question

The principle of comparative advantage explains how

answer

two nations may engage in mutually beneficial trade, even though one of them is more productive than the other.

question

Externalities affect only the buyer and seller involved in an exchange.

answer

False

question

To calculate the opportunity cost of going to college, an economist would include the amount of earnings of her mother.

answer

False

question

Budget deficit equals

answer

Spending - tax

question

Which of the following is the best definition of openness?

answer

The average of imports and exports expressed as a share of GDP.

question

Economic fluctuations are defined as

answer

alternating periods of significant GDP growth and decline.

question

Slope of a line is defined as rise over run.

answer

True

question

When residents surrounding an airport complain about noise from aircraft landings and take-offs, the relevant economic analysis is that of

answer

negative externalities

question

People generally purchase less of a commodity as its price increases. This implies that the relationship between quantity purchased and the price of the commodity must have a

answer

negative slope

question

American households spend more of their incomes on goods than on services.

answer

False

question

Gross domestic product is

answer

the money value of all final goods and services produced within U.S boundary in one year

question

Most American workers

answer

are employed in the service-producing sector.

question

Abstraction can be thought of as

answer

omitting unimportant details in order to understand complex phenomena.

question

The largest single portion of the federal budget is devoted to

answer

Social Security and unemployment compensation.

question

Teenage employment in the United States has risen in the last two decades.

answer

False

question

Which of the following illustrates government acting as a referee?

answer

enforcing contract provisions between buyer and seller

question

Which of the following is an example of a fiscal policy initiative?

answer

Reduction in taxes

question

Which of the following groups has had declining labor force participation over the last 30 years?

answer

teenagers

question

What is a progressive tax?

answer

If the ratio of tax to income rises as income rises

question

Suppose the economy is in a recession. What is the best monetary policy to recover the economy?

answer

Lowering of interest rate

question

The U.S. economy is relatively open in terms of economic activity related to international trade.

answer

False

question

How does unemployment rate move?

answer

Rises in recessions and falls in boom periods

question

Sam went to a movie show of one hour. The cost of ticket was 10 dollar. If he did not watch the movie, he could work in a restaurant and could earn 10 dollar. What is the opportunity cost of watching the movie?

answer

10+10=20 dollars

question

If a decision maker uses marginal analysis, then the relevant costs are the

answer

additional costs of a particular activity or product.

question

The factors of production include all goods and services produced in an economy.

answer

False

question

Because of scarcity, every economic decision involves

answer

an opportunity cost

question

Which of the following would be most likely to cause an outward shift of the demand curve for electricity?

answer

an increase in the price of heating oil

question

Point B and A indicate the production of two goods: X and Y. Given that, B = (50 unit X and 80 unit Y) and A = (0 unit X and 100 unit Y), what is the opportunity cost of moving from point B to point A?

answer

50 units of X

question

Most firms take their production decision based on "satisficing"

answer

False

question

Any point inside the PPF are

answer

attainable

question

When there is a surplus, market price should go down

answer

True

question

Which factor will not affect the supply curve?

answer

income

question

Each point on the demand curve is

answer

a quantity demanded at that price.

question

The notion of opportunity cost can be represented graphically by the

answer

slope of the production possibilities frontier.

question

If the price of butter goes up

answer

demand of bread goes down

question

If the demand for steak shifts to the right, the most likely explanation is that

answer

consumer income has risen.

question

In the real world, ususally a PPF is "bowed outward"

answer

True

question

If price rises, quantity supplied should fall as supply becomes costly

answer

False

question

In the context of a PPF, increasing opportunity cost tends to occur if

answer

resources are specialized.

question

What would be the opportunity cost of a child using a coupon for a free ice cream cone?

answer

the other types of ice cream she could have selected

question

Equilibrium in a market is

answer

a situation in which there are no inherent forces that produce change.

question

Economics is generally concerned with

answer

how resources are allocated among alternative goals.

question

Technological progress has cut down the cost of processors and memory dramatically in the past twenty-five years. As a result, we have seen

answer

an increase in supply.

