ECON 2105 Final Ward UGA

An increase in the demand for pasta brings a​______ of pasta at the original price and the market price will​______ .

shortage;rise

Russell studies instead of playing tennis. The opportunity cost to him of studying is

the forgone value of playing tennis.

Martha can produce 6060 quilts or 180180 batches of chocolate chip cookies in a month.
Jane can produce 99 quilts or 1818 batches of chocolate chip cookies in a month.
Distinguish between comparative advantage and absolute advantage.

​_______ has an absolute advantage in both goods.

​______ has a comparative advantage in quilts.​ ______ has a comparative advantage in chocolate chip cookies.

Martha

Jane; Martha

The figure shows Felicia​'s PPF. Felicia currently produces 1010 bags of crackers and no mints.
If Felicia decides to produce 1 bag of mints​, her opportunity cost of the bag of mints is​ _______ of crackers.

IMAGE 1

2 bags

Suppose a meticulous housekeeper cleans her house for 5 hours every day, but to prepare for company, she decides to clean for an extra hour.

The​ _____ of one more hour of cleaning is​ _____.

marginal cost; an hour on facebook, if that is the best alternate use of her time

Which of the following statements are positive​?

1. Most household production is done by women
2. Every house should have a pet
3. Drunk drivers should have their licenses suspended for the remainder of their lives
4. Most iPods are purchased by teenagers

statements 1 and 4 are positive

If both the demand and supply​ increase, the equilibrium quantity

increases and the effect on the equilibrium price is indeterminate.

Harry produces 5 balloon rides and 4 boat rides an hour.
Harry could not produce more balloon rides without producing fewer boat rides.
Harry is​ ______ his production possibilities frontier.

producing on

According to the​ figure, the opportunity cost of producing another computer is

IMAGE 2

higher at B.

Taking a smartphone to the gym when you work out becomes more popular.

What is the result of this event?

The demand for smartphones increases

Over what range of prices does a shortage​ arise?
What happens to the price when there is a​ shortage?
The graph shows the demand curve and the supply curve in the market for hamburgers.
Draw a horizontal line at a price at which there is a shortage of hamburgers. Label it Shortage.

When a shortage​ arises, the price​ ______ to its​ equilibrium, which​ _______.

IMAGE 3

​rises; decreases the quantity demanded and increases the quantity supplied

Now suppose that the price is 80 cents a pack. Describe the situation in the gum market and explain how the price adjusts.

If the price is 80 cents a pack​, there is a​ ______ of gum​, so the price of a pack of gum ​______.

As the market moves toward the equilibrium​ price, the quantity demanded​ _______ and the quantity supplied​ _______.

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surplus; falls

increases; decreases

Good A and good B are substitutes in production. The demand for good A increases so that the price of good A rises. The increase in the price of good A shifts the

supply curve of good B leftward.

In an​ hour, Abe can catch 20 pounds of salmon or pick 10 pounds of oranges.
In an​ hour, Zeb can catch 1010 pounds of salmon or pick 1010 pounds of oranges.

The opportunity cost of catching a pound of salmon is​ ______ for Abe
than for Zeb​, and the opportunity cost of picking a pound of oranges
is​ ______ for Abe than for Zeb.

So​ ______ has a comparative advantage in producing​ ______

​lower; higher

Abe; salmon

Leisure Land produces only sunscreen and camel rides.
The table shows the marginal benefit and marginal cost schedules for camel rides.

If Leisure Land produces 36 camel rides​, the marginal benefit from camel rides ​______ the marginal cost of camel rides.
To achieve allocative​ efficiency, Leisure Land must​ ______ the quantity of camel rides produced.

IMAGE 5

exceeds; increase

Refer to​ this​ graph, which​ represents​ Alice's Production Possibilities Frontier. At which levels of production is Alice​ producing​ inefficiently?

IMAGE 6

200 units of lemonade and 50 units of pizza

If the price of a candy bar is​ $1 and the price of a fast food meal is​ $5, then the

relative price of a fast food meal is 5 candy bars.

People come to expect that the price of a gallon of gasoline will rise next week. As a​ result,

​today's demand for gasoline increases.

Normal goods are those for which demand decreases as

income decreases.

