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132 Cards in this Set
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Which of the following is not a basis for trade between two nations? (1) Different skill levels of the labor forces (2) One nation's absolute advantage (3) A difference in tastes between countries (4) Economies of scale (5) Different Capital Stocks |
(2) One nation's absolute advantage |
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Suppose that workers in Transylvania can produce only two goods: yo-yos or sweatsocks. The Transylvanian currency is the daler. In what unit is the opportunity cost of yo-yos measured? |
Sweatsocks |
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For each watch Denmark produces, it gives up the opportunity to make 50 lbs of cheese. Germany can produce one watch for every 100 lbs of cheese it produces. The opportunity cost of producing cheese/watches is higher in Denmark. |
The opportunity cost of producing cheese is higher in Denmark. |
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Malinda's farm is capable of producing Beets and Corn. Malinda would like to increase her production of Beets and Corn, and so she is considering her available options. If Malinda converts 2 acres of usable farmland, her production possibilities will experience (1) Marginal Growth (2) Intensive Growth (3) Extensive Growth (4) Diminishing Growth (5) none of the above
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(3) Extensive Growth |
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Which of the Following is True? (1) International trade makes it possible for a country's consumption possibilities to exceed its production possibilities (2) International trade requires that a country's production possibilities exceed its consumption possibilities. (3) A country's production possibilities always equal its consumption possibilities. (4) The term autarky refers to self-insufficiency (5) As long as there is full employment of resources, a country's production possibilities will exceed consumption possibilities even with trade. |
(1) International trade makes it possible for a country's consumption possibilities to exceed its production possibilities |
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If business leaders become optimistic about future sales and profits, they will increase/decrease spending on the plant and equipment, which increases/decreases employment and income and, therefore, the economy will experience growth/recession/federal budget deficits. |
If business leaders become optimistic about future sales and profits, they will increase spending on the plant and equipment, which increases employment and income and, therefore, the economy will experience growth. |
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Dr. Lee lies to have a shot of Jack Daniel's with a pecan Blizzard every Friday. If the price of Jack Daniels falls, what will be the effect on Dr. Lee's demand for pecan Blizzards? |
The demand for pecan Blizzards would increase. |
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at $2.10 the QD is 750, the QS is 480. If the government sets a price ceiling for gas at a price of $2.10 per gallon, there will be a surplus/shortage of 120/150/270 million gallons of gas per month. |
at $2.10 the QD is 750, the QS is 480. If the government sets a price ceiling for gas at a price of $2.10 per gallon, there will be a shortage of 270 million gallons of gas per month. |
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Suppose that 2 events occur simultaneously in the US market for health care, a normal good: (1) An increase in the number of immigrant doctors and (2) The economy enters a recession (which decreases consumers' income). An economist would predict with certainty that the equilibrium price will rise/fall/remain the same. |
Suppose that 2 events occur simultaneously in the US market for health care, a normal good: (1) An increase in the number of immigrant doctors and (2) The economy enters a recession (which decreases consumers' income). An economist would predict with certainty that the equilibrium price will fall. |
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Lee sells a house she has owned for 10 years. To make it more marketable, she buys carpeting and has it professionally installed, and buys wallpaper that her husband hangs. Which items would be included in this years GDP? |
(5) The sale price of the wallpaper and carpeting and the installation fee for the carpet. |
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Using the rule of 70, a sustained 3.5% per year real GDP growth rate will (1) Last for 35 years (2) Quadruple the current level of real GDP in about 40 years |
(2) Quadruple the current level of real GDP in about 40 years |
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Will, a US citizen in ECON1015, decides to take a backpack trip to Europe for the summer. While traveling, Will stops in various places and works in a local restaurant to make extra spending money. We know that he is contributing to the GDP of the EU/US and the GNP of EU/US. |
Will, a US citizen in ECON1015, decides to take a backpack trip to Europe for the summer. While traveling, Will stops in various places and works in a local restaurant to make extra spending money. We know that he is contributing to the GDP of the EU and the GNP of US. |
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Which component of US household spending has grown the most over the past decade? (1)Taxes (2) Savings (3) Spending on Services (4) Spending on Durable Goods (5) Spending on Underground Activities |
(3) Spending on Services |
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Which of the following is not counted as part of Government Purchases? (2) The US government buys gasoline to fly Obama to Norway to pick up his Nobel Peace Prize. (4)The federal government pays the salary of a Navy officer, Jim Brave. (5) The state of Missouri pays $12,260 to help a welfare mom, Tanya, for her medical bills. (6) The city of Des Moines pays $10,000 to a tree-trimming firm to trim trees along a city road. |
(5) The state of Missouri pays $12,260 to help a welfare mom, Tanya, for her medical bills. |
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In a small country, using prices of 2007, GDP in 2007 was $200 and GDP in 2008 was $220. Using prices in 2008, GDP in 2007 was $300 and GDP in 2008 was $315. The country's BEA will calculate ____% as the growth in real GDP between those years. |
7.5% |
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Which of the following is a reason why government is a participant in a market-oriented economy? (1) To enforce contracts and to protect private property rights (2) To promote collusion (3) To promote the growth of natural monopolies (4) To provide more inequality in the distribution of income (5) All of the above |
(1) To enforce contracts and to protect private property rights |
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GDP may overstate the economy's welfare because GDP does not account for the (1) Air quality deteriorating because of the auto industry. (2) Water quality deteriorating due to hog farming. (3) Distribution of income becoming increasingly unequal. (4) All of the above (5) Amount of leisure increasing |
