Introduction to Economics
Introduction to Economics ECON 101
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This 19 page Class Notes was uploaded by Ferne Miller on Sunday October 25, 2015. The Class Notes belongs to ECON 101 at University of North Carolina - Chapel Hill taught by Rita Balaban in Fall. Since its upload, it has received 67 views. For similar materials see /class/228684/econ-101-university-of-north-carolina-chapel-hill in Economcs at University of North Carolina - Chapel Hill.
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Date Created: 10/25/15
ECON 1017008 Exam 3 Spring 2008 Bubble your answers on your scantron sheet by using your 2 pencil Each question is worth 166 points MULTIPLE CHOICE Choose the one alternative that best completes the statement or answers the question 1 3 An increase in the demand for loanable funds will occur if there is A an increase in expected profits from firm investment projects an increase in the nominal interest rate accompanied by an equal increase in inflation 001 a decrease in the real interest rate D an increase in the real interest rate Stagflation occurs when A inflation rises and GDP rises inflation rises and GDP falls inflation falls and GDP rises D inflation falls and GDP falls 001 Which of the following would cause both the equilibrium price and equilibrium quantity of barley assume that barley is an inferior good to increase A A decrease in consumer income A drought that sharply reduces barley output D Unusually good weather that results in a bumper crop of barley 001 An increase in consumer income Assume that the hourly price for the services of personal trainers has risen and sales of these services have also risen One can conclude that A the number of personal trainers has increased B personal trainers are deliberately charging high prices because they provide services for wealthy clients C the demand for personal trainers has increased D the law of demand has been violated If the Fed buys US Treasury securities then this A decreases reserves causes banks to reduce their loans and increases the money supply B increases reserves causes banks to reduce their loans and increases the money supply C increases reserves encourages banks to make more loans and increases the money supply D decreases reserves causes banks to reduce their loans and decreases the money supply lf production displays diseconomies of scale the long run average cost curve is A upward sloping above the short run average toal cost curve 001 downward isloping D above the long run marginal cost curve pigm 1 PM my ear aenmr zann e um Ru Gav mumnso i nndn lm Rafa to pigm 14 1h he gure above suppose he ecummyls rhmany a rh A The maverheh a he Federal Reserve7 A A de a reserve a D Ah apeh marke aeu a Treasury b1 Table 14 72 Price per dos I mduction h kn v schedule er he ran a Rafa to Table 14 Wha is he emnumma y ef uentnutput evexv A 5 umts a A umts c Isumt D n has he rmshuuld shu dawn A a purchase ufshares s preferred 5 C spe m5 an new uses D me cars held In mventnry an a luca ma dealer s m m x a u 5 rm pmduces cars In Mexxcu um pmduchun shuuld man mwards A u 5 GDP 13 Mencu sGNF C n wl nnta ectenher u s GNP Br u 5 GDP D u s GNF A mung hi prnduchun and cunwmptmn at me pmduct a canvmcmg everyune m mmume hi guud D assxgmng pmpeny ghts m the pmducers s the pmduct Pigtn104 cum Dummy a ms 12 Rsfa to pigm 10 4 Idennfy the curves In the diagram cast curve cast s c E verage mdcuszcurvef39 anabl sssssusve c stamenstcurve H s mstcurve gremhme a he maney srpply equals A he gmwxh rs e a pnee level E n c he gmwxh rs e a he velaclty a mnney D he gmwxhrate a real GDP E lneresses 111 he puts level rsrse real weshh and lswersednsrrnpndnspendrng Hymn la la ls 2n Steel lullllons m lunsl 3 is E a 3 l D 3 mman drs a s eel l7 In ahnn than hsn whs ls expee ed benems and hurls A less barmwers lenders c gres er lenders D less lenders barmwers pigm 4 4 n cu ve Duck m Sm mow Damnm n a m Quunmymnlgumms new at nick unimplnyment mthE nearfuture A sh39uctural D permanent A The laburfume panimpahnn rats Wm be mm a The unempluyment rate Wm be We he unempluyment rate Wm be smite th um 21 The federal funds rats 5 Lhe mtgrestrats banks charge each ether furnvermght Taans D the mtgrestrats a bankcharges xtsbesz msmmers 22 Campared m perfect cumthhun the canwm r sur A 5 hgherbecause pnae xshxgherand nutput 5 a 5 ehmmat d c 5 unchanged beeauae pnee and uutputare the same D 5 Inwerbecause pnce Ts hxgher and nutpuns luwer plus Tn a mumpnly the same N 3 IO U N Ch IQ V N 00 If the Fed raises the interest rate this will 11111121573 Year PotentiulReul GDP Real GDP Price Level 2011 14 trillion 14 trillion 150 2012 145 trillion 142 trillion 152 Refer to Table 1573 Consider the hypothetical information in the table above for potential real GDP real GDP and the price level in 2011 and in 2012 if the Congress and the president do not use fiscalpolicy If the Congress and the president use fiscal policy successfully to keep real GDP at its potential level in 2012 which of the following will be higher than if the Congress and the president had taken no action A potential GDP and the inflation rate B real GDP and the inflation rate C real GDP and potential GDP D real GDP and the unemployment rate inflation and real GDP in the short run A increase raise increase lower reduce raise D reduce lower 001 lf equilibrium is achieved in a competitive market A there will is no deadweight loss the deadweight loss will be maximized the deadweight loss will be the same as the opportunity cost of the last unit of output sold D the deadweight loss will equal the sum of consumer surplus and producer surplus 001 Which of the following is a true statement about real and nominal GDP A Nominal GDP is a better measure than real GDP in comparing changes in the production of goods and service year after year B If real GDP increases from one year to the next we know that production of goods and services has risen C If nominal GDP increases