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Economics final review

STUDY
PLAY
A normative statement is one of which:
Is based on value of judgements
If L and M are complementary goods, an increase in the price of L will result in:
A decrease in the sales of M
At the point where the demand and supply curves intersect:
There is neither a surplus nor a shortage of the product
Which of the fallowing is a positive statement?
a) the humidity is too high today
b) it is too hot to jog today
c) the temperature is 92 degrees today
d) i enjoy summer evenings when it cools off
c) temperature is 92 degrees today
the study of economics is primarily concerned with:
choices that are made in seeking to use scarce resources effieiently
video cassette recorders and video cassettes are:
complementary goods
the scarcity problem:
persists because economic wanted exceed availible productive resources
the law of demand states that:
price and quantity demanded are inversely related
a recent study found that an increase in the Federal tax on beer ( and thus an increase in price of beer) would reduce the demand for marijuana. we can conclude that:
beer and marijuana are complementary goods
economic resources are also called:
factors of production
an economist for a bicylcle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. this prediction is based on the assumption that:
bicycles are normal goods
the production possibilites curve illustrates the basic principle that:
if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced
the money payments made to owners of land, labor, capital and entrepreneurial ability are:
rent, wages, interest, and profits respectively
the law of increasing opportunity costs is reflected in a production possibilities curve that is:
concave to the origin
the demand for most products varies directly with changes in consumer incomes. such products are known as:
normal goods
economics may be defined as:
the social science cancerned with the efficient use of scarce resources to achieve maximum satisfaction
ideally, value judgements are involved at the:
level of policy only
if two goods are complements:
a decrease in the price of one will increase the demand for the other
if the demand for a normal good (for example, steak) shifts to the left, the most likely reason is that:
the price of cattle feed has gone up
the idea of opportunity cost:
is relevant to economies of all ideological persuastions
the term "quantity demanded":
refers to the amount of a product that will be purchased at some specific price
Refer to the above diagram. this economy will experience unemployment if it produces at point: see picture
D
Which of the fallowing statesments is correct? (see picture)
a) an increase in the price of C will decrease the demand for complementary product D.
b) a decrease in income will decrease the demand for an inferior good
c) an increase in income will reduce the demand for a normal good
d) a decline in the price of X will increase the demand for substitute product Y
a) an increase in the price of C will decrease the demand for complementary product D
A decrease in demand is depicted by a:
(see picture)
a) move from point x to point y
b) a shift from d1 to d2
c) shift from d2 to d1
d) move from point y to point x
c) shift from d2 to d1
the problems of aggregate inflation and unemployment are:
major topics of macroeconomics
the term "ceteris paribus" means:
other things equal
Refer to the diagram. the highest price that buyers will be willing and able to pay for 100 units of this product is:
$60
opportunity cost is best defined as:
the amount of one product that must be given up to produce one more unit of another product
which of the fallowing statements is correct?
