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.

Thomas Robert Malthus believed that population growth would

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

One unintended consequence of unemployment insurance is that it reduces the

search effort of the unemployed.

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

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

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

households are sellers, and firms are buyers.

Advocates of taxing consumption rather than income argue that

the current tax code discourages people from saving.

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

falls because his market income decreases.

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

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

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.

If the Fed wants to increase the money supply, it can

buy bonds in open-market operations.

Reducing inflation will tend to be costly if

expectations of inflation are slow to adjust.

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

Exchange rate falls 100 to 80. Price in Merica rise 180-200. Jap price stay the same. As a result

American goods have become less expensive relative to Japanese goods.

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

The demand curve shifts to the right.

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

$100 billion increase in government purchases

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

the price level is 2, and velocity is 4.

Economics is best defined as the study of

how society manages its scarce resources.

Which of the following policy actions would unambiguously reduce the supply of loanable funds and crowd out investment?

a decrease in taxes together with an increase in government spending

When Mateo and Sophia produce efficiently and make a mutually beneficial trade based on compara-tive advantage,

Mateo mows more, and Sophia washes more.

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.

What event shifts the supply curve for pizza to the right?

a decrease in the price of cheese, an input to pizza

A nation will typically import those goods in which

other nations have a comparative advantage.

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Macro Econ Midterm

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Questions 75

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

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