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55 Terms

1
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A movement along the demand curve for aquafresh toothpaste is caused by

A change in the price of aquafresh toothpaste

2
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Joe sold gold coins for $1000 that he bought a year ago for $1000. He says "at least i didn't lose any money on my financial investment". His economist friend points out that in effect he did lose money, because he could have received a 3 percent return on the $1000 if he had bought a bank certificate of deposit instead of the coins.

3
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The economist's analysis in this case incorporates the idea of what?

Opportunity costs

4
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The point on the production possibilities curve that is most desirable can be found by:

calculating where economic growth will be greatest

5
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Which of the following is included in GDP?

Marijuana purchased legally in Colorado.

6
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A larger budget deficit

raises the Real interest rate and

7
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reduces the quantity of investment.

8
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The law of increasing opportunity costs exists because:

resources are not equally efficient in producing various goods.

9
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In which of the following cases would purchasing power rise?

Nominal income rises by 2 percent, and the price level remains unchanged.

10
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Refer to the below diagram. The movement down the production possibilities curve from point A to point E suggests that the production of

computers, but not bicycles, is subject to increasing opportunity costs.

11
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If mayonnaise and miracle whip are substitutes, then which of the following would increase the demand for miracle whip?

an increase in the price of mayonnaise

12
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The unemployment rate is the

percentage of the labor force that is unemployed

13
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Kathleen is considering expanding her dress shop. If interest rates rise she is

less likely to expand. This illustrates why the demand for loanable funds slopes downward.

14
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Suppose that the adult population in the country of atlantis is 115 million. If 80 million people are employed and 5 million are unemployed, then

30 million are not in the labor force.

15
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Refer to figure 2-2. If households are sellers in the markets represented by box d of this circular-flow diagram,

16
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then

All of the above are correct

17
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Suppose the market for loanable funds is in equilibrium. What would happen in the market for loanable funds, other things the same, if the Congress and President increased the maximum contribution limits to 401(k) and 403(b) tax-deferred retirement accounts?

the real interest rate would decrease and the quantity of loanable funds would increase

18
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Elizabeth just received her Ph.D. in economics and has two competing job offers. The first is in Washington, D.C. and pays a salary of $200,000. She has a similar job offer in Austin, TX that pays $90,000. Which pair of CPIs would make the two salaries have the same purchasing power?

160 in Washington, D.C. and 72 in Austin, TX

19
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Alex sees that his neighbors' lawns all need mowing. He offers to provide the service in exchange for a wage of $20 per hour. Some neighbors accept Alex's offer and others refuse. Economists would describe Alex's behavior as:

rational self-interest, because he attempting to increase his own income by identifying and satisfying someone else's wants.

20
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Suppose you like to make, from scratch, pies filled with banana cream and vanilla pudding. You notice that the price of bananas has increased. As a result, your demand for vanilla pudding would

Decrease

21
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In response to the terrorist attacks of September 11, 2001, the government decided to allocate more resources toward defense goods. The government's decision reflects their assessment that:

the marginal benefits of additional defense goods outweighed the marginal cost.

22
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Which of the following statements is correct?

The interest rate that is usually reported is the nominal interest rate.

23
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Suppose government expenditures on goods and services increase, transfers are unchanged, and taxes rise by less than the increase in expenditures. These changes in the government's budget cause

the equilibrium interest rate to rise and the equilibrium quantity of loanable funds to fall.

24
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Unanticipated inflation

reduces the real burden of the public debt to the Federal government.

25
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Refer to figure 4-22. At a price of $12, there is a

shortage of 4 units.

26
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In deciding whether to study for an economics quiz or go to a movie, one is confronted by the idea(s) of:

scarcity and opportunity costs

27
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A government budget deficit affects the supply of loanable funds, rather than the demand for loanable funds,

28
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because

in our model of the loanable funds market, we define "loanable funds" as the flow of resources available to fund private investment.

29
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In national income accounting, we use which of the following pairs of terms interchangeably?