a) utility and usefulness are synonymous
b) the marginal utility derived from successive units of a product tends to be similar for all consumers
c) because utility is not measurable, the utility-maximizing rule provides no useful insights as to consumer behavior
d) a product may yield utility, but not be functionally useful
d) a product may yield utility, but not be functionally useful
the law of supply
reflects the amounts that producers will want to offer at each price in a series of prices
the law of diminishing marginal utility states that:
beyond some point additional units of a product will yield less and less extra satisfaction to a consumer
suppose you have a limited money income and you are purchasing products a and b whose prices happen to be the same. to maximize your utility you should purchase a and b in such amounts that:
their marginal utilities are the same
a shift to the right in the demand curve for product A can be most reasonably explained by saying that:
consumer preferences have changed in favor A so that they now want to buy more at each possible price
at the equilibrium price:
there are no pressures on price to either rise or fall
"economics is concerned with using scarce productive resources efficiently in attempting to satisfy society's material wants." this statement is:
positive and correct
a product has utility if it:
satisfies consumer wants
if the price of product L increases, the demand curve for close-substitue product J will:
shift to the right
the demand curve shows the relationship between:
price and quantity demanded
macroeconomics can best be described as the:
study of the large aggregates of the economy or the economy as a whole
in presenting the idea of a demand curve economists presume that the most important variable in determining the quantity demanded is:
the price of the product itself
anne kasperson works in her own home as a full-time caretaker and homemaker. officially, she is:
not in the labor force
the consumer price index was 166.6 in 1999 and 172.2 in 2000. therefore, the rate of inflation in 2000 was about:
3.4 percent
real GDP is:
the nominal value of all goods and services produced in the domestic economy corrected for inflation or deflation
a college graduate using the summer following graduation to search for a job would best be classified as:
a part of frictional unemployment
"too much money chasing too few goods" best describes:
demand-pull inflation
kimberly voluntarily quit her job as an insurance agent to return to school full-time to earn an MBA degree. with degree in hand she is now searching for a position in management. kimberly presently is:
frictionally unemployed
suppose the total market value of all final goods and services produced in a partlicular country in 2001 is $500 billion and the total market value of final goods and services sold is $450 billion. we can conclude that:
GDP in 2001 is $500 billion
a nation'g gross domestic product (GDP):
is the dollar value of the total output produced within the borders of the nation
suppose that a person's nominal income rises by 5 percent and the price level rises from 125 to 130. the person's real income will:
rise by about 1 percent
part-time workers are counted as:
fully employed and therefore the offical unemployment rate may understate the level of unemployment
if the unemployment rate is 9 percent and the natural rate of unemployment is 5 percent, then the:
cyclical unemployment rate is 4 percent
net export are negative when:
a nation's imports exceed its exports
the unemployment rate is the:
percentage of the labor force which is out of work
gross domestic product (GDP) measures and reports output:
in dollar amounts
GDP is equal to:
C + Ig + G + Xn
"value added" refers to:
the difference between the value of a firm's output and the value of the inputs it has purchased from others
cost-push inflation may be caused by:
a negative supply shock
the GDP is the:
monetary value of all final goods and services produced within a nation in a particular year
inflation means that:
prices in the aggregate are rising, although some particular prices may be falling
GDP can be calculated by summing
investment, government purchases, consumption, and net exports
suppose there are 5 million unemployment workers seeking jobs. after a period of time, 1 million of them become discouraged over their job prospects and cease to look for work. as a result of this, the official unemployment rate would:
decline
net export:
exports less imports
if the consumer price index rises from 300 to 333 in a particular year, the rate of inflation in that year is:
11 percent
demand-pull inflation
occurs when total spending exceeds the economy's ability to provide output at the existing price level
value added can be determined by:
subtraccting the purchase of intermediate products from the value of the sales of final products
in national income accounting, G stands for:
government purchases
the labor force includes
employed workers and persons who are officially enemployed
the rate of inflation can be found by subtracting
last years price index from this years price index and dividing the difference by last years price index
Dr T Nuwal an economics professor, decided to take a year off from teaching to run a commercial fishing boat in alaska. that year, dr.nuwal would be officially counted as:
employed
tom atoe grows tomatoes for home consumption. this activity is:
productive but is excluded from GDP becuase no market transaction occurs
inflation initiated by increases in wages of other resource prices is labled:
cost-push inflation
GDP differs from NDP in that
gross investment is used in calculating GDP and net investment is used in calculating NDP
consumption of fixed capital (depreciation) can be determined by:
subtracting NDP from GDP
real income can be determined by:
deflating nominal income for inflation
to be officially unemployed a person must:
be in the labor force
cost-of-living adjustment clauses (COLAs):
tie wage increases to changes in the price level
the presence of discouraged workers:
may cause the official unemployment rate to understate the amount of unemployment
in calculating GDP, governmental transfer payments, such as social security of unemployment compenstation are:
not counted
unemployment involving a mishmatch of the skills of unemployed workers and the skills required for available jobs is called:
structural unemployment
if the consumer price index falls from 120 to 116 in a particular year, the economy has experienced:
deflation of 3.33 percent
search unemployment and wait unemployment are types of
frictional unemployment
money functions as:
a store of value, a unit of account, a medium of exchange.. ect
with an MPS of .4, the MPC will be..
