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Principles of Macroeconomics

by: Waylon Pacocha MD

Principles of Macroeconomics ECON 2133

Marketplace > East Carolina University > Economcs > ECON 2133 > Principles of Macroeconomics
Waylon Pacocha MD
GPA 3.96

Nehad Elsawaf

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Nehad Elsawaf
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This 18 page Class Notes was uploaded by Waylon Pacocha MD on Sunday October 11, 2015. The Class Notes belongs to ECON 2133 at East Carolina University taught by Nehad Elsawaf in Fall. Since its upload, it has received 264 views. For similar materials see /class/221350/econ-2133-east-carolina-university in Economcs at East Carolina University.


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Date Created: 10/11/15
PRINCIPELES OF MACROECONOM39ICS ECON 2133 F inal review questions A This statement is true C Market allocates society s resources better than governments D Only B and C 3 A only the values that society places on those products B only the costs to society of producing those products D none of the above 4 The assumption that people do not intentionally make decisions that would leave them worse off is known as the economic welfare assumption A This statement is true an increase in the growth rate of the quantity of money will be accompanied by an increase in the B unemployment rate C policymakers are able to reduce the in ation rate and at the same time reduce the unemployment rate D policymakers can in uence the in ation rate but not the unemployment rate 6 A the impact of a change in consumer s income on the sales of computers B the impact of a snowstorm on the sales of snow shovels C the most efficient means for General Motors to produce an automobile A This statement is true so The opportunity cost of attending college might best be described as A the money that must be paid in order to attend college I ll n39c C the least ivalued alternative use of the student s time D the value that the student attaches to learning 9 The scientific method is A the use of modern technology to understand the way the world works B the use of controlled laboratory experiments to understand the way the world works I D only A and C 10 Which of the following is are normative statements A An increase in consumer income will cause a rise in the demand for beef C As society increases its wealth the problem of scarcity disappears ll When a country has a comparative advantage in producing a certain good a the country should import that good b the country should produce just enough of that good for its own consumption c the country s opportunity cost of that good is high relative to other countries opportunity costs of that same good 12 Belarus has a comparative advantage in the production of linen but Russia has an absolute advantage in the production of linen If these two countries decide to trade b Russia should export linen to Belarus c Trading linen would provide no net advantage to either country d Without additional information about opportunity costs this question cannot be answered Assume that Sue and Tom can switch between producing corn and producing beef at a constant rate a 105 bushels of corn and 165 pounds of beef c 35 bushels of corn and 22 pounds of beef d 42 bushels of corn and 66 pounds of beef b 65 pounds of beef c 43 pounds of beef d 53 pounds of beef 15 It is possible for the US to gain from trade with Germany even if it takes U S workers fewer hours to produce every good than it takes Germ an workers b This statement is false 16 It has been noted that some resources are better suited to produce certain goods than other resources This implies a A linear PPF c Increasing relative costs d Only b and c a Efficiency b Equality d Externality 18 1f trade makes a country better off then everyone in this country has to be better off as well a This statement is true 19 An economy s production possibilities frontier is also its consumption possibilities frontier a under all circumstances under no circumstances llllua it ilmr ujl l j r b d when the opportunity cost between the two goods being produced is constant 20 If an economy has 60000 labor hours available to produce cars and butter If one car can be produced using 125 labor hours and one pound of butter can be produced using 25 labor hours what is the maximum number of cars that this economy can produce a 240 cars c 500 cars d 1200 cars 21 In the above problem if the economy splits its resources evenly between the production of the 2 goods what is the maximum number of pounds of butter that can be produced a 2400 Tbs 2000 Tbs b L gum 1th d 1000 lbs 22 If you can cook a meal in one hour and fold a laundry basket in 2 hours Whereas your roommate can cook a meal in one hour and fold a laundry basket in 3 hours which of the following is true a You have a comparative advantage in laundry folding b You have an absolute advantage in laundry folding c Both of you have an absolute advantage in cooking a meal 23 The gains from trade take place because of a Absolute advantage b Comparative advantage c Specialization 24 The theory of comparative advantage is attributed to David Ricardo b This statement is false 25 Two individuals engage in the same two productive activities In which of the following circumstances would neither individual have a comparative advantage in either activity a One individual s production possibilities frontier is steeper than the other individual s production possibilities frontier ST One individual is faster at both activities than the other individual I V 39e smear mu li d None of the above is correct 26 The opportunity cost of attending college might best be described as a the money that must be paid in order to attend college c the least ivalued alternative use of the student s time d the value that the student attaches to learning 27 The rationality assumption in economics implies a that people don t make decisions that will intentionally make them worse off b that people should weigh