ECON: 205 Problem Set 1, ECON Final Exam

Which of the following is true? a. Economics is a social scienceb. Microeconomics involves the study of choices made by individuals, firms or marketsc. Macroeconomics involves the study of the aggregate market or entire economyd. All of the above

d. all of the above

Free trade between the U.S. and Mexico will allow consumers in both countries to consume more goods. This is a...a. false statementb. normative statementc. positive statementd. all of the above

c. positive statement

Assume the U.S. is considering to spend an additional $10 billion on national defense. Also assume the U.S. is considering to spend additional money hiring new teachers as $10 billion could purchase 2,500 teachers for the next 50 years at a salary of $80,000 per year.If the U.S. decides to spend an additional $10 billion on national defense, what is the opportunity cost of that decision? a. $10 billionb. $80,000c. the value of new weapons, assuming the $10 billion in national defense spending was spent on new weapons d. the value of 2,500 teachers for the next 50 years at a salary of $80,000 per year

d. the value of 2,500 teachers for the next 50 years at a salary of $80,000 per year

A point inside the production possibilities frontier is... a. feasible but not efficientb. efficient but not feasiblec. both feasible and efficientd. neither feasible nor efficient

a. feasible but not efficient

Consider the production possibilities frontier for an economy that produces only cookies and ice cream, and assume production currently occurs at a point somewhere on the economy's production possibilities frontier. If a discovery of the remarkable health benefits of ice cream changes consumers preferences, we would expect... a. production to be at a point inside the production possibilities frontierb. production to move to a different point on the production possibilities frontierc. the production possibilities frontier to shift outwardd. the production possibilities frontier to shift inward

b. production to move to a different point on the production possibilities frontier

Suppose a nation produces food and clothing. In terms of the nation's production possibilities frontier, assume clothing on the x-axis, food on the y-axis. An increase in immigration leading to an increase in the labor force would be illustrated by...a. the production possibilities frontier shifting out along both axesb. the production possibilities frontier shifting in along both axesc. the production possibilities frontier shifting out only along the y-axisd. the production possibilities frontier shifting out only along the x-axis

a. the production possibilities frontier shifting out along both axes

Suppose a nation produces food and clothing. In terms of the nation's production possibilities frontier, assume clothing on the x-axis, food on the y-axis. An increase in technology used in the production of clothing would be illustrated by... a. the production possibilities frontier shifting out along both axesb. the production possibilities frontier shifting in along both axesc. the production possibilities frontier shifting out only along the y-axisd. the production possibilities frontier shifting out only along the x-axis

d. the production possibilities frontier shifting out only along the x-axis

A production possibilities frontier that is a straight line indicates... a. constant costs of productionb. increasing costs of productionc. diminishing costs of productiond. decreasing costs of production

a. constant costs of production

In an hour, Sluggo can wash 4 cars or mow 8 lawns, Bruno can wash 3 cars or mow 1 lawn. Who has the absolute advantage in car washing, who has the absolute advantage in lawn mowing? a. Sluggo in washing cars, Bruno in mowing lawnsb. Bruno in washing cars, Sluggo in mowing lawnsc. Sluggo in washing cars, Sluggo in in mowing lawnsd. Bruno in washing cars, Bruno in mowing lawns

c. Sluggo in washing cars, Sluggo in in mowing lawns

In an hour, Sluggo can wash 4 cars or mow 8 lawns, Bruno can wash 3 cars or mow 1 lawn. Who has the comparative advantage in car washing, who has the comparative advantage in lawn mowing? a. Sluggo in washing cars, Bruno in mowing lawnsb. Bruno in washing cars, Sluggo in mowing lawnsc. Sluggo in washing cars, Sluggo in in mowing lawnsd. Bruno in washing cars, Bruno in mowing lawns

b. Bruno in washing cars, Sluggo in mowing lawns

When two countries produce efficiently and then make a mutually beneficial trade based on comparative advantage...a. each consumes at a point on their own production possibilities frontierb. one consumes inside their production possibilities frontier, while the other consumes outside theirsc. they both consume inside their production possibilities frontierd. they both consume outside their production possibilities frontier