The opportunity cost to produce 1 pretzel for Mark is 2 cookies. For​ Jessica, the opportunity cost to produce 1 pretzel is 3 cookies. From this​ information, we know that

Mark has a comparative advantage in pretzel production.

The income earned by the people who sell the services of the factor of production​ _______ is called​ _______.

entrepreneurship; profit

Flights to Paris are a normal good and​ people's incomes rise. At the same​ time, the price of jet fuel rises. The equilibrium price of a flight to Paris​ ________ and the equilibrium quantity of flights to Paris​ ________.

​rises; might​ increase, decrease, or not change

At one point along a PPF 40 tons of wheat are produced while 80 tons of rice are produced. At another point along the same
PPF​,
41 tons of wheat are produced while 70 tons of rice are produced. The opportunity cost of producing a ton of wheat between these points is​ ________ per ton of wheat.

10 tons of rice

When a timber mill makes logs from trees it also produces​ sawdust, which is used to make plywood.
a. Explain how a rise in the price of sawdust influences the supply of logs.
b. Explain how a rise in the price of sawdust influences the supply of plywood

A rise in the price of sawdust​ _________.

A rise in the price of sawdust​ _______.

increases the supply of logs

decreases the supply of plywood

An increase in the demand for ramen noodles and an increase in the supply of ramen noodles occur together.
What is the effect on the price and quantity of ramen noodles?

An increase in the demand for ramen noodles together with an increase in the supply of ramen noodles ​______ create a surplus or a shortage of ramen noodles at the original price.
The equilibrium price of ramen noodles ​______.

The equilibrium quantity of
ramen noodles ​_______.

​might; might​ fall, rise, or not change

increases

Producers of printers
expect the price of a factor of production used to produce a printer to rise and the number of firms producing and selling
printers to decrease.

You predict that the price of
a printer will​ ______ and the quantity of
printers bought will​ ______.

rise; decrease

If macaroni and cheese is an inferior​ good, then a decrease in income will result in

an increase in the demand for macaroni and cheese.

If Geoffrey and Hermione devote equal amounts of time and effort to making​ pretzels, Geoffrey produces more units than Hermione. This information tells us that

Geoffrey has an absolute advantage in producing pretzels.

Which graph shows the impact of scientists developing a more powerful​ fertilizer?

IMAGE 8

Figure A

On Saturday​ morning, you rank your choices for activities in the following​ order: go to the​ library, work out at the​ gym, have breakfast with​ friends, and sleep late. Suppose you decide to go to the library. Your opportunity cost is

working out at the gym.

A decrease in the supply of
golf clubs brings a​______ of
golf clubs at the original price and a​______ in their price.

shortage; rise

T-shirts and tank tops are substitutes.
If the price of a T-shirt decreases​, how does the demand for tank tops ​change?'

If the price of a T-shirt decreases​,
the demand for tank tops will​ _______.

decrease, and the demand curve for
tank tops will shift leftward

By specialization and​ trade, two individuals can

consume at a point beyond their individual production possibilities frontiers.

Why does demand not change when the price of a good changes with no change in the other influences on buying​ plans?
Consider the demand for onions.

The demand for onions does not change when a change in​ _______ occurs.

An increase in the price of onions
​_______.

the price of onions

decreases the quantity of onions demanded and results in a movement up along the demand curve for onions

The figure shows the circular flow model.
In 2014​, flow D was ​$3 trillion​, flow E was −$0.7 trillion, flow A was ​$13.3 trillion​, and flow C was ​$2 trillion.
Calculate consumption expenditure.

In 2014​, consumption expenditure is $9 trillion.

Real GDP is calculated by​ _______.

An economy produces only digital​ cameras, chocolate​ bars, and watches
The table gives the quantities produced and prices in 2015 and 2016. The reference base year is 2015.
What is real GDP in 2016 in terms of the reference​ base-year prices?

summing together the value of the​ year's production using the prices of the reference base year

Real GDP in 2016 in terms of reference​ base-year prices is ​$17.

The Population Survey in Blogsville for the past month is given in the table.
In Blogsville last​ month, how many people were in the labor force and how many people were in the​ working-age population?

