FINAL REVIEW

Question 1

A recurring theme in economics is that people have ______ economic _____ but ________ __________

Answer 1

unlimited / wants / limited resources.

Question 2

Which of the following is a land resource?
A) a farmer
B) an oil drilling rig
C) a machine for detecting earthquakes
D) natural gas

Answer 2

D) natural gas (the material itself)

Question 3

The law of demand states that, all else held constant,…?

Answer 3

price & quantity dem are inversely related.

Question 4

A point/combination that is on the production possibilities frontier is…

Answer 4

attainable and efficient.

Question 5

In the circular flow model of the market system, households…?

Answer 5

buy products and sell resources.

Question 6

All else held constant, an increase in the price of tablets will result in a..?

Answer 6

movement up and to the left along the demand curve for tablets.

Question 7

Is the following a Macroeconomic question? - Are increasing wage demands by workers contributing to price inflation?

Answer 7

YES

Question 8

There is excess production of tomatoes in the market. This implies that..?

Answer 8

The current price is above the equilibrium level.

Question 9

A decrease in Dem & increase in Sup will..?

Answer 9

decrease price and affect the equilibrium quantity in an indeterminate way.

Question 10

If the government removes a tax on suppliers, then this will cause the ________ schedule to shift ________.

Answer 10

supply, right

Question 11

Is the following a Macroeconomic question? - What is the least costly way to produce automobiles and trucks
in the United States?

Answer 11

NO

Question 12

An example of an intermediate good would be..?
A) bricks bought by a homeowner who plans to build a patio in his backyard.
B) groceries bought by a dentist for his family.
C) cars bought by a car-rental company.
D) paper and ink bought by a publishing company.

Answer 12

D) Paper and ink

Question 13

The sale of a used automobile would not be included in GDP of the current year because it is..?

Answer 13

not current production.

Question 14

What is the largest expenditure component of GDP?

Answer 14

Personal consumption spending

Question 15

GDP measured using base year prices is called..?

Answer 15

Real GDP

Question 16

What is the likely effect of an increase in net exports?

Answer 16

It shifts the ag dem curve right.

Question 17

What is the likely effect of a decrease in consumer spending?

Answer 17

It shifts the ag dem curve left

Question 18

A price index is…?

Answer 18

Cost of a market basket of G/S in a base period divided by cost of the same market basket in another period.

Question 19

Given the annual rate of economic growth, the “rule of 72” allows one to..?

Answer 19

calculate the # of years required for real GDP to double.

Question 20

Real GDP measures..?

Answer 20

current output at base year prices

Question 21

(1) Real-Balances Effect
(2) Household Expectations
(3) Interest-Rate Effect
(4) Personal Income Tax Rates
(5) Profit Expectations
(6) National Income Abroad
(7) Government Spending
(8) Foreign Purchases Effect
(9) Exchange Rates
(10) Degree of Excess Capacity
Which of the above factors best explain the downward slope of aggregate demand curve? (3 of em)

Answer 21

1, 3, 8

Question 22

Which of the following will not increase a nation’s real GDP?
A) number of workers
B) labor productivity
C) technological progress
D) average price level

Answer 22

D) average price level

Question 23

What is a measure of economic growth that is most useful for measuring changes in the overall size of an economy?

Answer 23

Increases in Real GDP

Question 24

In the long run, if the production of all goods increases for a society (there is economic growth), it will cause the production possibility frontier to..?

Answer 24

shift outward

Question 25

If the dollar appreciates in value relative to foreign currencies, aggregate demand..?

Answer 25

decreases because net exports decrease.

Question 26

If the dollar deappreciates in value relative to foreign currencies, aggregate demand..?

Answer 26

increases because net exports increase.

Question 27

If the government wishes to increase the level of real GDP, it might reduce

Answer 27

taxes

Question 28

Recessions → automatic ________ / Expansion → automatic _____________

Answer 28

Tax cut / Tax increase

Question 29

If an economy is operating at the natural rate of unemployment, it is...?

Answer 29

producing at its full employment @ real GDP.

Question 30

The key driver behind the crowding out phenomenon is..?

Answer 30

an increase in the interest rate.

Question 31

What is Unit of account?

Answer 31

used to compare prices of goods and services.

Question 32

The functions of money are to serve as a..?

Answer 32

unit of account, a store of value, and a medium of exchange.

Question 33

What is Medium of exchange?

Answer 33

people use it in transactions.

Question 34

What is Store of value ?

Answer 34

way people can transfer wealth from the present to the future

Question 35

equation of exchanges is calculated as?

Answer 35

money supply x velocity of money = price level x real GDP.

Question 36

The Federal Reserve System is an??

Answer 36

independent agency of government.

Question 37

Who oversees Fed Reserve?

Answer 37

Federal Reserve Board of Governors

Question 38

Which of the following correctly expresses the Fisher equation? A) i = r − πe B) r = i + πe C) i = r + πe D) r = i – πe

Answer 38

C) i = r + πe

Question 40

Currency, checking accounts, and savings accounts are..?

Answer 40

the major components of money supply M1.

Question 41

Which of the following will increase commercial bank reserves? A) the purchase of government bonds in the open market by the Federal Reserve Banks B) a decrease in the reserve requirement C) an increase in the discount rate D) an increase in the federal funds rate

Answer 41

A) the purchase of government bonds in the open market by the Federal Reserve Banks