d. they both consume outside their production possibilities frontier

Which goods will a nation typically import?a. those goods in which the nation has an absolute advantageb. those goods in which the nation has a comparative advantagec. those goods in which other nations have an absolute advantaged. those goods in which other nations have a comparative advantage

d. those goods in which other nations have a comparative advantage

Suppose in an hour's time, Japan can produce either 4 cars or 8 trucks; South Korea can produce either 3 cars or 2 trucks. Which of the following is true? a. Japan's opportunity cost of producing cars is 2 trucks per carb. Japan's opportunity cost of producing cars is 1/2 truck per carc. South Korea's opportunity cost of producing cars is 1.5 trucks per card. South Korea's opportunity cost of producing cars is 3 trucks per car

a. Japan's opportunity cost of producing cars is 2 trucks per car

Suppose in an hour's time, Japan can produce either 4 cars or 8 trucks; South Korea can produce either 3 cars or 2 trucks. Which of the following is true? a. Japan has the comparative advantage in cars, South Korea has the comparative advantage in trucksb. Japan has the comparative advantage in trucks, South Korea has the comparative advantage in carsc. Japan has the comparative advantage in cars, Japan has the comparative advantage in trucksd. South Korea has the comparative advantage in cars, South Korea has the comparative advantage in trucks

c. Japan has the comparative advantage in trucks, South Korea has the comparative advantage in cars

Suppose in an hour's time, Japan can produce either 4 cars or 8 trucks; South Korea can produce either 3 cars or 2 trucks. Which of the following is true for both countries to gain from trade? a. Japan should export cars, South Korea should export trucksb. Japan should export trucks, South Korea should export carsc. Japan should export both cars and trucksd. South Korea export both cars and trucks

b. Japan should export trucks, South Korea should export cars

The population of the Wolfpack Republic is 100 people: 40 work full time, 20 work half-time but would prefer work full time, 10 are looking for a job, 10 would like to work but are so discouraged they have given up looking, 10 are not interested in working because they are full time students, and 10 are retired. What is the number unemployed?

a. 10

The population of the Wolfpack Republic is 100 people: 40 work full-time, 20 work half-time but would prefer work full-time, 10 are looking for a job, 10 would like to work but are so discouraged they have given up looking, 10 are not interested in working because they are full-time students, and 10 are retired. What is the the size of the labor force?

c. 70

If the economy is at its natural rate of unemployment...a.only those frictionally and structurally unemployed are without a jobb.there is 0% cyclical unemploymentc.the economy is at full employmentd.all of the above

d. all of the above

Which of the following can cause structural unemployment? a.programs to promote free tradeb.an increase in the minimum wagec.efficiency wagesd.all of the above

d. all of the above

According to the theory of efficiency wages...

a. firms may find it profitable to pay above-equilibrium wages

The discount rate is

b. the rate of interest on loans from the Federal Reserve to banks

If the Federal Reserve would like to increase the money supply, it can ________ the reserve ratio, _______ the discount rate, or _______ government securities in the open market.

c. decrease, decrease, purchase

Assume that the banking system has total reserves of $100 billion. If required reserves are 10 percent of deposits, banks hold no excess reserves and households hold no currency, then the money multiplier is ______, and the money supply is ______.

a. 10, $1 trillion

If the reserve ratio is 25% and the Federal Reserve increases the quantity of reserves with an open market purchase of $120 million in government securities, the money supply can increase by as much as

d. $480 million

The method used most often by the Federal Reserve to change the money supply is to __________, to influence _________, which is _________.

c. buy and sell government securities in the open market, the federal funds rate, the interest rate on loans between banks

It is sometimes suggested that the Federal Reserve should try to achieve zero inflation. If we assume velocity is constant, how would the Federal Reserve best achieve a zero percent inflation rate according to the quantity theory of money?

c. increase the money supply equal to the rate of real GDP growth

According to the quantity theory of money and the Fisher effect, if the central bank increases the rate of money growth...

a. inflation and the nominal interest rate both increase

Suppose an economy is expanding with an increase of real GDP, while the Federal Reserve is holding the money supply constant. We most likely would expect

c. deflation

If the Federal Reserve increases the money supply, we would expect

a. an increase in aggregate demand

Suppose that people anticipate inflation to equal 3 percent, but in fact, prices rise by 5 percent. This unanticipated increase in inflation would _____ a homeowner with a fixed-rate mortgage; _____ a union worker in the second year of a multi-year labor contract; _____ a college that has invested some of its endowment in government bonds.