Question facts
1. 24 million people had​ full-time jobs
2. 14 million people had​ part-time jobs
3. 5 million people were without work but were available for work and had made specific efforts to find a job within the past four weeks or were waiting to be recalled from a layoff or had a new job to start within the next 30 days
4. 8 million​ part-time workers were looking for​ full-time jobs
5. 35 million people of working age did not have jobs and did not want jobs

In Blogsville last​ month, ______ million people were in the labor force and​ ______ million people were in the​ working-age population.

43; 78

Business cycles are

unpredictable, but always have two phases and two turning points.

Which of the following statements is​ true?

Real GDP fluctuates around potential GDP.

Which of the following expenditures is for an intermediate​ good?

General Motors buys new tires to put on the cars​ it's building.

Which of the following is TRUE regarding business​ cycles?
I. Cycles are predictable.
II. In each​ cycle, a peak follows an expansion.
III. Potential GDP fluctuates around real GDP.

II only

If new capital increases labor​ productivity, the supply of labor ​ ________ and the demand for labor​ ________.

stays the​ same; increases

In calculating​ GDP, household production is

not included because there is no market transaction.

An advance in technology that results in increased productivity results in a

rightward shift of the labor demand curve.

Suppose that the United States cracks down on illegal immigrants and returns millions of workers to their home countries.
Draw a labor supply curve and a labor demand curve for the United States. Label the curves LS0 and LD0.
Draw a point at the equilibrium quantity of labor and the equilibrium real wage rate. Label it 1.
Now suppose the United States returns millions of illegal immigrant workers to their home countries.
Draw and label a curve that shows the effect of this return of workers.
Draw a point at the new equilibrium quantity of labor and the equilibrium real wage rate. Label it 2.

The effect of the United States returning millions of workers to their countries of origin is​ _____ the U.S. PF and​ _____ in potential GDP.

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a movement down​ along; a decrease

During a​ year, a​ firm's net investment is ​$6,400 and depreciation is ​$1,600.
What is the​ firm's gross investment?

The​ firm's gross investment is​ ______.

$8,000

Explain the processes that will bring the growth of real GDP per person to a stop according to
a. Classical growth theory.
b. Neoclassical growth theory.
c. New growth theory.

According to classical growth​ theory, the growth of real GDP per person stops when​ _______.

According to neoclassical growth​ theory, the growth of real GDP per person stops when​ _______.

According to new growth​ theory, the growth of real GDP per person​ _______.

a population explosion eventually occurs and real GDP per person returns to the subsistence level

technology stops advancing

persists indefinitely

In 2014​, a​ country's exports were ​$1,840 billion and imports were ​$2,357 billion.
What was the value of net​ exports?

The value of net exports in 2014
was −517 billion dollars.

The table gives information reported by the Bureau of Labor Statistics for August​, 2017.
What is the unemployment​ rate?

Labor Force: 160.6 million
Employment: 153.4 million
​Working-age population: 255.4 million

The unemployment rate is 4.5 percent.

In the​ figure, a trough is at point​ ________ and a peak is at point​ ________.

IMAGE 12

b​;a

A typical family on Sandy Island consumes only juice and cloth.
Last​ year, which was the base​ year, the family spent ​$24 on juice and ​$6 on cloth. In the base​ year, juice was ​$3 a bottle and cloth was ​$2 a length.
This​ year, juice is ​$8 a bottle and cloth is ​$6 a length.
Calculate
a. The CPI basket.
b. The CPI in the current year.
c. The inflation rate in the current year.

The CPI basket is 8
bottles of juice and
3 lengths of cloth.

The CPI in the current year is 273.3.

he inflation rate in the current year is 173.3
percent.

The table provides some data on real GDP and the population of Japan in 2011 and 2012.
Calculate the growth rate of real GDP and the growth rate of real GDP per person.
Calculate the approximate number of years it takes for real GDP per person in Japan to double if the population growth rate and the real GDP growth rate are maintained at their 2012 levels.

Year: 2011
Real GDP: 491.5
Population: 127.8

Year: 2012
Real GDP: 498.8
Population: 127.6

The growth rate of real GDP is 1.49 percent.