the marginal costs to the marginal benefits of their actions c that people should systematically and purposefully do the best they can to achieve their objectives 28 If the government offers to reduce your property taxes by 10 percent if you install solar heating for your home this would be an example of aan a o ortunity cost c trade off d externality a the invisible hand b the decentralized decisions of many consumers and producers 39 nal39 ro e of prices 30 In a positive externality more of a good is produced than economically warranted a This statement is true 31 In a market failure prices signal the true value and cost of goods and services to society therefore the government can play a pivotal role in improving market outcomes b This statement is false a its ability to distribute income equally among its citizens b the amount of goods and services it can trade with the rest of the world c It s productivity 33 In economics in ation a is the increase in the general price level b decreases with the decrease in the quantity of money c can decrease unemployment in the short run a What to produce b How much output to produce c Who gets the output produced b This statement is false a scarcity b tradeoff c efficiency GM wll j39w eilh v 37 Which one of the following is an example of a normative statement a A digital camera costs more than a disposable camera b Most digital cameras sold in the United States are imported from other countries d More people will buy digital camras as their prices decline 38 All of the following are examples of macroeconomic problems EXCEPT a in ationary pressures caused by an increase in the cost of petroleum b unemployment caused by a fall off in the level of residential construction c a decline in the rate of overall economic growth a This statement is true 40 In the circular flow model a The flow ofreal goods and services is equivalent to the flow of income b A spent generates a cycle of income flows The household sector sells goods and services a inwll 1 a Production takes place over a specific period of time b resources are fully employe c Resources are fixed over the production period W r 42 As a policy advisor the economist employs the scientific method in order to explain the world around him a This statement is true 43 In economics human capital is a the same as physical capital b an input to the production process c the accumulated training and education of labor 44 The PPF shows the possible combination of output that the economy should produce given a certain level of resources and technology b This statement is false 45 Any point outside the PPF represents a a possible and efficient point b a possible but inefficient point c an unattainable but efficient point Mi 46 The AD curve slopes downward due to the a Wealth effect b Interest rate effect c Exchange rate effect a the dollar depreciates b the interest rate falls I quot 39 d All of the above 48 1f international speculators speculate against a currency a The exchange rate depreciates exports rise and AD curve shifts to the right b The exchange rate appreciates exports rise and AD curve shifts to the right The exchane rate a 39 orts fall and AD curve shifts to the left t 4 O If an investment tax credit expires then the AD curve will a shift to the right L 139 ll c ot be affected d none of the above on C An increase in US interest rates will a discourage borrowers but will attract investors b lower investment spending c shift AD curve to the left Lquot The liquidity preference theory help explain a Equilibrium in the money market b The interest rate effect c The wealth effect A shift in the AD curve y Ii N V V 7 v 397 An increase in equ1 ibrium output None of the above 53 The natural rate of output is known as equilibrium output potential output or fullemployment output is correct a This statement is true b lflm s a 2000 c 3000 d 4000 55 Ml is defined as a Currency in circulation and demand deposits b Travelers checks and other checkable deposits c Saving deposits L r a This statement is true b Tltu r 39 l1 39 a 10 b 20 d 02 a The Board of Governors b The Federal Open Market Committee The Fed Regional Banks a rn w m W ll b Sells government bonds c Raises the Reserve requirement ratio d All of the above 61 When the Fed lowers the discount rate a It discourages banks from borrowing from it b it l fg V mm jv 39J H N c It reduces money supply d Only b and c 62 l lu 39 l mv dde b This statemen s alse 63 The Federal Deposit Insurance reduced bank runs in the US increased the problems of moral hazard in US banks has been created in response to the massive bank failures during 19291933 J l m39 a b c This statement is false a It increases reserves in the banking system b It increases the federal funds rate c It re uces the supply of federal funds in the market n 7 7 a Medium of exchange b Store of value c Unit of account l Full mi my mltm 67 Unemployment data is produced by h US Census de c The National Beau of Economic Research d None of the above Work in part time jobs Have been available for work and had tried to find employment in the past 4 weeks Have been laid off and waiting to be recalled for ajob 9 797 a are classified as unemployed b would like to work but have given up looking for work c re n w H ot in the labor force 3 those who are currently employed The total em lo ed workers minus discoura d workers in the econom lllm None of the above a b 9 412 1 a 443 d 401 72 Structural unemployment is caused by a People looking for jobs that match their skills ng for higher wages m m im w jmrj um ll b This statement is false 74 Minimum wage laws b Decrease the quantity of labor supplied and increase the quantity of labor demanded c Create a shortage of labor d Contribute to frictional unemployment b This statement is false a the spending approach b the factor income approach c the expenditure approach 77 The Investment component of GDP measures a capital equipment inv entorie s c financial assets 78 When an American doctor opens a practice in Bermuda his production there