Intro Macroeconomics Honors
Intro Macroeconomics Honors ECON 2110
University of Memphis
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Econ 2110 Review41 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question 1 The institution in the US charged with creating and regulating the supply of money i5 the a US Trea5u b Federal Reserve c Department of Commerce d Department of Weights and Measures e 39 t 2 The first paper currency issued by the US government was known a5 the a Federal Reserve note b treasury bill c greenback d pound e gold certificate 3 In what year was the Federal Reserve System was created a 1790 b 1861 c 1879 d 1913 e 1935 When a piece of currency must be accepted for payment because the government says 50 the currency i5 called a commodity money b money backed by gold c highpowered money d greenback5 e at money Suppose that the Department of Transportation i5 compiling data on traffic accidents and it wants to present the data in the form of an index lfthere were 2000 accidents in the base year 1997 and 2100 accidents in 1998 what i5 the value ofthe index for 1998 a 952 b 100 c 105 d 200 e 210 6 In the following index which year i5 likely to be the base period 1991 1233 1992 1453 1993 1114 1994 100 1995 943 a 1991 b 1992 c 1993 d 1994 e 1995 The Consumer Price Index CPI excludes goods imported from other countries and consumed by residents ofthe United States a True b False Which of the following statements i5 true about the behavior of the CPI a it has risen steadily since 1960 b it ha5 fallen steadily since 1960 c it fell during the 19605 and has risen ever since d it rose sharply in the 19705 and then declined in the 19805 e it ha5 risen and fallen with roughly equal frequency since 1960 9 Whenever price5 are ri5ing in ation i5 ri5ing a True b Fal5e 10 Refer to Figure S1 Based on the gure a the price level ha5 risen and fallen since 1965 b the price level in 1985 i5 lower than in 1980 c the price level fell from 1980 to 1990 d the price level has not fallen 5ince1965 e the base year i5 1965 11 If prices as measured by the CPI tripled and nominal wages tripled what would happen to real wa es a they would triple b they would remain unchanged c they would increase by onethird d they would decrease by onethird e they would increase by a factor of nine 12 Use the table below to nd the real wage in 1998 ear No 39 hour Y mInal Wa e E 1997 1250 1550 1998 1300 1600 a 806 b 813 c 838 d 1300 e 2080 13 According to classical economics a the economy moves to full employment in the long run b the economy is always at full employment in the short run c the economy is rarely at full employment d business cycles explain longrun uctuations in the economy e the economy is at full employment in the short run but in the long run business cycle movements lead the economy away from full employment 14 What major historical event led tothe most signi cant challenge to classical economic thinking the war on povert a b the American Revolution c World War II d the Great Depression e the oil shocks of the 1970s 15 Which ofthe following is a de nition of economic uctuations a movements in prices around their longrun tren b shi s in the longrun trend of output c movements of the real wage over the long run d shi s in the longrun trend of rices e movements in output around its longrun trend 16 lfthe actual real wage exceeds the equilibrium wage there will be an excess supply of labor a True b False 17 According to the classical model there is no need for government intervention in the economy if the economy is le alone full employment output will eventually occur True b False 18 Which ofthe following groups would be considered suppliers in the labor market government agencies rms a b c households d stockholders e landlords 19 Refer to Figure T1 lfthe real hourly wage rate was 6 in the market illustrated by the graph what would be the fect7 a there would be a shortage of 40 million workers and the wage rate would rise b there would be a shortage of 20 million workers and the wage rate would rise c there would be a surplus of 40 million workers and the wage rate would fall d there would be a surplus of 20 million workers and the wage rate would fall e it would create unemployment 20 According to Say39s law in the aggregate demand creates its own suppl the production of output will generate exactly enough income to purchase what has been produced the economy is incapable of producing output fast enough to ensure full employment full employment cannot be sustained without government ac ion consumer saving prevents the economy from reaching full employment 92510 57m Econ 2110 Review 51 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question 1 According to Thomas Malthus the human race is doomed to suffer repeated famines and wars because a population and food supply both increase arithmetically b population and food supply both increase geometrically c population increases arithmetically while food supply increases geometrically d population increases geometrically while food supply increases arithmetically