(1) Air quality deteriorating because of the auto industry. (2) Water quality deteriorating due to hog farming. (3) Distribution of income becoming increasingly unequal. (4) All of the above |
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Hyundai, a Korean auto company, produces cars in the US with some of those exported to other nations and some of them sold in the US. If the prices of these cars decrease then the GDP deflator will Increase/Decrease/No change, and the CPI will Increase/Decrease/No change. |
Hyundai, a Korean auto company, produces cars in the US with some of those exported to other nations and some of them sold in the US. If the prices of these cars decrease then the GDP deflator will Decrease, and the CPI will Decrease. |
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Suppose the price of a gallon of milk rises from $3.00 to $3.30 and the price of yogurt rises from $0.50 to $1.00. If the CPI rises from 100 to 140, then people will likely buy More/Less Milk and More/Less Yogurt. |
Suppose the price of a gallon of milk rises from $3.00 to $3.30 and the price of yogurt rises from $0.50 to $1.00. If the CPI rises from 100 to 140, then people will likely buy More Milk and Less Yogurt. |
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Kyle purchased 1 share of Stryker stock for $200 in year 1 and sold that share in year 2 for $400. The inflation rate between year 1 and year 2 was 50%. If the capital gains tax is 50%, what is Kyle's after tax real capital gain if the tax is on nominal gains? What is it if the tax is on real gains? |
$0, $50 |
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In response to the question, "what are your feelings on recessions?" Josh Welker responds, "I like recession, it cuts out the weak...it's just survival of the fittest for businesses." Josh's statement (1) May be true. The increased real GDP experienced during a recession could be indicative of a more productive society. (2) Is false, recessions are never a good thing. (3) May be true. Recessions lead to a more efficient society by driving inefficient firms out of business. (4) Is false, recessions only impact consumers |
(3) May be true. Recessions lead to a more efficient society by driving inefficient firms out of business. |
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The practice of reducing risk through diversification could be summed up by the phrase: (1) A penny saved is a penny earned (2) Neither a borrower nor a lender be (3) Buy low, sell high (4) Don't put all your eggs in one basket (5) A fool and his gold are soon parted |
(4) Don't put all your eggs in one basket |
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In the country of Happyaccountants, the CPI in 2008 was 150 and the CPI in 2009 was 165. Adam, a resident of Happyaccountants, borrowed money in 2008 and repaid the loan in 2009. If the nominal interest rate was 7%, then the real interest rate Adam paid was (1) 17% (2) 10% (3) 7% (4) -3% (5) 3% |
(4) -3% |
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Assume GDP is $7000, consumption expenditure is $5,500, Total Tax Collection is $2,200, Government Transfer and Interest Payment is $1,200. Suppose the government is running a budget surplus of $100. Then we know that net taxes (T) is ________ and government purchase (G) is _______. |
$300, $1000? $1000, $900 |
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Which of the following is False? (1) When a country saves a larger portion of its GDP, it will have more capital and higher productivity. (2) Interest Rates are compensation for inflation, the level of risk, and the time value of money. (3) Because every transaction has a buyer and a seller, every transaction contributes equally to the economy's income and it its expenditure. (4) Because of activity in the underground economy, GDP statistics overstate the true volume of economic activity. (5) The expansion of IRA type accounts and a consumption tax would likely increase private saving. |
(4) Because of activity in the underground economy, GDP statistics overstate the true volume of economic activity. |
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Vincent buys health insurance and then he requests an unreasonably high number of certifications to see a specialist. Alex buys auto insurance because he knows that he has narrowly avoided many accidents. The example with Vincent best illustrates Moral Hazard/Adverse Selection, and the example with Alex best illustrates Moral Hazard/Adverse Selection. |
Vincent buys health insurance and then he requests an unreasonably high number of certifications to see a specialist. Alex buys auto insurance because he knows that he has narrowly avoided many accidents. The example with Vincent best illustrates Moral Hazard, and the example with Alex best illustrates Adverse Selection. |
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As the real wage rate rises, the opportunity cost of (1) Working rises. (2) Leisure rises. (3) Leisure falls. (4) Buying goods and services rises. (5) Saving rises. |
(2) Leisure Rises |
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Suppose that Bill's utility drops more if he loses $100 than if he gains $100. This implies that Bill's Marginal Utility increases/diminishes as wealth rises, so he must be risk averse/but we can't tell if he is risk averse. |
Suppose that Bill's utility drops more if he loses $100 than if he gains $100. This implies that Bill's Marginal Utility diminishes as wealth rises, so he must be risk averse. |
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Which of the following is false about the Great Depression? (1) It was the biggest recession in history and it began with the stock market crash of 1929. (2) Economists generally interpret the Great Depression as the result of a huge fall in aggregate demand. (3) Deflation occurred and the Fed cut the Money Supply. (4) The unemployment rate in the US rose to almost 25%; investment, consumption, and real GDP fell and more than 1/3 of all banks failed. (5) The type of unemployment increased dramatically was probably frictional and structural unemployment. |
(5) The type of unemployment increased dramatically was probably frictional and structural unemployment. |
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Which of the following is true about automatic stabilizers? (1) They require ongoing decisions about government purchases and taxation to promote full employment and price stability. (2) They tend to stimulate aggregate demand when the economy is experiencing an expansionary gap. (3) The effect of automatic stabilizers on the business cycle is to make both upswings and downswings smaller. (4) They include government purchases of goods and services by requiring Congressional approval. (5) They include tax cuts passed by Congress to ease a current recession in an economy that has a proportional income tax. |
(3) The effect of automatic stabilizers on the business cycle is to make both upswings and downswings smaller. |
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Which of the following best illustrates the use of discretionary fiscal policy? (1) Congress provides $1 billion in relief aid for hurricane victims. (2) Congress appropriates $500 million to help the needy, and the appropriation is financed by a tax on wealth. (3) Congress passes a bill authorizing $2 billion in additional spending when it receives news of a deepening recession. (4) The Federal Reserve tightens credit when it receives news of accelerating inflation. (5) Income tax receipts are smaller because of a decline in real GDP during a recession. |