is part of the US39 a GDP ll 739 c real GDP 79 Stag ation results from continued decreases in aggregate demand a This statement is true 80 Changes in the price of oil a can only lead to recessions b have not contributed much to output uctuations in the United States d created both in ation and recession in the United States in the 1970s 139 ll lintlllw ll 39 81 Suppose the economy is in longrun equilibrium In a short span of time there is a large in ux of skilled immigrants a major new discovery of oil and a major new technological advance in electricity production In the short run we would expect a the price level to rise and real GDP to fall c the price level and real GDP both to stay the same d All of the above are possible d Per capita real GDP b This statement is false 83 Suppose an apartment complex converts to a condominium so that the former renters are now owners of their housing units Suppose further that a current estimate of the value of the condominium owners39 housing services is the same as the rent they previously paid What happens to GDP as a result of this conversion a GDP necessarily increases b GDP necessarily decreases c GDP is unaffected because neither the rent nor the estimate of the value of housing services is included in GDP 84 If the US government pays 22 million in unemployment insurance benefits US GDP will39 a Increase by 22 million b Decrease by 22 million d None of the above b This statement is false 86 A steel company sells some steel to a bicycle company for 150 The bicycle company uses the steel to produce a bicycle which it sells for 250 Taken together these two transactions contribute a l50to GDP I in c between 250 and 400 to GDP depending on the profit earned by the bicycle company when it sold the bicycle d 400 to GDP 87 Which of the following events would cause GDP for 2007 to increase a InFebruary 2007 Amanda sells a 1996 Honda Accord to Isabella lquot c In December 2007 Isabella eats onions that she harvested from her backyard garden in October 2007 d All of the above are correct 88 Consider two cars manufactured by Chevrolet in 2007 During 2007 Chevrolet sells one of the two cars to Sean for 24000 Later in the same year Sean sells the car to Kati for 19000 The second automobile with a market value of 30000 is unsold at the end of 2007 and it remains in Chevrolet s inventory The transactions just described contribute how much to GDP for 2007 a 24000 b 43000 d 73000 89 If Kim bought last year s computer model for 1000 to use in her office then39 a Investment and GDP will rise by 1000 b Consumption and GDP will rise by 1000 d None of the above 90 The GDP deflator is a better in ation measure than the CPI b This statement is false 91 If the average annual tuition and fees in public colleges and universities in the US were 1414 in 1986 In 2006 the average went up to 5834 IF the CPI 1096 2038 in 1986 and 2006 respectively which of the following is correct a i wE39ElW quotL 556 wwwmllts lbw b If prices were as high in 1986 as 2006 then tuition and fees would have been 3150 on average c Tuition and fees are not rising as fast enough as the overall cost of living d None of the above 92 Indexation refers to a a process of adjusting the nominal interest rate so that it is equal to the real interest rate 1 11m r 111quotnii u minim wwllllz tswuu a Limlllvsu mmuhl 1139 m mm c using a price index to de ate dollar values d an adjustment made by the Bureau of Labor Statistics to the CPI so that the index is in line with the GDP de ator 93 In the economy of Lexington in 2008 consumption was 6000 exports were 1000 GDP was 10000 government purchases were 2000 and imports were 600 What was Lexington s investment in 2008 1400 a 2400 37 0 P 3600 94 Suppose an economy s production consists only of corn and soybeans In 2005 20 bushels of corn are sold at 4 per bushel and 10 bushels of soybeans are sold at 2 per bushel In 2004 the price of corn was 2 per bushel and the price of soybeans was 1 per bushel Using 2004 as the base year it follows that for 2005 a nominal GDP is 50 real GDP is 100 and the GDP de ator is 50 b nominal GDP is 50 real GDP is 100 and the GDP de ator is 200 c nominal GDP is 100 real GDP is 50 and the GDP de ator is 50 1611 711151 le 1P uquot 11 h 95Rea1 interest rate L39xe TY li Hl jill 7min we at 1mm w llstlm b Is the Nominal interest rate plus in ation C F UUIIUWCI and I dVCl when it s high d Only a and c 96 Problem with the CPI includes39 a Calculating a current basket of goods and services b Not including imported consumer goods b This statement is false a Nominal GDP b Real GDP d Real GNP 99 If the nominal interest rate is 15 percent and the rate of in ation is 05 percent then the real interest rate is NOMINAL INTEREST RATE INFLATIONRATE a 4 percent b 2percent c 1 percent H17 l u b Th1s statement 1s false Hi I b This statement is false mm im w 102 Fiscal policy refers to the idea that aggregate demand is affected by changes in a the money supply c trade policy d All of the above are correct 104 Some economists argue that a monetary policy should actively be used to stabilize the economy b fiscal policy should actively be used to stabilize the economy c fiscal policy can be used to shift the AD curve b This statement is false 106 According to classical macroeconomic theory changes in the money supply change nominal but not real variables b This statement is false 107 An increase in the actual price level does not shift the shortrun aggregate supply curve but an expected increase in the price level shifts the shortrun aggregate supply curve to the left a This statement is true 108 If aggregate demand shifts right then eventually price level expectations rise The increase in price level expectations causes the shortrun aggregatesupply curve to shift to the left b This statement is false a This statement is true 110 Which of the following is included in the aggregate demand for goods and services a consumption demand b investment demand c net exports Good luck


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