following does the Federal Reserve not do? -conduct monetary policy – act as a lender of last resort -convert Federal Reserve Notes into gold – serve as a bank regulator
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convert Federal Reserve Notes into gold
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Which tool of monetary policy does the Federal Reserve use most often?
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open-market operations
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Assets- Reserves $2000, Loans $8000 Liabilities- Deposits $10,000 The reserve ratio for this bank is… If $1000 is deposited into the First Bank of Johnson City, and the bank takes no other actions, its… Starting from the situation as depicted by the T-account, if someone deposits $500 into the First Bank of Johnson City, and if the bank makes new loans so as to keep its reserve ratio unchanged, then the amount of new loans what is makes will be…
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20 percent assets will increase by $1000 $400
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Price Elasticity of Demand
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% Change in Quantity Demanded / % Change in Price
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Perfectly Inelastic Demand
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Elasticity equals zero demand line is vertical
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Inelastic Demand
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Elasticity is less than 1
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Unit Elastic Demand
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Elasticity Equals 1
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Elastic Demand
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Elasticity is grater than 1
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Perfectly Elastic Demand
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Elasticity Equals Infinity
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A problem that the FeD faces when it attempts to control the money supply is that
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the Fed does not control the amount of none that households choose to hold as deposits in banks
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The reserve requirement ratio is 10 percent. Which of the following pairs of changes would both allow a bank to lend out an additional $10,000?
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the Fed buys a $10,000 bond from the bank or the Fed lends the bank $10,000
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The Relationship between Marginal Cost and Average Total Cost
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Whenever marginal cost is less than average total cost, average total cost is falling. Whenever marginal cost is greater than average total cost, average total cost is rising. The marginal-cost curve crosses the average-total-cost curve at its minimum.
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Important Properties to remember about MC, ATC curve
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Marginal cost rises with the quantity of output. The ATC curve is U shaped. The MC curve crosses the ATC curve at the minimum of ATC.
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The Relationship between Short-Run and Long Run Average Total Cost
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Many decisions are fixed in the short run but variable in the long run, so a firm’s long run cost curves differ from its short-run cost curves.
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Economies of Scale
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the property whereby long-run ATC falls as the quantity of output increases -higher production levels allow specialization among workers, which permits each worker to become better at a specific task
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Diseconomies of Scale
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the property whereby long-run ATC rises as the quantity of output increases -coordination problems that are inherent in any large organization
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Constant Returns to Scale
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the property whereby long-run ATC stays the same as the quantity of output changes
question

If marginal revenue is greater than marginal cost,
answer

the firm should increase its output
question

If marginal cost is greater than marginal revenue,
answer

the firm should decrease its output
question

At the profit-maximizing level of output,
answer

marginal revenue and marginal cost are exactly equal.
question

A weaker demand together with a strong supply would most likely result in
answer

a lower price
question

Which of the following statements is correct? The demand for natural gas is more elastic over a short period of time than over a long period of time. The demand for smoke alarms is more elastic than the demand for Persian rugs. The demand for bourbon whiskey is more elastic than the demand for alcoholic beverages in general. All of the above.
answer

The demand for bourbon whiskey is more elastic than the demand for alcoholic beverages in general.
question

On a 500-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product?
answer

less than 5800
question

Physical Capital
answer

the stock of equipment and structure
question

human capital
answer

knowledge and skills
question

natural resources
answer

inputs into production provided by nature
question

technological knowledge
answer

understanding of best way to produce goods and services
question

GDP Deflator
answer

(Nominal GDP/Real GDP) * 100
question

Unemployment rate
answer

(# of unemployed/ labor force) *100
question

Labor force participation rate
answer

(labor force/adult population) *100
question

frictional unemployment
answer

because it takes time for workers to search for the jobs that best suit their tastes and skills
question

structural unemployment
answer

because the # of jobs available in some labor markets is insufficient to provide a job for everyone who wants one
question

money
answer

the set of assets in an economy that people regularly use to buy goods and services from other people
question

M1
answer

demand deposits traveler’s checks other checkable deposits currency
question

M2
answer

savings deposits small time deposits money market mutual funds a few minor categories everything in M1

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