ASU ECN 211 FINAL EXAM Review (Chapters 1-4, 6, 10-12, 15-17, 20-22)

Refer to the figure. If the government imposes a minimum wage of $9, then how many workers will be employed?

6,000

Which of the following Fed actions would increase the money supply?

Buy bonds

A soft drink cost $1.75 in 2019. The value for the CPI in 1965 is 60.2 and the value of the CPI for 2019 is 236.2, what is the price of a soft drink in 1965 dollars?

$0.45

Refer to the figure. If the economy starts at Y, then W represents:

A recession

The United Kingdom is an advanced economy, and over the past century its rate of economic growth has been higher than that of the United States.

False

If candles and candlesticks are complements, then which of the following would increase the demand for candles?

A decrease in the price of candlesticks.

Refer to the figure. If the production possibilities frontiers shown are each for one day of production, then which of the following combinations of tacos and burritos are Adam and Deirdre together unable to produce in a given day? (you'll have to look the image up on the internet)

700 tacos, 150 burritos.

Which of the following is NOT an automatic stabilizer?

An increase in money supply.

Monica has $500 to spend and wants to buy either a new snowboard or a new laptop. Both the snowboard and the laptop cost around $500, so she can only buy one. This illustrates the basic concept that:

People face trade-offs

Gross Domestic Product (GDP)

Includes the value of government services but not the value of services provided by major household appliances purchased in a previous period.

Tax increases shift aggregate demand curve to the:

Left. While increases in government spending shift the aggregate demand curve to the right.

Positive statements are NOT:

Prescriptive

Refer to the Table. Suppose the government imposes a price floor of $5 on this market. What will be the size of the surplus in this market?

12 units

Which of the following did NOT occur in the housing and financial crisis?

Shift of the long run Phillips curve to the left.

The Fed changes the discount rate and, as a direct result, reserves have increased. The Fed has most likely:

Decreased the discount rate.

Suppose Jessica can wash six windows per hour or she can iron twelve shirts per hour. Peter can wash four windows per hour or he can iron ten shirts per hour. Which of the following is not true?

Peter has an absolute advantage over Jessica in ironing shirts.

When deciding how much to save, people care most about before-tax nominal interest rates.

True

Frictional unemployment is caused by:

A job search and sectoral shifts.

Refer to the Table. If the price were $80, a(n):

Surplus of 35 units would exist, and price would tend to fall.

Refer to the Table. Suppose the government imposes a price ceiling of $2 on this market. What will be the size of the shortage in this market? (you'll have to look for the image on the internet)

6 units

Which of the following theories can explain both inflation and hyperinflation?

The quantity theory of money

The unemployment that results from the process of matching workers and jobs is called frictional unemployment.

True

The unemployment that results from the job search is ______________.

Frictional

Refer to the table. If the local government imposed a minimum wage of $10 in Crabapple Corners, how many people would be unemployed?

0

In 2014, a farmer grew and sold $2 million worth of green beans to a company that froze and bagged them. The company produces $4 million worth of bags of frozen beans in 2014, with sales to households during the year of $3 million. The unsold $1 million worth of frozen beans remains in the company's inventory. The transactions just described contribute how much to GDP for 2014?

$4 million

The Bureau of Labor Statistics places people in the "employed" category if they are:

Temporarily absent from work due to illness.

Cyclical unemployment is closely associated with the short-run ups and downs of economic activity.

True

Stagflation results from continued decreases in aggregate supply.

True

If the nominal interest rate is 4 percent and the inflation rate is 6 percent, then the real interest rate is:

-2 percent

Refer to the Figure. A government-imposed price of $12 in this market is an example of a:

Binding price ceiling that creates a shortage.

If the nominal interest rate is 5 percent and the real interest rate is 3 percent, then the inflation rate is:

2 percent

Which of the following is the immediate effect of a monetary injection?

The money supply increases, whereas the economy's ability to supply goods and services does not change.

In the markets for factors of production in the circular-flow diagram, households are _________ and firms are __________.

Sellers, buyers

Suppose that a small economy that produces mostly agricultural goods experiences a year with exceptionally bad conditions for growing crops. The bad weather would:

Shift the short-run aggregate-supply curve to the left, and the short-run Phillips curve to the right.

Productivity is defined as the:

Amount of output produced from each unit of labour input.

In what year did economist A. W. Phillips publish his famous article that showed a negative correlation between the rate of unemployment and the rate of inflation?

1958

Changes in taxes or government spending that increase aggregate demand without requiring policy makers to act when the economy goes into a recession are called:

Automatic stabilizers

An economy recently had nominal GDP of 5 trillion euro and a GDP deflator of 125. What was real GDP?