The growth rate of real GDP per person is 1.65
percent.

If the population growth rate and the real GDP growth rate are maintained at their
2012 ​levels, real GDP per person in Japan will double in approximately 42
years .

When the unemployment rate​ ______ the natural unemployment​ rate, real GDP​ ______ potential GDP.

is greater than; is less than

The table shows three years of CPI data.
Calculate the inflation rate for the years ended June 2015 and June 2016.
How did the inflation rate change in 2016​?

June 2014 CPI: 238.3
June 2015 CPI: 238.6
June 2016: 241.0

The inflation rate for the year ended June
2015 is .1 percent.

The inflation rate for the year ended June 2016 is 1 percent.

In 2016​, the inflation rate increased

The table gives information about the U.S. labor market in 2007.
What is the number of people unemployed​?

Working-age population: 231.9 million
Labor Force: 153.1 million
Employed: 146.0 million

The number of people
unemployed is 7.1
million.

The country of Kemper is on its aggregate production function at point W in the figure. The government of Kemper passes a law that makes 4 years of college mandatory for all citizens. After all citizens have their​ education, the economy will

IMAGE 13

move to point such as
Z.

The figure shows the circular flow model.
During 2015​, flow A was ​$13,134 billion​, flow B was ​$9,162 billion​, flow D was ​$3,340 billion​, and flow E was −$777 billion.
Calculate GDP and government expenditure.

GDP is $13,134 billion

Government expenditure is $1,409 billion

At the full−employment
equilibrium in the labor​ market,

there is neither a shortage nor a surplus of labor.

A firm agreed to pay its workers ​$31 an hour in 2016 and ​$35 an hour in 2017. The price level for these years was 241 in 2016 and 245 in 2017.
Calculate the real wage rate in each year​ (to the nearest​ cent).
What is the real wage increase received by these workers in​ 2017?

The real wage rate in 2016 was ​$12.86.

The real wage rate in 2017 was ​$14.29.

The change in the real wage rate between 2016 and 2017 is 1.43 dollars.

The quantity theory of money asserts that an increase in the quantity of money

will lead to an equal percentage increase in the price level.

Joe has a term deposit that pays 10 percent a year and its value after two years will be ​$5,000.
What is the present value of​ Joe's term​ deposit?

The present value of​ Joe's term deposit is
​$4132.23

Which of the following is NOT an asset of the Federal​ Reserve?

Federal Reserve notes

Calling Out​ China's Tricks:

In​ 2016, the U.S. trade deficit with China hit an ever rising​ $350 billion, the largest deficit with any U.S. trading partner. Chinese​ currency, the​ yuan, has risen in value by 24 percent against the U.S. dollar since the Chinese government loosened its currency system in July 2005.​ However, U.S. manufacturers contend the yuan is still​ undervalued, making Chinese goods more competitive in this country and U.S. goods more expensive in China. China buys U.S.​ dollar-denominated securities to maintain the value of the yuan in terms of the U.S. dollar.
​Source: The New York Times​, April​ 12, 2017
What was the exchange rate policy adopted by China until July​ 2005? Explain how it worked.

The graph shows the foreign exchange market prior to any intervention by China.
Draw a point at the equilibrium exchange rate and equilibrium quantity of dollars.
Suppose that​ China's target exchange rate is 7 yuan per U.S. dollar.
Draw a horizontal line at the target exchange rate. Label it.
Draw an arrow to show the surplus or shortage of U.S. dollars at​ China's target rate. Label it.

The exchange rate policy adopted by China until July 2005 was a​ _______ exchange rate. To make it​ work, China​ _______.

In the​ graph, the​ People's Bank of China must​ _______ U.S. dollars to maintain its target​ rate, and if it stopped the U.S. the yuan would​ _______.

IMAGE 14

​fixed;
buys and sells U.S. dollar reserves to maintain the target exchange rate

​buy; appreciate

The table provides information about the nominal interest rate and the CPI inflation rate in the United States for the past five months.

IMAGE 15

In October 2019​,
the real interest rate was 1.28 percent.

Between June 2019
and October 2019​,
the real interest rate
decreased

In the​ figure, the shift in the demand curve for U.S. dollars from D0 to D2 could occur when

IMAGE 17

the U.S. interest rate falls.