d. help, hurt, hurt

A profit-maximizing firm in a perfectly competitive market is currently producing 500 units of output, at a price of $40 and total cost of $1000. At this current level of output, marginal cost is _______, and average total cost is_________.

d. $40, $2

Every firm will maximize profit where...

c. MR=MC

Suppose the bubble gum market is perfectly competitive and in its long run equilibrium. If then new regulations increase costs for each firm in the industry, short run economic profits will be _________, though in the long run economic profit will be _____ as firms _______ the industry.

a. negative, zero, exit

In the long-run equilibrium of a perfectly competitive market earning zero economic profit, which of the following is true for each firm? a.P=MCb.P=ATCc.MR=MCd.all of the above

d. all of the above

If a perfectly competitive market is one of constant costs, this implies the long run market supply curve is...

c. perfectly elastic

Comparing a perfectly competitive market to one that is monopolized, which of the following is true? a.At the profit maximizing output for a perfectly competitive firm, P=MCb.At the profit maximizing output for a monopolist, P>MRc.If perfectly competitive market becomes monopolized, we would generally expect the price to increase and less output to be producedd.All of the above

d. All of the above

A significant long-run difference between monopoly and perfect competition is that...a. there's free entry and exit in a perfectly competitive market, while barriers to entry exist in a monopolized market.b. the monopolist controls market supply, while the perfectly competitive firm's influence on market supply is imperceptible.c. the demand curve for the monopolist is the market demand curve, while the demand curve faced by the perfectly competitive firm is perfectly elastic. D. all of the above

d. all of the above.

A natural monopoly is best defined as...

d. ownership of economies of scale leading to a monopoly

Suppose the DeBeers company is a monopolist in its market to sell diamonds. Also suppose this year the company earns economic profits. This implies that the price of diamonds will...

d. exceed both the marginal cost and average cost of producing diamonds.

Which of the following is true regarding price discrimination?a.For a firm to effectively practice price discrimination, its product must not be easily resalableb.For a firm to effectively practice price discrimination, it must have some monopoly powerc.In the case of perfect price discrimination, the seller knows each buyer's reservation or maximum price

d. all of the above

Which of the following shows GDP in an economy measured as total spending?

a. GDP = C + I + G + (net exports)

Suppose you are a U.S. citizen living in North Carolina, and you purchase a Maserati produced in Italy. How does your purchase affect U.S. GDP?

c. U.S. GDP will be unchanged

Consider an economy that produces only doughnuts. In year 1 the quantity produced is 100 doughnuts and the price is $2; in year 2 the quantity produced is 200 doughnuts and the price is $3. What is nominal GDP for year 1 and year 2?

d. nominal GDP in year 1 is $200; nominal GDP in year 2 is $600

Consider an economy that produces only chocolate bars. In year 1, the quantity produced is 3 bars and the price is $4. In year 2, the quantity produced is 4 bars and the price is $5. In year 3, the quantity produced is 5 bars and the price is $6. Year 1 is the base year.What is real GDP for year 1, year 2, year 3?

c. $12, $16, $20

Which of the following is true?a.Honda producing cars in the U.S. is a part of U.S. GDPb.Ford producing cars in the U.S. is a part of U.S. GDPc.Toyota producing cars in the U.S. is a part of U.S. GDP d. all of the above

d. all of the above

Which most likely has a greater effect on the U.S. CPI: a 10% increase in the price of chicken or a 10% increase in the price of caviar? Why?

a. a 10% increase in the price of chicken since chicken would be a greater component of the average consumer's market basket

Suppose the current year value of the CPI is 200. If the market basket of goods used to calculate the CPI cost $500 in the base year, what is the value of that same market basket of goods in the current year?

c. $1000

If the price of imported French wine rises, is the CPI or GDP deflator in the U.S. affected more? Why?

d. the CPI since it would not be a part of the GDP deflator- imported goods are not included in GDP