4 trillion euro, and real GDP is a better gauge of economic activity than nominal GDP

In a 100-percent-reserve banking system, if an individual withdraws money from their checking account, currency would:

Increase, but demand deposits would decrease by the same amount and M1 would not change.

Which of the following is NOT among the four industries with the largest employment in the United States today?

Cotton goods

Both the production of goods and services and the unemployment rate are used to measure the business cycle.

True

Which of the following is an example of foreign portfolio investment?

In the 1800s, Europeans purchased stock in America companies that used the funds to build railroads and factories.

Which of the following defines productivity?

The quantity of goods and services produced from each unit of labour input.

To decrease the money supply the Fed can conduct open-market sales. Alternatively, the Fed can:

Increase the discount rate.

Over the past several decades in the United States, the labor force participation rate(s) of:

Women has increased while that of men has decreased.

Refer to the Table. If the market consists of Albert and Phillip only and the price falls by $2, the quantity demanded in the market increases by: (you'll have to look the image up on the internet)

5 units.

Consider three countries with diminishing returns to capital. Country A has real GDP per person of $12,000; Country B has real GDP per person of $20,000; Country C has real GDP per person of $25,000. Suppose that the saving rate increases by the same rate in all three countries.

For the next few years, Country A will grow fast than Countries B and C.

Refer to the Figure. Consider the market for winter sweaters. A decrease in the price of wool could be shown in the market for winter sweaters by a:

Shift from S2 to S1

Refer to the table. Assume that England and France each has 40 labor hours available. Before specialization and trade each country divides its time equally between the production of cheese and wine. Then, both countries decide they could be better off if they specialized in the production of one good and traded with each other. If England specializes in cheese and France specializes in wine and the countries trade 10 units of cheese for 8 units of wine, England's gains from trade will be: (you'll have to look the image up on the internet)

10 units of cheese and 4 units of wine.

Which of the following is an example of a positive, as opposed to normative, statement?

Inflation occurs when the government prints too much money.

Other things the same, when an economy increases its saving rate, consumption increases now and production rises later.

False

Economists mostly agree that reducing unemployment benefits would:

Reduce unemployment, but there is disagreement about its effects on economic well-being

As the reserve ratio increases, the money multiplier:

Decreases

Refer to Table 28-2. If the local government imposed a minimum wage of $12 in Crabapple Corners, how many people would be unemployed? (you'll have to look for the image on the internet)

2,000

The Fed changes the discount rate and, as a direct result, reserves have decreased. The Fed has most likely:

Increased the discount

An improvement in technology would cause the long-run aggregate-supply curve to shift:

Right.

Minimum wages create unemployment in markets where they create a:

Surplus of labour. Most U.S. workers get paid more than the minimum wage.

Refer to the Figure . Germany would incur an opportunity cost of 6 units of Good X if it increase its production of Good Y by:

12 units.

From 2006 to 2009, aggregate demand shifted to the left because of a crisis in the:

Housing market.

Bertha bought 10 shares of iSnack stock for $1 per share. In one year, she sold 5 shares for $5 a share. During this year, the price level increased from 140 to 147. What is Bertha's before-tax real capital gain?

$19

100 x ((147-140)/140)= 5%

5 x $5 = $25

$25 - $5 = $20

$20 - $20 x 0.05 = $19

One issue with using changes in U-3 as evidence of the health of the labor market is that an increase in the number of people working part-time who were working full-time (and would still like to work full-time) will ________

Not change U-3, all else being equal, because part-time and full-time work are both counted as employed.

The central bank would decrease the money supply to counter rising output in response to a(n):

Favourable supply shock.

In the U.S., people are required to pay taxes on real capital gains irrespective of their nominal capital gains.

False

When countries trade, it is possible for both countries to benefit.

True

Tom becomes unemployed but is unemployed for only a few weeks. Arnold becomes unemployed and remains so for fifteen weeks. During a typical year there are _____ unemployed persons whose experience is similar to Tom's than to Arnold's. Persons with unemployment experiences similar to _____ count for most of the unemployment at any point in time.

More, Arnold's

Refer to the Figure. Which of the following is correct?

If the economy is at Point B, a policy to restore full employment would be an increase in the money supply.

Policies such as rent control and trade barriers persist because almost all economists agree that those policies are desirable.

False

If a U.S. company buys brewing equipment made in Germany by a German firm, the other things the same:

U.S. imports increase and so U.S. net exports decrease.

In 2019 an economy's consumption was $5400, GDP was $9000, government purchases were $1800, exports were $500, and investment was $2000. What were this country's imports in 2019?