(3) Congress passes a bill authorizing $2 billion in additional spending when it receives news of a deepening recession. |
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Which of the following is incorrect according to lecture and the text? (1) Congressional control over the Fed is limited because the Fed is not dependent on Congress funds to support its operations. (2) Exchange is necessary in an economy if Labor is specialized. (3) Barter is the direct exchange of goods and services for other goods and services. (4) In order for legal tender to work properly, the authorities who issue it implicitly promise the public they will not print paper money so fast that it loses its value. (5) Shoeleather cost refers to the costs of adjusting price lists and other posted prices in order to cope with inflation. |
(5) Shoeleather cost refers to the costs of adjusting price lists and other posted prices in order to cope with inflation. |
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Which of the following typically rises during a recession? (1) Corporate profits (2) Auto sales (3) The price level (4) Garbage collection (5) Unemployment compensation |
(5) Unemployment compensation |
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What are the 3 important macroeconomic goals that most economists and society agree? (1) Economic Growth, Full Employment, and Low interest rates (2) Economic Growth, full employment, and stable prices (3) Economic Growth, Zero unemployment, and falling prices. (4) Economic Growth, low unemployment, and a balanced budget (5) Economic Growth, a balanced budget, and a balanced international trade |
(2) Economic Growth, full employment, and stable prices |
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The aggregate supply curve can be shifted right by all but which of the following? (1) Discovery of new oil reserves (2) New technologies (3) A one-time tax rebate to low-income families (4) An increase in immigration (5) Investment tax credit |
(3) A one-time tax rebate to low-income families |
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In Econland (Nominal dollars, GDP Deflator=150) Wages and Salaries: 11 trillion Profit: 1 trillion Interest: 0.5 trillion Gov Tax Revenue: 3.5 trillion Interest on Debt: 0.1 trillion Money Supply: 3 trillion Imports: 2 trillion Exports: 1.5 trillion Consumption Spending: 10 trillion Private investment spending: 3 trillion Gov Purchases: 2.5 trillion Gov Spending: 5 trillion
What is the nominal GDP of Econland? |
15 trillion |
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In Econland (Nominal dollars, GDP Deflator=150) Wages and Salaries: 11 trillion Profit: 1 trillion Interest: 0.5 trillion Gov Tax Revenue: 3.5 trillion Interest on Debt: 0.1 trillion Money Supply: 3 trillion Imports: 2 trillion Exports: 1.5 trillion Consumption Spending: 10 trillion Private investment spending: 3 trillion Gov Purchases: 2.5 trillion Gov Spending: 5 trillion
Which of the following is incorrect about Econland? (1) Real GDP in Econland is 10 trillion (2) Transfer payments must be 2.4 trillion (3) The contribution of net exports to nominal GDP is -0.5 trillion (4) The government is in debt (5) Econland is experiencing a budget surplus in the amount of 2 trillion.
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(5) Econland is experiencing a budget surplus in the amount of 2 trillion. |
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In Econland (Nominal dollars, GDP Deflator=150) Wages and Salaries: 11 trillion Profit: 1 trillion Interest: 0.5 trillion Gov Tax Revenue: 3.5 trillion Interest on Debt: 0.1 trillion Money Supply: 3 trillion Imports: 2 trillion Exports: 1.5 trillion Consumption Spending: 10 trillion Private investment spending: 3 trillion Gov Purchases: 2.5 trillion Gov Spending: 5 trillion
According to the equation of exchange, Velocity (V) must be _____. |
5 |
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What essential factor enable commercial banks to create money? (2) Required reservers (3) State and local government securities (4) US government securities (5) net worth |
(1) Excess reserves |
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If an increase in excess reserves of $20 million increases checkable deposits in the banking system by a maximum of $200 million, the required reserve ratio is ___% |
10% |
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Consider two countries. Country A has a population of 1,000, 800 of them work 8 hours/day to produce 128,000 final goods. Country B has a population of 2,000, and 1,800 of them work 6 hours/day to produce 270,000 final goods. Country A has a higher/lower productivity and a higher/lower real GDP per person than country B. |
Consider two countries. Country A has a population of 1,000, 800 of them work 8 hours/day to produce 128,000 final goods. Country B has a population of 2,000, and 1,800 of them work 6 hours/day to produce 270,000 final goods. Country A has a lower productivity and a lower real GDP per person than country B. |
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Stores like Starbucks must accept (1) Federal Reserve Notes, which are legal tender, but they do not need to accept credit cards even though they are legal tender. (2) Currency, which is legal tender, but they need not accept traveler's check although they are legal tender. (3) Federal Reserve notes, which are legal tender, but they need not accept credit cards because they are not legal tender. (4) Currency, which is a medium of exchange, and they also need to accept traveler's checks because they are legal tender. (5) Currency, because it is backed by gold and easy to handle. |
(3) Federal Reserve notes, which are legal tender, but they need not accept credit cards because they are not legal tender. |
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All of the following are powers of the Federal Reserve System except: (1) The ability to buy and sell government securities (2) The authority to issue Federal Reserve Notes (3) The responsibility to clear checks (4) The power to set the reserve requirement for banks. (5) The obligation to mint US coins. |
(5) The obligation to mint US coins. |
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When Elliot transfers $19,875 from his checking account to a money market mutual fund, M1 increases/decreases/stays the same and M2 increases/decreases/stays the same. |
When Elliot transfers $19,875 from his checking account to a money market mutual fund, M1 decreases and M2 stays the same. |
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Little Reece has been mowing his neighbors lawns since he was nine for $10 dollars/lawn. Reece turned 16 and his mowing business is thriving. If Reece decides not to report his earnings, which of the following changes in the labor market does the BLS observe? (1) The working age population has increased (2) The labor force has increased (3) The number of people employed has increased (4) The unemployment rate has decreased (5) None of the above |
(1) The working age population has increased |