e population increases exponentially while food supply increases geometrically 2 What is the famous label Thomas Carlyle gave to economics a the premier social science b the notsoscientific science c the dismal science d the optimistic science e the boring science 3 Economic growth is de ned as a longrun increase in an economy39s a resources b employment rate c total output of goods and services d level of pro ts e money supply 4 Which of the following is an important cause of economic growth a both c and d b all ofthe following c increases in the capital stock d improvements in technology e increases in employment 5 If the labor supply curve shifts le ward what will happen tothe real wage rate employment and real output assuming no change in the labor demand a the real wage will increase employment will decrease and real output will increase b the real wage will decrease employment will decrease and real output will increase c the real wage will increase employment will decrease and real output will decrease d the real wage will increase employment will increase and real output will increase e the real wage will decrease employment will increase and real output will increase 6 Over the past century increases in labor demand have outpaced increases in labor supply sothat the average wage rate has increased and employment has a decreased b remained constant c increased d uctuated e ebbed The typical American worker pays how many cents out of each additional dollar earned in federal state and local taxes combined a 40 cents b 5 cents c 90 cents d 75 cents e 10 cents Economists have favored a laissezfaire approach to increase labor supply by decreasing government involvement throu a lower taxes or a less generous social safety net b a more generous social safety ne c higher taxes and a generous social safety net d no social safety net e higher taxes Referto Figure U4 If employment grows and the economy moves from point Ato B on the graph a the population must have increased b the effect on labor productivity cannot be determined with the information given c labor productivity remains unchanged d labor productivity will rise e labor productivity will decline 10 Referto Figure U4 Which ofthe following could cause a movement from point Ato B on the production function a an improvement in technology b an increase in the capital stock c introduction ofa government policy that stimulates investment spending d the discovery of new petroleum reserves e an increase in employment 11 Referto Figure U6 An investment tax credit that increases the demand for loanable funds from D to D2 will increase investment spending by 400 billion and leave the interest rate unchanged 100 billion and leave the interest rate unchanged 100 billion and increase the interest rate by 2 percentage points 200 billion and leave the interest rate unchanged 200 billion and increase the interest rate by 2 percentage points 12 Which ofthe following is the definition for labor productivity used in the text real GDPstock of human capital real GDPnumber ofworkers real GDPreal wage real GDPpopulation real GDPstock of physical capital 13 lfthe nation39s capital stock increases labor productivity will increase and the production function will shi downward 91510 mpovm a True b False 14 An increase in the capital stock causes labor productivity to decrease and the standard of living to increase increase and the standard of living to decrease decrease and the standard of living to decrease increase while the standard of living remains constant increase and the standard ofliving to increase 15 Everything else equal an increase in the supply of loanable funds will lower the interest rate and reduce investment spending lower the interest rate and increase investment spending increase the demand for funds increase the interest rate and reduce investment spending increase the interest rate and increase investment spending maven 92510 57m 16 Refer to Figure U7 Which ofthe following policies would most likely shi the supply of funds curve from 81 to 2 introduction of an investment tax credit cutting the corporate pro ts tax rate increasing personal income tax rates eliminating taxes on interest income decreasing the government39s budget de cit During recessions output a and unemployment both fal b and unemployment both rise 9151057 c rises but unemployment falls d falls but unemployment rises e and unemployment stagnate and both remain constant 18 You are reading a newspaper article that refers to expansions and contractions in the economy The references are to changes in a wage rates b inflation rates c movements in exchange rates d rea GDP e investment expectations 19 What is similar in both booms and busts is the existence of a unemployment at disturbing levels b economic growth c pessimism on the part of individuals untrained in economics d incentives to change the level of unemployment e inflationary tendencies 20 A spending shock typically involves a dramatic reduction in spending in virtually all sectors ofthe economy simultaneous y a True b False