The term​ "crowding out" relates to the decrease in

private investment from a government budget deficit.

How does a change in the quantity of money change the interest rate in the short​ run?

Starting from a​ short-run equilibrium, when the Fed
decreases the quantity of​ money, _______.

The price of a bond​ ______ and the interest rate in the short run​ ______.

people enter the loanable funds market and sell bonds

falls;rises

When the quantity of money demanded is greater than the quantity of money​ supplied, people​ ________ bonds and the interest rate​ ________.

​sell; rises

The graph shows demand for loanable funds curve.
Suppose the real interest rate falls.

Draw either an arrow along the demand curve showing the direction of change or a new demand curve.

When the real interest rate
falls​, the​ ______ because the​ ______ is the opportunity cost of loanable funds.

IMAGE 18

quantity of loanable funds demanded increases​; real interest rate

The fact that using money avoids the double coincidence of wants necessary in a barter economy illustrates which function of​ money?

medium of exchange

What happens if there is a shortage or a surplus of U.S. dollars in the foreign exchange​ market?

The graph shows the foreign exchange market.

Draw a point at the equilibrium exchange rate and the equilibrium quantity of dollars.

Draw a horizontal line at a price at which there is a surplus of dollars. Label it Surplus.

Draw an arrow that shows the change in the quantity demanded as the foreign exchange market moves from the price at which you have indicated the surplus toward equilibrium. Label it 1.

Draw an arrow that shows the change in the quantity supplied as the foreign exchange market moves from the price at which you have indicated the surplus toward equilibrium. Label it 2.

If a shortage of U.S. dollars occurs in the foreign exchange​ market, the​ _______ and the exchange rate​ _______.

If a surplus of U.S. dollars occurs in the foreign exchange​ market, the​ _______ and the exchange rate​ _______.

IMAGE 19

quantity of U.S. dollars demanded decreases and the quantity of U.S. dollars supplied​ increases;
rises

quantity of U.S. dollars demanded increases and the quantity of U.S. dollars supplied​ decreases;
falls

Suppose the peso − dollar foreign exchange rate changes from 50 pesos per dollar to 30 pesos per dollar. Then the peso has​ ________ against the dollar and the dollar has​ ________ against the peso.

appreciated; depreciated

In November​ 2015, the exchange rate was 1.33 Canadian dollars per U.S. dollar.
By November​ 2016, the exchange rate had risen to 1.35 Canadian dollars per U.S. dollar.
Explain the imports effect of this change in the exchange rate.

As the exchange rate rises​,
the prices of​ foreign-produced goods and services to Americans​ ______ and the volume of U.S. imports​ ______.

fall; increases

When real GDP​ increases, people demand

more real money.

The table gives information about the commercial banks in Zap.
If banks have no unplanned​ reserves, what is the​ banks' desired reserve​ ratio?

Reserves: 400
Loans: 4,500
Deposits: 5,000
Total Assets: 9,800

The desired reserve ratio is 8 percent.

What are the official measures of​ money?
Are all the measures really​ money?

Savings deposits: 300
checking deposits: 225
time deposits: 200
money market mutual funds and other deposits: 120
currency and traveler's checks: 150

The two main official measures of money in the United States today are​ ______.
The two main official measures of money in the United States​ ______ really money.

The table shows the amounts held as the various components of M1 and M2.

M1 and​ M2; are

The value of M1 is ​$375 billion.
The value of M2 is ​$995 billion.

Households will choose to save more if

current disposable income increases.

income is expected to decrease in the future.

Joe has a term deposit that pays 10 percent a year and its value after two years will be ​$2,000.
What is the present value of​ Joe's term​ deposit?

The present value of​ Joe's term deposit is
​$1652.89.

Compared to a balanced​ budget, when the government runs a budget​ deficit,

interest rates​ rise, and​ firms' private investment decreases.

If the U.S. interest rate rises while interest rates in the rest of the world do not​ change, the higher U.S. interest rate

increases the demand for dollars.

Suppose an increase in the monetary base of ​$2​00,000 increases the quantity of money by ​$400,000.
Calculate the money multiplier.