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Suppose Macroland has an adult population of 100 million, the labor force participation rate was 65% and there were 6.5 million unemployed people. Which of the following is correct? (1) The unemployment rate was 6.5% (2) The unemployment rate was 10% (3) There were 93.5 million employed workers (4) The employment to population ratio was 71.5% (5) The natural rate of unemployment was 6.5% |
(2) The unemployment rate was 10% |
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Which of the following is not a possible cause of the high jobless rate among poorly educated young black men? (1) Failing schools (2) Absent Parents (3) Racial Discrimination (4) Fewer White Collar Jobs (5) Rising Incarceration Rate |
(4) Fewer White Collar Jobs |
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Hyperinflation (1) Was primarily a 19th century phenomenon (2) is always accompanied by extremely rapid growth in the money supply (3) is really nothing to worry about since it affects only nominal GDP and not real GDP. (4) occurs when an economy grows too rapidly (5) is always accompanied by rapid shrinkage of the money supply. |
(2) is always accompanied by extremely rapid growth in the money supply |
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Sam and Carolyn face a progressive tax structure that has the following marginal tax rates: 0% on the first $20,000, 20% on the next $20,000, and 50% on all additional income. Sam earns $50,000/year, and Carolyn earns $50,000/year. If Sam and Carolyn get married the "marriage penalty" is $_______. |
$16,000 |
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Gina calculates that for every extra dollar she earns, she owes the government 40 cents. Her total income now is $50,000, on which she pays taxes of $15,000. Determine her average tax rate and her marginal tax rate. |
Average tax rate: 30% Marginal Tax rate: 40% |
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If a poor family has 3 children in public school, and a rich family has 2 children in private school, the benefits principle would suggest that (1) The poor family should pay more in taxes to pay for public education than the rich family (2) The rich family should pay more in taxes to pay for public education than the poor family (3) The benefits of private school exceed those of public school (4) The moor are more active in political processes. (5) Public schools should be financed by property taxes. |
(1) The poor family should pay more in taxes to pay for public education than the rich family |
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Ms. Spring currently ears $200,000/year while her secretary, Mr. Fall ears $30,000/year. If both of their incomes are subject to diminishing marginal utility, taking a dollar from Ms. Spring and giving it to Mr. Fall will (1) Increase society's total utility (2) Decrease society's total utility (3) Lower Ms. Spring's marginal utility of income (4) Increase Mr. Fall's marginal utility of income (5) None of the above is correct |
(1) Increase society's total utility |
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Which of the following is false? (1) A common criticism of government programs that are designed to assist the poor is that they provide incentives for people to become "needy" (2) The payroll tax differs from the individual income tax because the payroll tax is primarily used to pay for social security and medicare. (3) One advantage to the Earned Income Tax Credit (EITC) is that it benefits the working poor. (4) The reason why small changes in productivity growth rates have large long-term effects on economic growth over the long run is that lower productivity growth effects on the economy are compounded over the years, leading to large cumulative effects. (5) The largest source of revenue for the federal government is the sales tax. |
(5) The largest source of revenue for the federal government is the sales tax. |
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Medicare/Medicaid/Insurance/SCHIP is the government's health plan for the elderly, whereas Medicare/Medicaid/Welfare/SCHIP is the government's health plan for the poor. |
Medicare is the government's health plan for the elderly, whereas Medicaid is the government's health plan for the poor. |
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Who observed that "in this world, nothing is certain but death and taxes?" |
Benjamin Franklin |
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Which of the following is false? (1) A fair tax provides transparencies in government by removing tax loopholes and reducing the potential for corruption of government officials (2) The most efficient tax possible is a lump-sum tax. (3) Measures of poverty that fail to account for the value of in-kind transfers overstate the actual poverty rate. (4) As tax laws become more complex, the administrative burden of taxes increase. Tax avoidance is legal, whereas tax evasion is illegal. (5) Decreasing income inequality reduces poverty. |
(5) Decreasing income inequality reduces poverty. |
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Which of the following describes a situation where tax laws give preferential treatment to specific types of behavior? (1) Tax evasion (2) An administrative burden (3) A political payoff (4) A tax loophole (5) Compensation for the benefit of the society |
(4) A tax loophole |
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On taxable income up to $10,000 the tax rate:5% from $10,000 - $30,000 the tax rate: 10% from $30,000 - $70,000 the tax rate: 25% from $70,000 - $120,000 the tax rate: 30% from $120,000 - $250,000 the tax rate: 40% Over $250,000 the tax rate: 50%
If Logan has $50,000 in taxable income, his tax bracket will be ___%, and his tax liability will be $_______. |
Tax Bracket: 25% Tax Liability: $7,500 |
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In the US approximately 80% of millionaires did not inherit their wealth. This statement is an example of (1) Transitory Income (2) Permanent Income (3) The effectiveness of government anti-poverty programs. (4) Economic Mobility (5) Vicious cycle of poverty and inequality |
(4) Economic Mobility |
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The poverty rate is the highest in the 1940s for which group of people? (1) Married couples (2) Female-headed households, no spouse present (3) Asians, pacific islanders (4) The elderly (5) Blacks |
(4) The elderly |
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Which of the following is not an example of in-kind transfers? (1) Medicaid (2) Food Stamps (3) Medicare (4) The Earned Income Tax Credit (5) Housing Vouchers |
(4) The Earned Income Tax Credit |
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What is the meaning of "law-making lags"? (1) It refers to the multiplier effect in the banking system associated with the creation of money (2) It refers to the rent seeking behavior that discretionary policy causes in the general population. (3) It takes time for the federal government to recognize the state of the economy (4) It takes time for Congress to pass the laws needed to change taxes or spending. (5) It takes time for newly implemented laws to affect real GDP. |
(4) It takes time for Congress to pass the laws needed to change taxes or spending. |
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When the FOMC conducts Open Market Sales/Open Market Purchases/Open Market Operations, it tends to lead an appreciation of the US currency, whereas when the FOMC conducts Open Market Sales/Open Market Purchases/Open Market Operations it tends to lead to a depreciation of the US currency. |