1.0 minus .4
currency in circulation is part of:
m1, m2, and m3
checkable deposits are classified as money because:
they can be readily used in purchasing goods and paying debts
the value of money varies
inversely with the price level
most modern banking systems are based on:
fractional reserves
refer to the above diagram. the break-even level of GDP (=income) is:
$150
a reserve requirement of 20% means a bank must have a $1000 of reserves if its checkable deposits are:
$5000, 1000 is 20% of 5000
for all levels of income to the left of the intersection of the 45-degree line and the consumption schedule, the APC is:
greater than 100 percent
credit card balances are:
not a component of m1, m2, and m3
in defining money as m1 economists exclude time deposits because:
they are not directly or immediately a medium of exchange
which of the fallowing is correct?
MPC + MPS = APC + APS
checkable deposits are also called:
checking accounts
if you write a check on a bank to purchase a used honda civic, you are using money primarily as:
a medium of exchange
if ben's MPC is .80, this means that he will:
spend eight-tenths of any increase in his disposable income
excess reserves refer to the:
difference between actual reserves and required reserves
open-market operations refer to:
the purchase or sale of government securities by the Fed
at the point where the consumption schedule intersects the 45-degree line:
saving is zero
the paper money used in the United States is:
Federal Reserve Notes
when the reserve requirement is increased:
the excess reserves of member banks are reduced
which of the fallowing relations is not correct?
a) 1-MPC = MPS
b) APS + APC = 1
c) MPS = MPC +1
d) MPC + MPS = 1
c) MPS = MPC +1
refer to the above table. the value of the dollar in year 2 is:
$.80
the interest rate at which the Federal Reserve banks lend to commercial banks is called the:
discount rate
fiat money is:
money because the government asserts that it is
Holly's break-even level of income is $10,000 and her MPC is .75. If her actual disposable income is $16,000, her level of:
consumption spending will be $14, 500
the fed can change the money supply by:
changing bank reserves through the sale or purchase of government securites, changing the quantities of required and excess reserves by altering the legal reserve ratio, changing the discount rate so as to encourage or discourage commercial banks in borrowing from the central banks
the 45-degree line on a chart relating consumption and income shows:
all the points at which consumption and income are equal
checkable deposits are:
included in m1
in the united states monetary policy is the responsiblity of the:
board of governors of the federal reserve system
the transactions demand for money is most closely related to money functioning as a:
medium of exchange
which of the fallowing is not part of the m2 money supply?
a) money market mutual fund balances
b) money market deposit accounts
c) currency
d) large (100,000 or more) time deposits
large (100,000 or more) time deposits
the APC is calculated as:
consumption/ income
in the aggregate expenditures model, dissaving means
that the households are spending in excess of their current incomes
which of the fallowing is a tool of monetary policy?
a) open market operations
b) changes in banking laws
c) changes in tax rates
d) changes in government spending
a) open market operations
the difference between m1 and m2 is that:
the latter includes small time deposits, noncheckable savings accounts, money market deposit accounts, and money market mutual fund balances
at the point where the consumption schedule intersects the 45-degree line:
the APC is 1.00
in the aggregate expenditures model, the:
MPC is greater than zero, but less than one
the primary purpose of the legal reserve requirement is to:
provide a means by which the monetary authorities can influence the lending ability of commercial banks
if the price index rises from 100 to 120, the value of the dollar will fall by:
1/6th
in the united states, the money supply 1, is compromised of:
coins, paper currency, and checkable deposits
if the consumption schedule is linear, then the:
saving schedule will also be linear
the MPC can be defined as that fraction of a:
change in income that is spent
the amount that a commercial bank can lend is determined by its:
excess reserves
the three main tools of monetary policy are:
the discount rate, the reserve ratio, and open-market operations
a $200 price tag on a cashmere sweater in a department store window is an example of money functioning as a:
unit of account
suppose a family's consumption exceeds of its disposable income. this means that its:
APC is greater than 1