Suppose you take a job today on Wall Street earning an annual salary of $300,000. Suppose your grandfather worked on Wall Street in 1985 earning an annual salary of $50,000. If the CPI in 1995 was 200, and the CPI today is 600, which of the following is true?

a. in real terms, your salary today is higher than your grandfather's 1985 salary

Suppose the actual nominal rate of interest you pay on a loan from your bank is 3%. If the current rate of inflation is 2%, what is the real rate of interest on that loan?

b. 1%

List the four determinants of labor productivity.

a. physical capital per worker, human capital per worker, natural resources per worker, technological knowledge per worker

Suppose you are an American purchasing corporate stock from BMW, a German automaker.

c. This is an example of foreign portfolio investment

Suppose BMW, a German automaker, opens a plant in North Carolina...

c. this is an example of foreign direct investment, and will lead to an increase in U.S. GDP

Which of the following policies will promote economic growth?a.Increased funding for higher education to increase human capitalb.Increased incentives for workers to contribute to a retirement account, leading to increased savingsc.Increased programs to ensure low income families are able to purchase needed foodd.All of the above

d. all of the above

Which of the following is an international institution devoted to promoting global economic growth? a.IMFb.World Bankc.GATT/WTOd.all of the above

d. all of the above

Which of the following is true?

d. national savings = public savings + private savings

Financial markets and financial intermediaries are different types of financial institutions. Two types of financial markets are ______ and ______, two types of financial intermediaries are ______ and _______

a. stock market and bond market, banks and mutual funds

Which of the following will lead to an increase in interest rates?

c. an increase in the federal budget deficit

Assume a closed economy (no international trade) has government spending of $100 billion, taxes of $200 billion, and investment spending of $300 billion. Calculate the level of public savings and private savings

a. public savings is $100 billion, private savings is $200 billion

What is the name of our federal agency responsible for enforcing regulations in financial markets?

d. Securities and Exchange Commission

Consider the production possibilities frontier for an economy that produces only cookies and ice cream, and assume production currently occurs at a point somewhere on the economy's production possibilities frontier. If a discovery of the remarkable health benefits of ice cream changes consumers preferences, we would expect...

b. production to move to a different point on the production possibilities frontier

Suppose a nation produces food and clothing. In terms of the nation's production possibilities frontier, assume clothing on the x-axis, food on the y-axis. If the production along the nation's production possibilities frontier exhibits increasing costs...

a. will have to give up an increasing amount of clothing in order to produce more food

Suppose a nation produces food and clothing. In terms of the nation's production possibilities frontier, assume clothing on the x-axis, food on the y-axis. If part of the labor force becomes unemployed and sits at home instead of producing food and clothing, this will best be illustrated by...

c. production to be at a point inside the production possibilities frontier

Suppose a nation produces food and clothing. In terms of the nation's production possibilities frontier, assume clothing on the x-axis, food on the y-axis. If a hurricane destroys a portion of the nation's ability to produce food, but does not affect the production of clothing, this will best be illustrated by...

a. the production possibilities frontier shifting in only along the y-axis

Assume the U.S. is considering to spend an additional $10 billion on national defense. Also assume the U.S. is considering to spend additional money hiring new teachers as $10 billion could purchase 2,500 teachers for the next 50 years at a salary of $80,000 per year.If the U.S. decides to spend an additional $10 billion on national defense, what is the opportunity cost of that decision?

d. the value of 2,500 teachers for the next 50 years at a salary of $80,000 per year

A production possibilities frontier that is a straight line indicates...

a. constant costs of production

Which goods will a nation typically import?

d. those goods in which other nations have a comparative advantage

Suppose in an hour's time, France can produce either 1 snowboard or 2 surfboards; Germany can produce either 9 snowboards or 3 surfboards. Which of the following is true?

c. Germany's opportunity cost of producing snowboards is 1/3 surfboard per snowboard

Suppose in an hour's time, France can produce either 1 snowboard or 2 surfboards; Germany can produce either 9 snowboards or 3 surfboards. Which of the following is true?

d. Germany has the comparative advantage in snowboards, France has the comparative advantage in surfboards

Suppose in an hour's time, France can produce either 1 snowboard or 2 surfboards; Germany can produce either 9 snowboards or 3 surfboards. Which of the following is true for both countries to gain from trade? a.France should import snowboardsb.Germany should export snowboardsc.France should export surfboardsd.

d. All of the above

Which of the following would tend to decrease the demand for Pepsi?

a. a decrease in the price of Coke, assuming the goods are substitutes

A change in which of the following will NOT shift the demand curve for Coke?

b. the price of Coke

If the number of firms in the market selling cheese increases, we would likely expect...

c. an increase in the quantity demanded for cheese

Suppose the price elasticity of demand for pretzels is -3.0. If the price of pretzels increases by 10%, we would expect sales for pretzels to decrease by ______ percent, as the demand for pretzels is _______

c. 30%, elastic

Suppose that the price of good A increasing causes the demand for good B to increase. What do we know about these goods?

d. these goods are substitutes

Suppose Coca Cola creates a new marketing campaign which increases the costs for them to produce Coke. Suppose though that this new marketing campaign is unsuccessful, and increases the demand for Pepsi, while decreasing the demand for Coke. What are the predicted net effects in the market for Coke?

d. a decrease in the equilibrium quantity of Coke, while the effect on the equilibrium price of Coke is uncertain

Suppose the cross elasticity of demand between good A and good B is -2.5. If the price of good A rises, what would be expected to happen in the market for good B?

c. the equilibrium price for good B would be expected to decrease, while its quantity demand decreases

If the cross elasticity of demand between pencils and laptops is 0, then the two goods are...

c. unrelated

Suppose consumers will buy the same amount of a good no matter what the price. The demand curve is a vertical line. The price elasticity of demand for this particular good would be...

b. perfectly inelastic

A 20% decrease in price causes the quantity demanded of a good to increase by 40 percent. The value for the price elasticity of demand is ___________, and demand is ____________.

d. -2, elastic

Suppose our federal government wants to enact a tax that will cause a greater burden of expense to producers selling that good, than the burden of expense to consumers purchasing that good. Which would be optimal?

a. a good with a relatively elastic demand, and relatively inelastic supply

A minimum wage is likely to cause unemployment if...

a. set above the equilibrium wage

A price ceiling set above the equilibrium price causes...

c. no effect in the market

Which of the following would cause a shortage to exist in a market?

d. a price ceiling set below the equilibrium price

Suppose the government levies a tax on the market for avocados. Assuming a normal upward sloping supply curve and a normal downward sloping demand curve for avocados, the price for buyers will _______, price received by sellers will ______, and quantity sold will ______.

a. increase, decrease, decrease

A firm is producing 10 units of output at a total cost of $100. The firm's fixed cost is $30. Which of the following is true?

a. average total cost is $10

Homer sells cupcakes on Saturdays. He spends $50 for ingredients and sells $190 worth of cupcakes. If he didn't sell cupcakes, he could work at the local brewery on Saturday and earn $150. In his cupcake business, Homer has an accounting profit of _________ and an economic profit of ________.

b. $140, - $10

Which of the following is the best example of economies of scale?

b. As a firm produces more of its product, its average costs of production decrease

If the hammer factory increases production, the average total cost of production is expected to increase. If the current average total cost is $5, what is most likely the current marginal cost?

d. $7

Suppose you operate a factory producing wrenches. Your current level of output is 1000 wrenches per week. Your weekly fixed cost is $40,000. If your weekly total cost is $100,000,

d. average variable cost of production is $60

A competitive firm maximizes profit by choosing the quantity at which...

b. marginal cost equals price

A profit-maximizing firm in a perfectly competitive market is currently producing 500 units of output, at a price of $40 and total cost of $1000. At this current level of output, marginal cost is _______, and average total cost is_________.

d. $40, $2

In the long-run equilibrium of a perfectly competitive market with identical firms, what are the relationships among price P, marginal cost MC, and average total cost ATC?

d. P = MC and P = ATC

A perfectly competitive firm's short-run supply curve is its _________ cost curve above its _________ cost curve.

d. marginal, average variable

The existence of economic losses in a perfectly competitive market induces firms to __________ the market, which shifts the market supply curve to the__________ and __________ market price.

a. exit, left, increases

Suppose the market for building new homes is perfectly competitive and one of constant costs. If the demand for new homes increases,

b. the price to build a new home will go up in the short run, but not in the long run

If a perfectly competitive market is one of constant costs, this implies the long run market supply curve is

c. perfectly elastic

Suppose the pretzel market is perfectly competitive and in its long run equilibrium. If then there is a new process that reduces the costs for each firm in the industry, short run economic profits will be _________, though in the long run economic profit will be _____ as firms _______ the industry.

d. positive, zero, enter

What is the relationship between price P, marginal revenue MR, and marginal cost MC for a profit maximizing monopolist?

b. P > MR and MR = MC

Suppose the DeBeers company is a monopolist in its market to sell diamonds. Also suppose this year the company earns economic profits. This implies that the price of diamonds will...

d. exceed both the marginal cost and average cost of producing diamonds.

A significant long-run difference between monopoly and perfect competition is that... a. there's free entry and exit in a perfectly competitive market, while barriers to entry exist in a monopolized market.b. the monopolist controls market supply, while the perfectly competitive firm's influence on market supply is imperceptible.c. the demand curve for the monopolist is the market demand curve, while the demand curve faced by the perfectly competitive firm is perfectly elastic.

d. all of the above

The graph below shows the average cost, marginal cost, demand, and marginal revenue curves for a market. If the market is perfectly competitive, the price is ___ and the quantity is ____. If the market is monopolized, the price is ___ and the quantity is ____.

c. 6, 45, 8, 30

If the government attempts to break up a natural monopoly to enforce competition in a market...

a. the average cost of producing the good will increase.

Which of the following is true regarding a monopoly?

d. a monopoly is a socially inefficient market structure since the quantity in the market is too low and price too high.

When a monopolist practices price discrimination...

b. it charges different consumers different prices for the same good

Which of the following is true? a. GDP = C + I + G + (exports-imports)b. GDP = C + S + Tc. GDP is a measure of final goods and services produced within an economyd. all of the above

d. all of the above

Suppose you are a U.S. citizen living in North Carolina, and you purchase a Maserati produced in Italy. How does your purchase affect U.S. GDP?

c. U.S. GDP will be unchanged

Suppose Ford, an American automobile producer, opens a plant in Canada. Which of the following is true? a. The cars Ford produces at the Canadian plant are a part of U.S. GNPb. The cars Ford produces at the Canadian plant are a part of Canadian GDP

c. both of the above are true

Consider an economy that produces only chocolate bars. In year 1, the quantity produced is 3 bars and the price is $4. In year 2, the quantity produced is 4 bars and the price is $5. In year 3, the quantity produced is 5 bars and the price is $6. Year 1 is the base year.What is nominal GDP for year 1, year 2, year 3?

b. $12, $20, $30

Consider an economy that produces only chocolate bars. In year 1, the quantity produced is 3 bars and the price is $4. In year 2, the quantity produced is 4 bars and the price is $5. In year 3, the quantity produced is 5 bars and the price is $6. Year 1 is the base year.What is real GDP for year 1, year 2, year 3?

c. $12, $16, $20

Consider an economy that produces only chocolate bars. In year 1, the quantity produced is 3 bars and the price is $4. In year 2, the quantity produced is 4 bars and the price is $5. In year 3, the quantity produced is 5 bars and the price is $6. Year 1 is the base year.What is the GDP Deflator for year 1, year 2, year 3?

c. 100, 125, 150

Which economic statistic best measures well-being among nations?

d. GDP per capita

Which of the following is true? a. The National Bureau of Economic Research is the agency which reports real GDP and when the economy is in an official recessionb. The Bureau of Labor Statistics is the agency which reports the CPI and the inflation ratec. a recessionary economy is one where real GDP is declining

d. all of the above

Which most likely has a greater effect on the U.S. CPI: a 10% increase in the price of chicken or a 10% increase in the price of caviar? Why?

a. A 10% increase in the price of chicken since chicken would be a greater component of the average consumer's market basket.

Because consumers can sometimes substitute cheaper goods for those that have risen in price...

a. the CPI can slightly overvalue inflation

A small nation produces and consumes only cookies and milk. Assuming that the average market basket of goods contains 1 box of cookies and 3 containers of milk, calculate the CPI for Year 2. Assume Year 1 is the base year. The value of the CPI in Year 2 is ______, and the annual rate of inflation (annual percentage increase in CPI) in Year 2 is _______.

a. 137.14, 37.14%

A small nation produces and consumes only cookies and milk. In Year 1, the nation consumes 10 units of cookies at $40 apiece, and 30 units of milk at $10 apiece. In Year 2, the nation consumes 12 units of cookies at $60 apiece, and 50 units of milk at $12 apiece. Assume Year 1 is the base year. The value of the GDP deflator in Year 2 is ______, and the annual rate of inflation (annual percentage increase in GDP deflator) in Year 2 according to the GDP deflator is _______.

d. 134.69, 34.69%

If the price of imported French wine rises, is the CPI or GDP deflator in the U.S. affected more? Why?

d. the CPI since it would not be a part of the GDP deflator- imported goods are not included in GDP.

Suppose you take a job today in the financial industry earning an annual salary of $90,000. Also suppose your mom had that same job in the year 2000, earning $60,000 per year. If the CPI was 200 in the year 2000, and today's CPI is 300, which of the following is true?

c. in real terms, your salary today is equal to your mom's 2000 salary

Suppose your bank pays you a nominal interest rate of 2% on your savings. If the current rate of inflation is 1%, what is the rate of real interest you earn on your savings?

c. 1%

List the four determinants of labor productivity.

a. physical capital per worker, human capital per worker, natural resources per worker, technological knowledge per worker.

Which of the following is correct?a. Physical capital represents the stock of plant and equipment used to produce goods and servicesb. Human capital represents the knowledge and skills workers acquire through education, training, and experiencec. Students enroll in college to obtain greater human capitald. All of the above

d. All of the above

Which of the following will promote economic growth within a nation? a. a policy to promote an increase in savingsb. a policy to promote and protect patents and intellectual propertyc. a policy to promote general levels of healthd. all of the above

d. all of the above

Does a college education increase productivity? If so, why?

d. yes, it leads to an increase in human capital

Suppose a Japanese company opens a factory in South Korea...

a. this is an example of foreign direct investment and will lead to increased GDP in South Korea

In recent decades Americans have increased their purchase of stocks in foreign-based companies. The Americans who bought these stocks were engaged in...

a. foreign portfolio investment

Why does a policy to promote free trade lead to economic growth?a. our trading partners use dollars obtained in the purchase of U.S. goods to invest in U.S. physical assetsb. our trading partners use dollars obtained in the purchase of U.S. goods to invest in U.S. financial assetsc. foreign direct investment and foreign portfolio investment into the U.S. leads to more jobs in the U.S. in addition to lower interest rates to incentivize further investmentd. all of the above

d. all of the above

Which of the following is an international institution devoted to promoting global economic growth?a. IMFb. World Bankc. GATT/WTOd. all of the above

d. all of the above (IMF, World Bank, and GATT/WTO)

Financial markets and financial intermediaries are different types of financial institutions. Two types of financial markets are ______ and ______, two types of financial intermediaries are ______ and _______.

a. stock market and bond market, banks and mutual funds

If a popular show on personal finance convinces Americans to save more for retirement, the ______ curve for loanable funds would shift, driving the equilibrium interest rate ______.

b. supply, down

Which of the following may lead to an increase in interest rates? a. an increase in the federal budget deficitb. an increase in investment spendingc. a decrease in private savingsd. all of the above

d. all of the above

If the federal government collects more in tax revenue than it spends, and households consume more than they receive in disposable income, then

d. private saving is negative, but public saving is positive

Assume a closed economy (no international trade) has government spending of $200 billion, taxes of $150 billion, and investment spending of $250 billion. Calculate the level of private savings.

c. $300 billion

Suppose GDP is $8 trillion, taxes (T) is $1.5 trillion, private savings is $0.5 trillion, and public savings is $0.2 trillion. Assuming this economy is closed (no international trade), calculate consumption (C), government purchases (G), national savings (NS), and investment (I).

d. C=$6 trillion, G= $1.3 trillion, NS= $0.7 trillion, I= $0.7 trillion

What is the name of our federal agency responsible for enforcing regulations in financial markets?

d. Securities and Exchange Commission