When the FOMC conducts Open Market Sales, it tends to lead an appreciation of the US currency, whereas when the FOMC conducts Open Market Purchases it tends to lead to a depreciation of the US currency. |
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Suppose that the dollar buys less cotton in Egypt than in the US. Traders could make a profit by buying cotton in the US/Egypt and selling it in the US/Egypt, which would tend to raise the price of cotton in the US/Egypt. |
Suppose that the dollar buys less cotton in Egypt than in the US. Traders could make a profit by buying cotton in the US and selling it in Egypt, which would tend to raise the price of cotton in the US. |
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Which of the following is false? (1) According to the purchasing power parity theory, in the long run the exchange rate between the Canadian dollar and the British Pound should reflect differences in price levels between Canada and Britain (2) A depreciation of the US real exchange rate induces US consumers to buy more domestic goods and fewer foreign goods. (3) The actions taken by arbitrageurs in the foreign exchange markets help assure that exchange rates are equalized across all markets (4) The establishment of General Agreement on Tariffs and Trade (GATT) in 1947 resulted in higher tariff rates. (5) If New Zealand has a balance of trade deficit, then it is borrowing from other countries. |
(4) The establishment of General Agreement on Tariffs and Trade (GATT) in 1947 resulted in higher tariff rates. |
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Which of the following would be a US foreign direct investment? (1) Your US based mutual fund buys stock in Eastern European companies (2) A US citizen opens and operates a law firm in Norway (3) A Swiss bank buys a US government bond (4) A German tractor factory opens a plant in Waterloo, Iowa. (5) A Swedish car manufacturer opens a plant in Tennessee. |
(2) A US citizen opens and operates a law firm in Norway |
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Suppose a basket of goods costs $400 in the US and 200 pounds in Britain. If the exchange rate is $1/pound, according to the purchasing power parity there will be an increase in demand for dollars/pounds which will lead to a(n) increase/decrease in the price of dollars/pounds in the foreign exchange market. |
Suppose a basket of goods costs $400 in the US and 200 pounds in Britain. If the exchange rate is $1/pound, according to the purchasing power parity there will be an increase in demand for pounds which will lead to a(n) increase in the price of pounds in the foreign exchange market. |
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Suppose the exchange rate for Mexican Pesos was 12 pesos in 2007 and it is 10 pesos in 2008. If SAS, a brand of US made shoes, costs $100 in both 2007 and 2008, then we know (1) The price of a pair of the SAS declines in Mexico from 2007 to 2008 (2) Ceteris paribus, US exports of the SAS increases and Mexico imports increases (3) The exchange rate has declined (4) US dollar has depreciated and Mexican peso has appreciated (5) All of the above |
(1) The price of a pair of the SAS declines in Mexico from 2007 to 2008 (2) Ceteris paribus, US exports of the SAS increases and Mexico imports increases (3) The exchange rate has declined (4) US dollar has depreciated and Mexican peso has appreciated (5) All of the above |
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The losers when the US institutes trade restrictions include (1) US consumers of imported goods, US producers who use important intermediate goods, and, if other countries retaliate, US exporters (2) US producers of goods that compete with imported goods only (3) US consumers of imported goods and US producers of goods that compete with imported goods (4) All US producers of all goods and US exporters (5) Only US exporters |
(1) US consumers of imported goods, US producers who use important intermediate goods, and, if other countries retaliate, US exporters |
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A college student, Anne, from MU travels to Italy, the money spent on hotels and sight-seeing in Italy is counted as services imported from/exported to America, and imported from/exported to Italy. |
A college student, Anne, from MU travels to Italy, the money spent on hotels and sight-seeing in Italy is counted as services exported to America, and imported from Italy. |
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What is the Dumping Argument for protection from international trade? (1) Domestic Firms must be protected until they gain a comparative advantage (2) Selling below cost to drive domestic firms bankrupt must be stopped (3) Any Firm necessary in wartime must be protected (4) Domestic Jobs must be protected from competition from low-paid foreign workers. (5) Foreigners selling products in the economy limit the nation's diversity and stability |
(2) Selling below cost to drive domestic firms bankrupt must be stopped |
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A depreciation of the US real exchange rate induces US consumers to buy More/Fewer domestic goods and More/Fewer foreign goods. |
A depreciation of the US real exchange rate induces US consumers to buy More domestic goods and Fewer foreign goods. |
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US auto workers sometimes experience structural unemployment because of the popularity of foreign cars. Which argument is a labor union most likely to present to Congress when it lobbies for trade restrictions? (1) National Defense Argument (2) Infant Industry Argument (3) Loss of domestic jobs argument (4) Antidumping argument (5) Declining Industry Argument |
(3) Loss of domestic jobs argument |
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In addition to Brazil, another country recently suffering from hyperinflation is ___________. |
Zimbabwe |
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Suppose the price of a gallon of ice cream rises $2 to $2.20 and the price of coffee rises from $2 to $3. If the CPI rises from 150 to 200, the people will likely buy More/Less ice cream and More/Less coffee. |
Suppose the price of a gallon of ice cream rises $2 to $2.20 and the price of coffee rises from $2 to $3. If the CPI rises from 150 to 200, the people will likely buy More ice cream and Less coffee. |
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On the land of "Dumb and Dumber", it is observed that the typical consumer market basket includes 5 rolls of toilet paper and 10 bags of black beans. In 2009, a typical consumer paid $3 for a roll of toilet paper and $6 for a bag of black beans. Then we know that the market basket costs $___ in 2009 and $___ in 2010. Using 2009 as the base year, the value for the CPI in 2010 is _____. |
market basket cost $50 in 2009 and $75 in 2010. the value for the CPI in 2010 is 150. |
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Suppose that Mr. Dumas has $100,000 in a 403b account (a retirement account) in 2009. He receives a statement in 2010 stating his account balance is $165,000. The real value of his retirement investment between 2009 and 2010 increased/decreased/no change. |
Increased |