question

Scarcity is the basic problem in Economics

answer

True

question

Most demand curves have positive slopes

answer

False

question

When GM advertises its cars, the company is trying to cause a

answer

rightward shift in the demand.

question

Do all valuable items have price tags?

answer

No, some have no explicit price on them.

question

A decrease in price of a certain good most likely will lead to

answer

an increase in quantity demanded but no change in demand.

question

At any point on the PPF, all resources are assumed to be employed

answer

True

question

If the wage of workers in the tea industry increases, there will be a lay-off. What will happen next?

answer

Supply of tea will decline

question

Which of the following is an intermediate good?

answer

salt

question

In a society 5 people have job, 3 people have no job and they are searching jobs, 2 people have no job but they are not searching jobs, and 5 are children. How many people are unemployed?

answer

3

question

If your nominal wage is $15 and price of an orange is $5, your real wage is

answer

$15/$5= 3 oranges

question

What do you mean by economic growth?

answer

income and production go up

question

The pricing policies of the Microsoft Corporation would be under microeconomics

answer

True

question

What is the price level?

answer

average prices of all goods and services

question

Who has the highest unemployment rate in U.S. recently?

answer

black teenagers

question

What activity is not included in the GDP?

answer

Emily cooked some soup for her family in her house

question

Japanese Honda plant in U.S. is a part of U.S. GDP

answer

True

question

What is a business cycle?

answer

growth rate of real GDP

question

What is inflation?

answer

sustained increase of the price level

question

What happens under inflation?

answer

borrowers gain and lenders lose

question

What is a double counting problem?

answer

calculating intermediate and final goods to determine GDP

question

What is stagflation?

answer

inflation and recession

question

In a society 5 people have job, 3 people have no job and they are searching jobs, 2 people have no job but they are not searching jobs, and 5 are children. How many people are in the labor force?

answer

8

question

To reduce unemployment government should decrease income taxes

answer

True

question

Real GDP per capita is growing, if

answer

real GDP growth rate is higher than population growth rate

question

A production function shows the relation between two goods

answer

False

question

Frictional unemployment is desirable for the economy

answer

True

question

What is one major problem of GDP?

answer

environmental costs are ignored

question

What happens during a recession?

answer

aggregate demand shifts left

question

GDP considers the value of non-market activities into calculation

answer

False

question

Which of the following relation is true?

answer

real interest rate = nominal interest rate - inflation

question

Children who help their mother for daily work is a part of the labor force

answer

False

question

Which problem will be under Macroeconomics?

answer

when there is recession, unemployment goes up

question

If total expenditure is higher than GDP,

answer

inventories are falling, firms increase their production

question

Which one is the example of consumer expenditure?

answer

Emily purchased a new computer for her personal use

question

If U.S. GDP is 5 trillion, income received from other countries is 0.5 trillion and income paid to other countries is 0.3 trillion, what is the U.S. GNP?

answer

5.2 trillion

question

Financial investments are a part of investment demand

answer

False

question

If the value of MPC goes up, multiplier goes down

answer

False

question

Suppose the value of investment multiplier in the economy is 5. What does it mean?

answer

If investment goes up by $1, real GDP goes up by $5

question

If interest rate goes up,

answer

you will spend less on your house

question

If price level goes down, the purchasing power of wealth goes up

answer

True

question

If U.S. prices are cheaper compared to Canada,

answer

Canada will import more from U.S.

question

Consumer expenditure is the biggest component of aggregate demand

answer

True

question

Which one is an example of investment spending?

answer

Sam purchased a new home

question

What are transfer payments?

answer

They are grants to some people

question

If MPC = 0.8 and change in disposable income is $1000, what is the change in consumption?

answer

$800

question

An investment is profitable, if the multiplier is higher than 1

answer

True

question

Consumption function shows the relation between national income and real consumer spending

answer

False

question

If price level goes up,

answer

consumption function shifts down

question

The graph of the total expenditure schedule has

answer

a positive slope

question

Net National Product = GNP - depreciation of capital

answer

True

question

What is net export?