$700

Y = C + I + G + NX

$9000 = $5,400 + $1,800 + $2,000 + $500 - imports = $9,700 - imports

Imports = $700

About what fraction of workers leave their jobs in a typical month?

3 in 100

If the equilibrium wage exceeds the minimum wage, then：

There will be no unemployment

When China experiences investment from abroad:

Chinese workers gain access to the state-of-the-art technologies developed and used in richer countries.

Which of the following events would cause the Fed to stabilize output through decreasing the money supply?

An increase in net exports

Because the price level does not affect the long-run determinants of real GDP, the long-run aggregate-supply curve is upward-sloping.

False

Most people do not primarily rely on labor income to maintain their standard of living.

False

The millennials are the largest generation in US history and, according to a recent study, 80% of them use mobile phone as their primary form of communication. As a result of millennials entering the market for mobile phones, the market demand for:

Mobile phones shifts to the right.

The growth that arises from capital accumulation requires that society sacrifice consumption goods and services now in order to enjoy more consumption in the future.

True

If money demand shifted to the left and the Federal Reserve desired to return the interest rate to its original value, it could:

Sell bonds to decrease the money supply.

Which of the following is the socially optimal rate of unemployment?

The socially optimal rate of unemployment is determined by society's values and is not necessarily the natural rate or full-employment rate of unemployment nor is it zero.

Refer to the Table. If these are the only four sellers in the market, then the market quantity supplied at a price of $16 is: (you'll have to look up the image on the internet)

56 units

The increase in living standards of Americans over the past century is mainly due to:

Improvements in productivity

Which of the following is NOT required for a market to exist?

A meeting location and time.

A main cause of large or persistent inflation is:

Excessive growth in the money supply

Refer to the Table. At which of the following prices would both Brian and Tabitha gain from trade with each other? (you'll have to look the image up on the internet)

6 bushels of apples for 4 pounds of pork

Any point outside a country's production possibilities frontier represents a combination of two goods that an economy

Cannot currently produce.

When aggregate demand shifts leftward along the short-run aggregate-supply curve, inflation:

Decreases and unemployment increases

Suppose the nominal interest rate is 6% and the inflation rate is 2%. What is the real interest rate?

4%

If you buy pizza at your favourite local pizzeria:

Both GDP and consumption spending will be higher.

Minimum wages create:

Structural unemployment if they create a surplus in the labour market.

China has a comparative advantage in the production of silk, but Japan has an absolute advantage in the production of silk. If these two countries decide to trade:

China should export silk to Japan

Which of the following pairs of values of the consumer price index (CPI) is consistent with an inflation rate of 5% from 2018 to 2019?

CPI in 2018 = 90; CPI in 2019 = 94.5

The CPI is able to measure changes in the quality of goods over time:

Imprecisely because it is relatively complicated to measure quality changes.

Suppose an economy produces two goods, food and clothing. This economy always operates on its production possibilities frontier. Last year, it produced 2000 units of food and 500 articles of clothing. This year it experienced a technological advance in its clothing-making industry. As a result, this year the society wants to produce 2200 units of food and 500 articles of clothing. Which of the following statements is correct?

The technological advance reduced the amount of resources needed to produce 500 articles of clothing, so these resources could be used to produce more food.

Suppose the consumer price index is 89 in 2012, 94 in 2014, 100 in 2016, and 103 in 2018. If Social Security Benefits were $1,000 in 2018 and we indexed for inflation, the Social Security benefits would have been ________ in 2016.

$970.87

Rent control is an example of a price:

Ceiling; in cities with rent control mechanisms other than price are used to ration housing.

The difference between the nominal interest rate and the inflation rate is equal to the real interest rate.

True

Suppose Jake and Tim can both produce two goods: football helmets and baseball bats. Which of the following is NOT possible?

Jake is a comparative advantage in the production of football helmets and in the production of baseball hats.

Refer the Table. In which year was the GDP deflator highest?

2013

Suppose there are five suppliers of ice cream in the town of Summerville. When the price of ice cream is $2 per scoop, Firm A is willing to sell 20 scoops, Firm B is willing to sell 50 scoops, Firm C is willing to sell 35 scoops, Firm D is willing to sell 100 scoops, and Firm E is willing to sell 40 scoops. From this information we can conclude that:

The market quantity supplied is less than 250 scoops when the price is $2 per scoop.

The Bureau of Labor Statistics classifies some marginally attached workers as discouraged workers. What additional criteria has to be met for a marginally attached worker to be a discouraged worker?

She provides a job-market related reason for not looking for work.