"public saving" and "government tax revenue minus government spending"

30
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Suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105

31
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The person's purchasing power will:

rise by about 15 percent.

32
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Consider the following data for a fictional economy that produces only two products: guns and butter. Refer to the table below.Nominal GDP for this fictional economy in 2006 equals:

$1,140

33
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Candice is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that

People face tradeoffs.

34
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Suppose that over the past year, the real interest rate was 6 percent and the inflation rate was -2 percent. It follows that

the dollar value of savings increased at 4 percent, and the purchasing power of savings increased at 6 percent.

35
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If the government institutes policies that diminish incentives to save, then in the loanable funds market

the supply of loanable funds shifts leftward.

36
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Refer to figure 4-27. Which of the four panels illustrates an increase in quantity demanded?

Panel (c)

37
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A budget deficit

changes the supply of loanable funds

38
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A bagel shop sells fresh baked bagels from 5 a.m. until 7 p.m. every day. The shop does not sell day-old bagels, so all unsold bagels are thrown away at 7 p.m. each day. The cost of making and selling a dozen bagels is $1.00; there are no costs associated with throwing bagels away. If the manager has 8 dozen bagels left at 6:30 p.m. on a particular day, which of the following alternatives is most attractive?

Lower the price of the remaining bagels, even if the price falls below $1.00 per dozen.

39
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Adam is looking for a job in marketing. He has had some offers and his prospects are promising, but he has not yet accepted a job. Amanda lost her job working for Mercury Bicycles because many customers decided they prefer bicycles manufactured by Ultimate Bicycles instead. Who is frictionally unemployed?

both Adam and Amanda

40
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Refer to the below diagram, which shows demand and supply conditions in the competitive market for product X. Other things equal, a shift of the supply curve from SO to S1 might be caused by a(n):

increase in the wage rates paid to laborers employed in the production of X

41
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If the inflation rate is 2 percent and the real interest rate is 7 percent, then the nominal interest rate is

9 percent

42
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A professional gambler moves from a state where gambling is illegal to a state where gambling is legal. Most of his income was, and continues to be, from gambling. His move

raises GDP.

43
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Refer to the below diagram. If society is currently producing the combination of bicycles and computers shown by point D, the production of 2 more units of bicycles:

will cost 1 unit of computers

44
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Full employment means that

taking seasonal fluctuations into account, only frictional and structural unemployment exist.

45
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GDP is defined as the

market value of all final goods and services produced within a country in a given period of time.

46
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Refer to figure 26-4. If the equilibrium quantity of loanabie funds is $50 billion and if the equilibrium nominal interest rate is 8 percent, then

the rate of inflation is approximately 2 percent.

47
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Suppose you lend $1,000 at an interest rate of 10 percent. If the expected real interest rate is 4 percent (based on your expected inflation), then the rate of inflation over the upcoming year that would be most beneficial to you (among the following choices would be a rate of inflation

Equal to 0%

48
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Suppose that coffee growers sell 200 million pounds of coffee beans at $2 per pound in 2007, and sell 240 million pounds for $3 per pound in 2008. Based on this information we can conclude that the:

demand for coffee beans has increased.

49
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Refer to the below tables. Opportunity costs are:

increasing in both Duckistan and Herbania.

50
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Social security payments are a.

excluded from GDP because they do not reflect the economy's production.

51
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A decrease in government spending and the enactment of an investment tax credit would definitely cause

the quantity of loanable funds traded to increase.

52
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A policy that induces people to save more shifts

the supply of loanable funds and reduces interest rates.

53
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Refer to figure 4-11. The movement from point A to point B on the graph is caused by

an increase in the price of the good.

54
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Refer to figure 4-6. Suppose that the federal government is concerned about obesity in the United States. Congress is considering two plans. One would require "junk food" producers to include warning labels on all junk food. The other would impose a tax on all products considered to be junk food (tax on the producers). We could illustrate the tax as producing a movement from

Point A to Point C in Panel 2

55
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Refer to the below diagram. A binding minimal wage is best illustrated by:

price C.