answer

export - import

question

If Canadian economy is strong,

answer

our net export goes up

question

Multiplier process in the economy does not work properly, if

answer

people save all their income and do not spend

question

What is NOT included in National Income?

answer

export

question

What does the circular flow indicate?

answer

Expenditure = income

question

Movement along the Aggregate Demand curve happens, if

answer

price level changes

question

What is NOT a property of a macroeconomic equilibrium?

answer

Firms have no incentive to change their patents

question

What might be one advantage of supply side tax cut?

answer

Inflation might be low

question

Stagflation means

answer

Inflation with lower GDP

question

Slope of aggregate supply is positive

answer

True

question

What is potential GDP?

answer

GDP produced by the maximum possible employment

question

Financial investments are a part of investment demand

answer

False

question

What is the problem of supply side tax cut?

answer

Inequality in the society will be high

question

Inflationary gap indicates that,

answer

labor demand is high

question

Higher wages decrease the cost of production

answer

False

question

Tax changes have a smaller multiplier effect than changes in government spending

answer

True

question

The value of tax multiplier is

answer

negative

question

If tax decreases,

answer

AD increases because consumption increases

question

As price level rises, firms like to produce more because

answer

profit rises

question

Conservative Presidents like a big government sector

answer

False

question

Budget deficit equals

answer

government expenditure - tax

question

Recessionary gap indicates that,

answer

Equilibrium GDP < Potential GDP

question

If rich people are becoming more rich,

answer

inequality in income distribution is increasing in the society

question

Superior technology

answer

improves labor productivity and increases total supply of goods & services

question

Core inflation includes the price changes of

answer

energy

question

If Government expenditure increases,

answer

AD increases

question

If equilibrium GDP = potential GDP,

answer

there is no recessionary or inflationary gap

question

Over the last 45 years,

answer

both price level and real GDP increased over time

question

A change in price level makes a

answer

movement along the same AS curve

question

There are few incidents of deflation in U.S. history

answer

True

question

Wages and prices do not fall easily in the U.S. economy

answer

True

question

Government can eliminate a recessionary gap by

answer

cutting taxes

question

In the short run if inflation goes up,

answer

unemployment goes down

question

If banks hold high reserves,

answer

money multiplier will be small

question

The price tag of a shirt indicates that its price is $10. Here money is working as

answer

unit of account

question

Barter requires the double coincident of wants

answer

True

question

The interest rate at which banks borrow reserves from each other is called

answer

federal funds rate

question

If U.S. Dollar is depreciated (lost its value),

answer

we expect U.S. export to rise

question

Which one is not money?

answer

credit cards

question

Bank run happens, if

answer

most of the depositors want to withdraw money from the bank

question

Which one is the most liquid asset?

answer

money

question

If federal funds rate and bond interest rate go down,

answer

all other interest rates in the economy usually go down

question

Commercial banks work as an intermediary between

answer

Depositors of money and borrowers of money

question

The Board of Governors of all the commercial banks determine the money supply in U.S.

answer

False

question

Previously 1 Dollar was exchanged for 25 Pesos. Now 1 Dollar is exchanged for 30 pesos.

answer

Dollar has become strong

question

If R = 20%, for an original deposit of $100, the change in money supply will be

answer

$500

question

What is a treasury bill?

answer

a bond issued by government

question

Federal Deposit Insurance Corporation (FDIC) regulates the commercial banks in U.S.

answer

True

question

An economy has currency of 10 million, demand deposit of 5 million, stock market asset of 2 million, and government debt of 1 million. What is the money supply in the economy?

answer

15 million

question

When there is a recession in the economy,

answer

Fed follows an easy monetary policy

question

For the period of 1915-2015, the highest number of bank failure happened during the recent financial crisis

answer

False

question

Federal Reserve controls the fiscal policy of U.S.

answer

False

question

Paper money has substantial value in alternative uses

answer

False

question

Systemic risk happens because

answer

financial institutions are interlinked

question

If all interest rates go down in the economy, we can expect the price level to

answer

increase

question

The members of the Fed is appointed by the President

answer

True

question

If bond prices go up,

answer

bond interest rates go down

Macroeconomics Practice Final – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards