If Mr. Keating quits his job as a teacher to homeschool his own children, GDP

falls because his market income decreases.

If the value of a nation’s imports exceeds the value of its exports, which of the following is NOT true?

The nation is experiencing a net outflow of capital.

Your opportunity cost of going to a movie is

total cash expenditure needed to go to the movie + the value of your time.

a type of money set by government decree.

Advocates for setting monetary policy by rule rather than discretion often argue that

cent bank with discretion r tempt to renege on announced commit to low inf

Which of the following is an example of an automatic stabilizer? When the economy goes into a recession,

more people become eligible for unemployment insurance benefits.

If nominal GDP is $400, real GDP $200, and the money supply is $100 then

the price level is 2, and velocity is 4.

Advocates of taxing consumption rather than income argue that

the current tax code discourages people from saving.

If a Pennsylvania gun manufacturer raises the price of rifles it sells to the U.S. Army, its price hike will increase

the GDP deflator but not the CPI.

L need investors. L borrow 60k from G with 7% interest & 10k from J with a promise of 10% of profits. What best describe

J is a stockholder, and G is a bondholder.

Movie tickets & streaming services are substitutes. If price of streaming increases, what happens for movie tickets

The demand curve shifts to the right.

One unintended consequence of unemployment insurance is that it reduces the

search effort of the unemployed.

According to traditional Keynesian analysis, which of the following increases aggregate demand the most?

$100 billion increase in government purchases

After Frank and Ruby trade, each of them consumes

at a point outside his or her production possibili-ties frontier.

Fiscal policy has a long lag mainly because

political process is slow to enact changes in government spending or taxes.

M wash 2 cars or mow 1 lawn & S wash 3 cars or mow 1 lawn. Who has the absolute advantage washing, & who has it in mow

Sophia in washing, neither in mowing

Between Mateo and Sophia, who has the comparative advantage in car washing, and who has it in lawn mowing?

Sophia in washing, Mateo in mowing

Thomas Robert Malthus believed that population growth would

put stress on the economy’s ability to produce food,

inflation fall from 5 to 4 percent, while unemployment rise from 6 to 7 percent. What event could be responsible fo dis

The government cuts spending and raises taxes to reduce the budget deficit.

Which of the following does NOT add to U.S. GDP?

The federal government sends a Social Security check to your grandmother.

The circular-flow diagram illustrates that, in markets for the factors of production,

households are sellers, and firms are buyers.

inflation fall from 5 to 4 percent, while unemployment falls from 7 to 6 percent. What event could be responsible fo dis

Newly discovered oil reserves cause world oil prices to plummet.

A nation will typically import those goods in which

other nations have a comparative advantage.

Economics is best defined as the study of

how society manages its scarce resources.

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Macro Econ Midterm

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Questions 75

Answers

1
Most economists believe that classical macroeco-nomic theory
is valid only in the long run.
is valid only in the short run.
is always valid
is never valid.
2
If Mr. Keating quits his job as a teacher to homeschool his own children, GDP
could rise or fall, depending on the value of home-schooling.
stays the same because he is engaged in the same activity.
rises because he now pays lower income taxes.
falls because his market income decreases.
3
economists are _ that natural resources limit econ growth. The prices of natural resources have tended to _ over time
concerned; fall
not concerned; rise
not concerned; fall
concerned; rise
4
If the value of a nation’s imports exceeds the value of its exports, which of the following is NOT true?
Domestic investment exceeds national saving.
Net exports are negative.
The nation is experiencing a net outflow of capital.
GDP is less than da sum of consumption investment, and government purchases
5
Your opportunity cost of going to a movie is
the price of the ticket.
0 as long as u enjoy the movie & consider it a goodf use of time and money
total cash expenditure needed to go to the movie + the value of your time.
the price of the ticket + the cost of soda & popcorn u buy at the theater.
6
10 peeps would like to work but gave up looking, 10 are not working bc school, 10 are retired. How many are unemployed
40
30
10
20
7
K produced 10 cookies year 1 for $2 & 12 cookies year 2 for $3. What does the real GDP increase by from year 1 to 2?
20%
80%
70%
50%
8
If the CPI is 200 for the year 2010 and 300 today, then $600 in 2010 has the same purchasing power as _____ has today.
$400
$500
$900
$700
9
One of our economic principles is that trade can make
make everyone worse off
make everyone better off
create deflation
create inflation
10
As a percentage of U.S. GDP, exports are now _________ and imports are now _______ than they were in 1950.
higher; higher
higher; lower
lower; higher
lower; lower
11
In da model of aggregate demand & aggregate supply, da quantity of _ is on the horizontal axis, & da _ is on the vert ax
output; interest rate
money; interest rate
output; price level
money; price level
12
Fiat money is
any asset used as the unit of account.
any asset used as the medium of exchange
a type of money with intrinsic value.
a type of money set by government decree.
13
Advocates for setting monetary policy by rule rather than discretion often argue that
cent bank follow a rule will be more responsive to needs of polit process
cent bank with discretion r tempt to renege on announced commit to low inf
it is sometimes useful to give the economy a burst of surprise inflation.
fiscal policy better than monetary policy a tool fo economic stabilization.
14
The CPI measures approximately the same economic phenomenon as
the unemployment rate.
the GDP deflator
real GDP.
nominal GDP.
15
Which of the following is an example of an automatic stabilizer? When the economy goes into a recession,
the Fed changes its target for the federal funds rate.
more people become eligible for unemployment insurance benefits.
Congress begins hearings about a possible stimulus package.
stock prices decline, particularly for firms in cyclical industries.
16
In economics, we study how people use scarce resources
that have alternative uses
that are owned by government
hat cannot be used
that have only one use
17
B economy has income 1k & gov spending .2k & taxes of .15k & investment of .25k. What is the private saving?
$400
$300
$100
$200
18
If nominal GDP is $400, real GDP $200, and the money supply is $100 then
the price level is 2, and velocity is 2.
the price level is 1⁄2, and velocity is 2.
the price level is 1⁄2, and velocity is 4.
the price level is 2, and velocity is 4.
19
Which of the following would shift the aggregate-demand curve to the left?
a decline in the stock market
all of the above
a decrease in government spending
an increase in taxes
20
U put $2k in savings account, a year later u have $2.1K. The CPI increases from 200-204.Nominal int __ Real int rate __
5; 3
1; 5
5; 1
3; 5
21
Advocates of taxing consumption rather than income argue that
taxing consumption does not cause any deadweight losses.
a consumption tax is a better automatic stabilizer.
the current tax code discourages people from saving.
the rich consume a higher fraction of income than the middle class.
22
If a Pennsylvania gun manufacturer raises the price of rifles it sells to the U.S. Army, its price hike will increase
the CPI but not the GDP deflator.
neither the CPI nor the GDP deflator.
the GDP deflator but not the CPI.
both the CPI and the GDP deflator.
23
L need investors. L borrow 60k from G with 7% interest & 10k from J with a promise of 10% of profits. What best describe
J is a stockholder, and G is a bondholder.
J is a stockholder, and L is a bondholder.
G is a stockholder, and J is a bondholder.
G is a stockholder, and L is a bondholder.
24
Movie tickets & streaming services are substitutes. If price of streaming increases, what happens for movie tickets
The demand curve shifts to the right.
The demand curve shifts to the left.
The supply curve shifts to the left.
The supply curve shifts to the right.
25
The discovery of a large new reserve of crude oil will shift the __ curve for gasoline leading to a __ equilibrium price
demand; higher
supply; lower
supply; higher
demand; lower
26
One unintended consequence of unemployment insurance is that it reduces the
amount of frictional unemployment.
income uncertainty that workers face.
search effort of the unemployed.
role of unions in wage setting.
27
According to traditional Keynesian analysis, which of the following increases aggregate demand the most?
$100 billion increase in government purchases
$100 billion decrease in government purchases
$100 billion decrease in taxes
$100 billion increase in taxes
28
When the economy goes into a recession, real GDP ________ and unemployment ________.
rises; falls
falls; rises
falls; falls
rises; rises
29
After Frank and Ruby trade, each of them consumes
at a point inside his or her production possibilities frontier.
at a point outside his or her production possibili-ties frontier.
the same amounts of meat and potatoes as the other.
at a point on his or her production possibilities frontier.
30
Fiscal policy has a long lag mainly because
consumers are slow to respond to changes in their after-tax incomes.
policymakers at the Federal Reserve do not meet frequently.
firms making investments are slow to respond to changes in interest rates.
political process is slow to enact changes in government spending or taxes.
31
If a cup of coffee costs 2 euros in Paris & $6 in New York and purchasing-power parity holds, what is the exchange rate?
4 euros per dollar
1/3 euro per dollar
1/4 euro per dollar
3 euros per dollar
32
To stabilize aggregate demand, the Fed could ____ its target for the federal funds rate or Congress could ____ taxes.
decrease; decrease
increase; decrease
increase; increase
decrease; increase
33
M wash 2 cars or mow 1 lawn & S wash 3 cars or mow 1 lawn. Who has the absolute advantage washing, & who has it in mow
Mateo in washing, neither in mowing
Sophia in washing, Mateo in mowing
Mateo in washing, Sophia in mowing
Sophia in washing, neither in mowing
34
Between Mateo and Sophia, who has the comparative advantage in car washing, and who has it in lawn mowing?
Sophia in washing, neither in mowing
Mateo in washing, neither in mowing
Mateo in washing, Sophia in mowing
Sophia in washing, Mateo in mowing
35
Thomas Robert Malthus believed that population growth would
spread the capital stock too thinly across the labor force,
eventually decline to sustainable levels,
put stress on the economy’s ability to produce food,
promote technological progress
36
reduce da rate of money growth & maintain at da new lower rate. expected infla will _ & short run Philip curve move _
decrease; downward
increase; downward
increase; upward
decrease; upward
37
inflation fall from 5 to 4 percent, while unemployment rise from 6 to 7 percent. What event could be responsible fo dis
The central bank increases the growth rate of the money supply.
The government cuts spending and raises taxes to reduce the budget deficit.
The appointment of a new Fed chair increases expected inflation.
Newly discovered oil reserves cause world oil prices to plummet.
38
Which of the following does NOT add to U.S. GDP?
The federal government sends a Social Security check to your grandmother.
The city of New York pays a salary to a policeman.
Boeing manufactures and sells a plane to Air France.
General Motors builds a new auto factory in North Carolina.
39
In the United States, unionized workers are paid about _____ percent more than similar nonunion workers.
40
5
15
2
40
A point inside the production possibilities frontier is
efficient but not feasible.
neither efficient nor feasible.
feasible but not efficient.
both efficient and feasible.
41
The circular-flow diagram illustrates that, in markets for the factors of production,
households and firms are both sellers.
households are sellers, and firms are buyers.
households are buyers, and firms are sellers.
households are buyers, and firms are sellers.
42
inflation fall from 5 to 4 percent, while unemployment falls from 7 to 6 percent. What event could be responsible fo dis
The central bank increases the growth rate of the money supply.
The government cuts spending and raises taxes to reduce the budget deficit.
The appointment of a new Fed chair increases expected inflation.
Newly discovered oil reserves cause world oil prices to plummet.
43
If the government wants to expand aggregate demand, it can ________ government purchases or ________ taxes.
decrease; increase
decrease, decrease
increase; increase
increase; decrease
44
when da gov runs a large budget deficit, it _ national saving & thereby __ capital formation and productivity grow
decreases; decreases
increases; increases
increases; decreases
decreases; increases
45
increase da money supply & expand aggregate demand it move da economy along da Phillip curve to a point _ infla & _ unem
lower; lower
lower; higher
higher; lower
higher; higher
46
compet labor mark an increase in da minim wage result in a _ in da quant of labor supply & a _ in the quan of labor dema
decrease; decrease
increase; increase
increase; decrease
decrease; increase
47
A nation will typically import those goods in which
the nation has an absolute advantage.
other nations have a comparative advantage.
the nation has a comparative advantage.
other nations have an absolute advantage.
48
Economics is best defined as the study of
how to run a business most profitably.
how society manages its scarce resources.
how the government can protect people from unchecked self-interest.
how to predict inflation, unemployment, and stock prices.
49
da reserve ratio is 1⁄4 & da cent bank increase da quant of reserve in da bank system by $120 da money supp increase by
$150
$480
$160
$90
50
X $ appreciate & cost remain da same at evrywhere, Y goods become _ expensive relative to X goods. Push X trade balance
more; deficit
less; deficit
less; surplus
more; surplus
51
a commun become more optimist ab da profit of capital da_ curve fo loan fund would move driving da equilibrium int rate_
demand; down
demand; up
supply; down
supply; up
52
Increases in the amount of human capital in the economy tend to ____ real incomes because they increase the __ of labor.
increase; bargaining power
decrease; bargaining power
decrease; productivity
increase; productivity
53
gov increase purchase by $1200. Marginal prosperity to consume is 2/3. How large an increase in aggregate demand?
$800
$3600
$1800
$400
54
Reducing inflation will tend to be costly if
wages and prices are not very sticky.
expectations of inflation are slow to adjust.
policymakers are credibly committed to low inflation.
central bankers exhibit a strong dislike of inflation.
55
In the Production Possibilities Frontier model, efficient tradeoffs and opportunity costs are shown
nowhere
by moving inside the frontier
by moving along the frontier
by moving outside the frontier
56
What event shifts the supply curve for pizza to the right?
a kitchen fire that destroys a popular pizza joint
a decrease in the price of cheese, an input to pizza
an increase in the price of pizza
an increase in the price of root beer, a complement to pizza
57
A sudden increase in business pessimism shifts the aggregate-________ curve, leading to ________ output.
supply; higher
demand; lower
supply; lower
demand; higher
58
When Mateo and Sophia produce efficiently and make a mutually beneficial trade based on compara-tive advantage,
Mateo and Sophia both mow more.
Mateo washes more, and Sophia mows more.
Mateo mows more, and Sophia washes more.
Mateo and Sophia both wash more.
59
Which of the following policy actions would unambiguously reduce the supply of loanable funds and crowd out investment?
a decrease in both taxes and government spending
an increase in taxes and a decrease in government spending
a decrease in taxes together with an increase in government spending
an increase in both taxes and government spending
60
If the Fed wants to increase the money supply, it can
buy bonds in open-market operations.
reduce income tax rates
sell bonds in open-market operations.
raise income tax rates.
61
Over the past century, ___ has experienced particularly strong growth, and __ has experi-enced particularly weak growth.
the United Kingdom; Canada
China; the United Kingdom
China; Canada
Canada; China
62
Because most loans are written in ________ terms, an unexpected increase in inflation hurts ________.
nominal; creditors
nominal; debtors
real; creditors
real; debtors
63
One of our economic principles is that people respond to
trade offs
government
incentives
standard of living
64
The main advantage of mutual funds is that they provide
an easy way to hold a diversified portfolio.
a return insured by the government.
a way to avoid fluctuations in stock and bond prices.
an asset that is widely used as the medium of exchange.
65
all quantities produced rise by 5% and all prices fall by 5%, which of the following best describes what occurs?
Real GDP is unchanged, while nominal GDP falls by 5 percent.
Real GDP rises by 5 percent, while nominal GDP falls by 5 percent.
Real GDP is unchanged, while nominal GDP rises by 5 percent.
Real GDP rises by 5 percent, while nominal GDP is unchanged.
66
The worlds rich countries have income per person that is about__ times income per person in the worlds poorest countries
10
2
4
30
67
Since economics is a science, it uses
the scientific method
guesswork
political ideology
opinions
68
An economy’s gross domestic product is
the excess of spending over income.
total spending as a percent of total income.
the excess of income over spending.
total income and total spending.
69
In the Circular Flow Model, money
goes around and around
is stagnant
is not relevant
disappears
70
According to the theory of efficiency wages,
right-to-work laws reduce the bargaining power of unions.
firms may find it profitable to pay above-equilibrium wages.
sectoral shifts are the main source of frictional unemployment.
an excess supply of labor puts downward pressure on wages.
71
If da central bank wants to contract aggregate demand, it can ___ da money supply & thereby __ the interest rate.
decrease; decrease
increase; increase
increase; decrease
decrease; increase
72
The best definition of a market is
a group of buyers and sellers of a good or service.
a store that offers a variety of goods and services.
a place where buyers meet and an auctioneer calls out prices.
a venue where the sole supplier of a good offers its product.
73
The main reason the cost of living varies across regions of the country is differences in the price of
clothing
food
housing
medical care
74
Exchange rate falls 100 to 80. Price in Merica rise 180-200. Jap price stay the same. As a result
the relative price of American and Japanese goods has not changed.
American goods have become less expensive relative to Japanese goods.
American goods have become more expensive rela-tive to Japanese goods.
both American and Japanese goods have become relatively less expensive.
75
Which of the following will shift the demand curve for pizza to the right?
a decrease in the price of pizza
the departure of college students when they leave for summer vacation
an increase in the price of root beer, a complement to pizza
an increase in the price of hamburgers, a substitute for pizza

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