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Which of the following is incorrect about the Consumer Price Index? (1) The BLS is in charge of constructing and reporting the value of the CPI monthly. Housing expenditures represent a large percentage of the typical urban household consumption basket. (2) The CPI is used as policy target to gauge our success in achieving low inflation and it measure inflationary tendencies in the economy (3) The benefits for many retired workers, social security recipients, government pensioners, and union workers' wage contracts are fully indexed to the inflation rate using the CPI. (4) The Boskin Commission concludes that the CPI overstated inflation by about 1.1%/year. (5) CPI is the most widely used price index in the US and it uses the reference base period 1982-1984=200 |
(5) CPI is the most widely used price index in the US and it uses the reference base period 1982-1984=200 |
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In 10 years Carol want from making $25,000 when CPI was 70, to making $65,000 when the CPI is 210. Carol can/cannot rightfully brag that her nominal and real income have risen in 10 years because her nominal income increased/decreased/no change, and/but her real income increased/decreased/no change during that period. |
In 10 years Carol want from making $25,000 when CPI was 70, to making $65,000 when the CPI is 210. Carol cannot rightfully brag that her nominal and real income have risen in 10 years because her nominal income increased, but her real income decreased during that period. |
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Suppose that in the country of Troy, the CPI in year 1 was 100 and the CPI in year 2 was 105. Rusgis, a resident of Troy, borrowed money in year 1 and repaid the loan in year 2. If the nominal interest loan was 8%, then the real interest rate paid was___%. |
Real interest rate: 3% |
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If the inflation rate is higher than expected in the US, which of the following persons in the US would be likely to gain? (1) Sarah, who borrowed $10,000 at 6% interest from Commerce Bank to purchase a Hyundai Sonata. (2) Commerce Bank who lent $10,000 to Sarah at 6% interest. (3) Anne, who is holding a large amount of cash (4) A retired couple, Morgan and Mark, who are living on a fixed pension (5) Dr. Lee, who has a contract with MU without a cost of living adjustment in her salary. |
(1) Sarah, who borrowed $10,000 at 6% interest from Commerce Bank to purchase a Hyundai Sonata. |
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In the year 1, the CPI is 141. In year 2, the CPI is 150. If Dennis's salary was $75,000 in year 1, what is the minimum salary he must earn in year 2 to "more than keep up with inflation"? (1) $75,000 x (100/140) (2) $75,000 x (150/141) (3) $75,000 x (141/150) (4) $75,000 x (100/150) (5) 150 x (141/$75,000) |
(2) $75,000 x (150/141) |
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One limitation of the price index, CPI, is that it doesn't take into account that cereals that households buy now are a lot more nutritious for a price than they were in the late 70's. This is called Product/Outlet Substitution/Real Price/Quality/New Good bias. |
One limitation of the price index, CPI, is that it doesn't take into account that cereals that households buy now are a lot more nutritious for a price than they were in the late 70's. This is called Quality bias. |
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If the price of used cars in the US decreased by 10%, then the GDP deflator will increase/decrease/no change, and the CPI will increase/decrease/no change. |
If the price of used cars in the US decreased by 10%, then the GDP deflator will no change, and the CPI will decrease. |
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If the government runs a budget deficit, the amount of national savings will increase/decrease/no change, this will result in a(n) crowding out of/increase in investment. |
If the government runs a budget deficit, the amount of national savings will decrease, this will result in a(n) crowding out of investment. |
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Sweden GDP: $3.85 billion Sweden Population: 9.05 million Ireland GDP: $2.23 billion Ireland Population: 4.21 million
Which country has the higher standard of living and why? Sweden/Ireland has a higher standard of living because their GDP/GDP per capita is higher. |
Ireland has a higher standard of living because their GDP per capita is higher. |
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Suppose that the tires of a certain tire manufacturer are discovered to be defective. Other things the same, the news would likely cause the demand for/supply of stock of this company to decrease, so the price would increase/decrease. |
Suppose that the tires of a certain tire manufacturer are discovered to be defective. Other things the same, the news would likely cause the demand for stock of this company to decrease, so the price would decrease. |
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What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income? |
The supply of loanable funds would shift right and investment would increase. |
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A scholarship gives you $2,000 today and promises to pay you $2,000 on year from today. What is the present value of these payments? (1) $4,000/(1+r) (2) $4,000/(1+r)^2 (3) $2,000+$2,000/(1+r) (4) $2,000/(1+r) + $2,000/(1+r)^2 (5) $2,000(1+r) + $2,000(1+r)^2 |
(3) $2,000+$2,000/(1+r) |
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Suppose that a nation of East Yahoo has net taxes of $3 trillion, government purchases of $5 trillion, and private savings of $7 trillion during 2009. We can conclude that investment must be equal to $___ trillion |
$5 trillion |
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Suppose that the "Dr. Lee's Kimchi House" stock is selling at $50 per share and it has retained earnings of $3 per share, and dividends of $7 per share. What is the price-earnings ratio and what is the dividend yield? |
Price-Earnings Ratio: 5 Dividend Yield: 14% |
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If the demand curve for loanable funds shifts rightward from equilibrium, the shift could be the result of (1) A decrease in tax on interest income (2) A decrease in the expected profit (3) A decrease in the interest rate (4) An increase in investment tax credit (5) An increase in the government surplus |
(4) An increase in investment tax credit |
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Which of the following is correct? (1) Stock is a promise to pay specified sums of money on specified dates and a bond is a certificate of ownership. (2) A bond buyer cannot sell a bond before it matures. (3) Over the last three decades in the US, services have become a smaller fraction of GDP relative to goods. (4) If the government's tax revenues exceed its expenditures, it would likely sell bonds directly to the public to raise more funds. (5) The sale of stocks to raise money is called equity finance, while the sale of bonds to raise funds is called debt finance. |
(1) Stock is a promise to pay specified sums of money on specified dates and a bond is a certificate of ownership. (5) The sale of stocks to raise money is called equity finance, while the sale of bonds to raise funds is called debt finance.