The money multiplier is 2.

The monetary base does NOT include

checking accounts at commercial banks.

it does include: (Federal Reserve notes., commercial​ banks' reserves., and reserves of depository institutions.)

The graph shows the demand for money curve and the supply of money curve.
The Fed decreases the quantity of real money supplied to ​$2.0 trillion.

Draw a new MS curve that shows the effect of the ​ Fed's action. Label it.

Draw a point at the new equilibrium quantity of money and interest rate.

After the Fed decreases the quantity of​ money, at an interest rate of 6
percent a​ year, people want to hold ​ _______ money than the quantity​ supplied, so they ​ _______ bonds.

The price of a bond​ _______ and the interest rate​ _______.

IMAGE 20

Before the Fed decreases the quantity of​ money, the equilibrium interest rate is 6
percent a year.

more; sell

​falls; rises

If the Fed sells government securities

commercial bank reserves will decrease.

U.S. residents come to believe that the dollar will depreciate in the​ future, that​ is, the exchange rate in the future will be lower than the current exchange rate. As a​ result,

the demand curve for dollars shifts leftward.

Sarah takes out a loan today for ​$26,000 at an interest rate of 4 percent a year.
She plans to repay the loan after 5 years.
How much will he have to​ pay?

Sarah will have to pay
​$31633

According to the quantity theory of​ money, in the long run

an increase in the quantity of money creates an increase in prices but no additional increase in real GDP.

Suppose that the world price of tomatoes is 60 cents a​ pound, the United States does not trade​ internationally, and the equilibrium price of tomatoes in the United States is 40 cents a pound.
The United States then begins to trade internationally.

The price of tomatoes in the United States​ ______.
U.S. consumers buy​ ______ tomatoes. The United States​ ______ tomatoes.

​______ gain from international trade in tomatoes.
​______ lose from international trade in tomatoes.

​rises;
fewer tomatoes and U.S. firms produce​ more; exports

U.S.​ producers; U.S. consumers

The graph shows​ Spain's demand for oranges and the supply of oranges by growers in Spain.
The world price of oranges is euro€1.00 a pound.
Draw and label the world price line.
Suppose there is free international trade.
Draw a point to show the quantity of oranges bought by Spanish consumers and the price they pay. Label it 1.
Draw a point to show the quantity of oranges supplied by Spanish producers and the price at which these oranges are sold. Label it 2.

IMAGE 22

With free international​ trade, Spain produces
fewer oranges than in the situation with no international trade and
imports some at the lower world price.

When a good is​ imported, _______.

consumers gain because they pay a lower price and increase the quantity they consume

When a good is​ exported, _______.

consumers lose because they pay a higher price and decrease the quantity they consume

The net gain from international trade is​ _______.

positive. Consumers gain more than producers lose with​ imports, and producers gain more than consumers lose with exports.

When the United States places a tariff on a​ good, the U.S.​ ______ and the U.S.​ ______ from the tariff.

Choose the statement that is
incorrect.

consumers of the good​ lose; producers of the good gain

A tariff creates a social loss because the domestic government loses revenue.

Trade between a rich and a poor country benefits

both countries.

Suppose the United States goes from a​ free-trade policy to a​ no-trade policy with other countries. Which of the following is a result of this new​ policy?

The U.S. no longer consumes outside its production possibilities frontier

A tariff is a

tax on an imported good or service.

Which of the following statements illustrates fiscal policy​?

The US government has proposed a hike in the corporate tax rate.

If tax revenues are​ $3,500 billion and the​ government's budget balance is a​ $720 billion​ deficit, calculate the​ government's outlays.

$4,220

How does a tax on labor income influence the equilibrium quantity of​ employment?

A tax on labor income​ ______.
The equilibrium quantity of labor​ ______.

decreases the supply of​ labor;
decreases

What is the Laffer curve and why is it unlikely that the United States is on the​ "wrong" side of​ it?

The Laffer curve is the relationship between the​ ______ and the​ ____.

It is unlikely that the United States is on the​ "wrong" side of this curve​ because, if it​ were, a decrease in the tax rate would​ ______ .

tax​ rate; amount of tax revenue collected

increase tax revenue