???? |
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Which of the following is false? (1) A change in tax laws that encourages greater saving would raise interest taxes. (2) Taxes on interest income can substantially decrease the future value of current saving. (3) Profits not paid out to stockholders are called "retained earnings" (4) Diversification results in reduction of firm specific risk (5) A bond is a promise to pay specified sums of money on specified dates and a stock is a certificate of ownership and claim to part of a firm's profits. |
(1) A change in tax laws that encourages greater saving would raise interest taxes. |
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Which of the following is false? (1) Demand-pull inflation may occur when the cost of raw materials such as energy inputs increase abruptly. (2) As the real wage rate rises, the opportunity cost of leisure rises. (3) When the country saves a larger portion of its GDP, it will have more capital and higher productivity. (4)Stock indexes are the average of a group of stock prices. (5) Discretionary fiscal policy is defined as making changes in tax rates and government spending to achieve macroeconomic goals. |
(1) Demand-pull inflation may occur when the cost of raw materials such as energy inputs increase abruptly. |
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Which of the following best illustrates Adverse Selection? (1) Sophia and Theresa add risky stocks to their portfolio. (2) When Philip rents a car, he might treat it with less care than he would if it were his own. (3) John, who has narrowly avoided many accidents, applies for automobile insurance. (4) Alex is unwilling to buy a stock when she believes its price has an equal chance of rising or falling $10. (5) Kathleen gets homeowners insurance and the checks her smoke detector batteries less frequently. |
(3) John, who has narrowly avoided many accidents, applies for automobile insurance. |
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In the long run, large/small/no differences in economic growth rates result in large differences in GDP per capita. |
In the long run, small differences in economic growth rates result in large differences in GDP per capita. |
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Which of the following is an example of foreign portfolio investment? (1) The purchase of US stock by a US citizen (2) The purchase of a US treasury bond by a German citizen (3) The purchase of a US mutual fund by a US citizen (4) The purchase of a Japanese factory by a Korean citizen (5) None of the above. |
(2) The purchase of a US treasury bond by a German citizen |
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Which of the following increases labor productivity? (1) An increase in the aggregate hours of work (2) Decreases in the availability of computers and factory buildings (3) Inventions of new machinery, equipment, or software (4) A decline in the health of the population (5) An increase in the number of immigrants |
(3) Inventions of new machinery, equipment, or software |
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Scott, an accountant, opens the Peterson Accounting service at his house in Kansas City. Suppose that during his first year of business his monthly income exceeds his monthly expenditures. Scott would be best described as a Investor/Saver/Borrower, or as a demander/supplier of funds. |
Scott, an accountant, opens the Peterson Accounting service at his house in Kansas City. Suppose that during his first year of business his monthly income exceeds his monthly expenditures. Scott would be best described as a Saver, or as a supplier of funds. |
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Suppose that the US congress passes new legislation that increases incentives for US residents to save. Everything else the same, and according to the analysis of the market for loanable fund, we would expect the interest rate/quantity of funds to increase/decrease/remain unchanged. |
Suppose that the US congress passes new legislation that increases incentives for US residents to save. Everything else the same, and according to the analysis of the market for loanable fund, we would expect the interest rate to decrease. |
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Financial Intermediaries do all of the following except (1) Link savers and borrowers (2) Earn profits by loaning money (3) Offer lower interest rates on savings than they charge on loans. (4) Print money (5) Accept Deposits |
(4) Print money |
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Which describes the phenomenon known as "crowding out"? The government runs a budget surplus/budget deficit, increasing/decreasing the interest rate and making it more/less expensive for the private sector to get funds for private investment. |
The government runs a budget deficit, increasing the interest rate and making it more expensive for the private sector to get funds for private investment. |
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Suppose you open a savings account at a local bank. The bank puts together your savings with the savings of other depositors and creates a loan to a local carpenter that uses the loan to buy new tools. Which of the following statements are true? (1) You participated in the direct finance channel (2) You participated in the indirect finance channel (3) The carpenter got his funds through equity financing (4) The carpenter got his funds through the indirect finance channel. (5) Only (2) and (4) of the above. |
(5) Only (2) and (4) of the above. |
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With the respect to the stock market, the acronym IPO stands for |
Initial Public Offering |
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If the inflation rate is higher than expected, which of the following groups in society would be more likely to gain? (1) Persons who borrowed money at 6% interest rate from their bank to purchase their house (2) Persons who bought US government bonds at 5% interest rate (3) Persons holding large amounts of money (4) Persons on fixed incomes (5) Workers under contract without a cost of living adjustment |
(1) Persons who borrowed money at 6% interest rate from their bank to purchase their house |
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Suppose that Lauren and Michael face a progressive tax structure that has the following marginal tax rates: 0% on the first $20,000 30% on the next $30,000 50% on all additional income. Lauren earns $50,000/year and Michael earns $50,000/year. Lauren and Michael live together and are considering whether to get married. If Lauren and Michael continue to live together unmarried, what would their total tax liability be? |
$18,000 |
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Suppose that Lauren and Michael face a progressive tax structure that has the following marginal tax rates: 0% on the first $20,000 30% on the next $30,000 50% on all additional income. Lauren earns $50,000/year and Michael earns $50,000/year. Lauren and Michael live together and are considering whether to get married. If Lauren and Michael get married, they need to file the tax as a single payer. What would their total tax liability be? |
$34,000 |
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Suppose that Lauren and Michael face a progressive tax structure that has the following marginal tax rates: 0% on the first $20,000 30% on the next $30,000 50% on all additional income. Lauren earns $50,000/year and Michael earns $50,000/year. Lauren and Michael live together and are considering whether to get married. If Lauren and Michael get married, what would the amount of the "marriage penalty" be? |
$16,000 |
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Tax evasion is (1) Facilitated by legal deductions to taxable income (2) The same as tax avoidance (3) Recommended by the American Accounting Association (4) Legal (5) Illegal |
(5) Illegal |
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Which of the following is false? (1) An inefficient tax system is one that imposes small deadweight losses and administrative burdens (2) If the government's expenditures exceeded its receipts, it would likely sell bonds directly to the public (3) A person's marginal tax rate equals the increase in taxes she would pay as a percentage of the rise in her income (4) In the US, the marginal tax rate on the personal federal income tax decreases as income increases. (5) A person's average tax rate equals her tax obligation divided by her income. |
(4) In the US, the marginal tax rate on the personal federal income tax decreases as income increases. |
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Joan uses the public transportation system which is funded by the local government. Michael drives a car. Joan makes $30,000/year, and Michael makes $55,000. If Joan is the only one who pays taxes for the public transportation system, this satisfies (1) The benefits principle (2) The ability-to-pay principle (3) Vertical Equity (4) Horizontal Equity (5) The progressive tax system |
(1) The benefits principle |
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Better health allows people to work harder, which raises a country's total income. This indicates that in effect, better health (1) is a primary cause of price increases. (2) Reduces the incentive to work (3) shifts out a country's production possibilities frontier (4) Increases consumer surplus (5) Increases the overall price level |
(3) shifts out a country's production possibilities frontier |
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A key difficulty facing insurance companies is that people know more about their health than do insurance companies, and that those people who are seriously ill are the most likely to want to obtain health insurance. What is this phenomenon called? |
Asymmetric Information |
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The aging of the US population has tended to increase/decrease/no change spending on health care, and the development of new drugs and medical equipment has tended to increase/decrease/no change spending on health care. |
The aging of the US population has tended to increase spending on health care, and the development of new drugs and medical equipment has tended to increase spending on health care. |
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Suppose that Imani is an economic consultant for the US Department of Defense. The US is considering whether to build a Border fence that will cost current taxpayers $10 billion. If the total benefit of having the Border Fence is spread out over the next 20 years and the prevalent interest is 5% per year, what should Imani advise the US government to do? (1) Build the fence if the total benefit is greater than $10billion x (1+0.05)^20 (2) Do not build the fence if the total benefit is greater than $10 billion x (1+0.05)^20 (3) Do not build because it is too expensive to tax payers (4) Build the fence because it will create jobs (5) Build the fence because it will prevent drug smuggling from Mexico. |
(1) Build the fence if the total benefit is greater than $10billion x (1+0.05)^20 |
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Increasing the amount of consumption spending and reducing the amount of savings increases/decreases/no change investment expenditures, and increases/decreases/no change long-run economic growth in the economy. |
Increasing the amount of consumption spending and reducing the amount of savings decreases investment expenditures, and decreases long-run economic growth in the economy. |
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An economy that does not have interactions in trade or finance with other economies is referred to as a ________ economy. |
A closed Economy |
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Which of the following is not a bases for trade between two nations? (1) Different skill levels of the labor forces (2) One nation's absolute advantage (3) A difference in tastes between countries (4) Economies of Scale (5) Different capital stocks |
(2) One nation's absolute advantage |
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Which of the following is incorrect? (1) Point D would be the plant under utilizing its resources (2) Points A, B, and C represent economical efficiency since they are on the production possibilities frontier (3) Point A could be considered more economically efficient than B if it represents a combination of CDs and Cassettes preferred by US consumers (4) Although E is preferred, it is impossible to achieve given the available resources and technology. (5) C can be achieved if the US uses all of the best technology that is available. |
(2) Points A, B, and C represent economical efficiency since they are on the production possibilities frontier |
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If the demand curve for loanable funds shifts leftward from the curve shown, the shift could be a result of (1) A decrease in investment tax credit (2) An increase in the expected profit (3) A rise in the interest rate (4) A fall in the interest rate (5) An increase in the government surplus |
(1) A decrease in investment tax credit |
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Suppose that AD2 represents the aggregate demand for the US. The output in the long-run must be ___ trillion. Currently the US must be experiencing (1) A recession gap of 2 trillion (2) A full-employment equilibrium (3) unemployment above the natural rate (4) an inflationary gap of 2 trillion |
$14 trillion (3) unemployment above the natural rate |
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Which of the following best describe the economy at F: (1) The US congress can stabilize the economy by decreasing taxes so that consumption and aggregate demand increase. (2) An Okun's gap occurs because the potential GDP is above the real GDP (3) The unemployment rate is below the natural rate (4) The resources in the economy are being overused. Unemployment and inflation are not related. (5) Nominal GDP is below Real GDP where real GDP equals potential GDP. |
(3) The unemployment rate is below the natural rate |
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Suppose that AD2 represents the Aggregate Demand for the US. In order for the economy to move towards potential GDP, the US government should increase/decrease/do nothing to government spending programs or increase/decrease taxes. |
In order for the economy to move towards potential GDP, the US government should increase government spending programs or decrease taxes. |
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Suppose that AD2 represents the Aggregate Demand for the US. If the Fed wants to help the economy reach the potential GDP, it might: (1) Buy US government bonds from the public. (2) Decrease the required reserve ratio. (3) Lower the Discount rate (4) All of the above (5) Sell bonds to increase money supply |
(1) Buy US government bonds from the public. (2) Decrease the required reserve ratio. (3) Lower the Discount rate (4) All of the above |
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A proportional tax is illustrated by tax A/B/C/D; a regressive tax is illustrated by tax A/B/C/D |
A proportional tax is illustrated by tax A; a regressive tax is illustrated by tax B or D |
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A lump-sum tax is illustrated by tax A/B/C/D; a proportional tax is illustrated by tax A/B/C/D |
A lump-sum tax is illustrated by tax D; a proportional tax is illustrated by tax A |
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The figure shows the Lorenz curve for a hypothetical country. We know that the highest 20% of households earn ___% of the society's total income. |
28% |
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Suppose that in 1980 an Apple Computer was sold for $4,000 and a bottle of vodka was sold for $10. Today, an identical Apple Computer sells for $1,000 whereas a bottle of vodka is sold for $20. We are able to conclude that the relative price of an Apple Computer has: (1) Decreased from 400 bottles of vodka to 50 bottles of vodka. (2) Has increased from $10 to $20. (3) Has stayed the same at 400 bottles of vodka (4) Has decreased from $4,000 to $1,000 (5) There is not enough information to conclude any of the above. |
(1) Decreased from 400 bottles of vodka to 50 bottles of vodka. |
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Which of the following would not shift the production possibilities frontier? (1) more efficient use of existing resources and technology (2) An increase in worker training (3) A war that destroyed many buildings (4) A tech improvement that improved fuel efficiency in cars (5) A decrease in the size of the labor force |
(1) more efficient use of existing resources and technology |
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Laws, customs, conventions, and other institutional elements that sustain an economy fall under the category of (1) Rules of the game (2) Financial institutions (3) Capital Infrastructure (4) Human Capital (5) Natural Resources |
(1) Rules of the game |
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The US has experienced Real/Nominal/Extensive/Intensive growth due to an increase in the average education level of US workers. In addition, the US has experienced potential/intensive/extensive growth as a result of discovery of crude oil in Alaska. |
The US has experienced Intensive growth due to an increase in the average education level of US workers. In addition, the US has experienced extensive growth as a result of discovery of crude oil in Alaska. |