from one year to the next we know that production of goods and services has risen D Increases in average prices do not affect the calculation of nominal GDP Suppose real GDP is 13 trillion with potential real GDP 135 trillion and that the Congress and the president plan to use fiscal policy to restore the economy to potential real GDP Assuming a constant price level and no crowding out effects the Congress and the president would need to increase government purchases by A 500 billion B less than 500 billion C None of the above are correct Congress must act to decrease government purchases in this case D more than 500 billion Suppose a developing country receives more machinery and capital equipment as foreign entrepreneurs increase the amount of investment in the economy As a result A the long run aggregate supply curve will shift to the right the long run aggregate supply curve will shift to the left the economy will move down along the long run aggregate supply curve D the economy will move up along the long run aggregate supply curve 001 D nutchmge decrease A a reduchun h eyehpeuy adue ed budgetsurplus 5 hp change In real GD F c an Increase In real GDP D an mar ease 111 he budget surplus 31 I39in 15 e2 pm Venl Lms sup eenm W5 man e mo 5 57 AD we GDP mum e 2mm nouns Rafa to H39th 1572 Th he graph above suppose he ecnmmyxs xmha y e pumtA The mavementuf he Cungress and he pre meha c Adezreasemmt reszra s D A e e stress In guvernmentpurchases dunng he pErmd a hmE whmh a he fullnwmg Ts me7 a The purchasng puweruf huusehuld meme fen between mm and ma c The purchasng puweruf huusehuld meme mse be weeh Z 7and max and he equxhbnum real mfgrestrat Wm A supply 12ft use a demandn h nee c demand leftf 1 D supply 15m fall H39th 12 4 puss Ind wh hey mm Pquot Gamaud a aa a mummy m y p rm maxxrmnng s pmm and has he whs wuuld yuu recumm nd m he mm D h m u Qd umts s s phee e W E ND 1s hm shuuld ewems phee m 11 and seu Q umts c Yes xhs maximums s prn tby charging he hxghest pnee pessMe D ND 1s hm shuuld ewems phee m 11 and seu Q umts 35 During an ex shsmh haw du h sheh and uhemplsymehuypmsuy chan527 husus h Thmd m c he cast e havmg she s awn space uutwexgl39s he behems D Sun Jm dxd nnthave a ehmee her mummats wasa slab A he demand furbutded ws ens phse exssue h he pnse range mnsxdered E he supply beut ed ws ens pme mElasuc h he phee range cansdered D he supply beut ed ws ens pme exssue h he pme range amidered 3 00 Fiscal policy is defined as changes in federal and to achieve macroeconomic objectives such as price stability high rates of economic growth and high employment A taxes the money supply B interest rates money supply C taxes interest rates D taxes expenditures 39 Optical engineers who lost theirjobs at AlcatelrLucent because their skills were no longer in demand in the economy were categorized as A frictionally unemployed B cyclically unemployed C structurally unemployed D unnaturally unemployed 40 The primary tool the Federal Reserve uses to increase the money supply is A printing more money B lowering the required reserve ratio C D buying Treasury securities lowering the discount rate 41 Minimum wage laws cause unemployment because the legal minimum wage is set A below the market wage causing labor demand to be greater than labor supply B above the market wage causing labor demand to be less than labor supply C below the market wage causing labor demand to be less than labor supply D too low E above the market wage causing labor demand to be greater than labor supply 42 A full time student who is not working is categorized as A not in the labor force a discouraged worker employed D frictionally unemployed E structurally unemployed 001 43 If a typical firm in a perfectly competitive industry is earning profits then A new firms will enter in the long run causing market supply to increase market price to fall and profits to decrease B the number of firms in the industry will remain constant in the long run C new firms will enter in the long run causing market supply to decrease market price to rise and profits to increase D all firms will continue to earn profits when it reaches the long run equilibrium 44 Gross domestic product in the economy is measured by the A total number of goods produced in the economy B total number of final goods and services produced in the economy C total number of services produced in the economy D dollar value of all final goods and services produced in the economy a 35 years c 21 years D 1 z pigm 4 4 Pncu no pm m 5h Suw y a 5 m a L mm D an m Gummy m swam Hanna a new A6 Rafa to pigm 44 Haw muchu he pex umttsx is pad by pruducers7 A 8 Hymn 0e a mmnymman mum Emma the emnnmma y e mxentnutput The ecummca yef cmm uutput is Q2 dues 51 represen ma cast nfharveshng salmDn r1 the pnvats marginal behem ufharveshng salmnn ml 14 e2 Price per dos lemmaM mm h my schedule fur the rm AB Rafa to m z e What 15 Shakh s pm trmsxlrmnng uutpu A n ms the rmshuuld shut dawn a a nun c 7 umts D A umts 49 If property rights are not enforced in a country A that country39s growth rate will not be affected B that country will grow more rapidly because of the reduction of law suits C the market system will still work smoothly D entrepreneurs are unlikely to risk their own funds investing in such an economy 50 You lend 5000 to a friend for one year at a nominal interest rate of 10 The CPI over that year rises from 180 to 190 What is the real rate of interest you will earn A 55 51 Why does the short run aggregate supply curve shift to the left in the long run following an increase in aggregate demand A Workers and firms adjust their expectations of wages and prices downward and they push for higher wages and prices B Workers and firms adjust their expectations of wages and prices downward and they accept lower wages and p rices C Workers and firms adjust their expectations of wages and prices upward and they push for higher wages and p rices D Workers and firms adjust their expectations of wages and prices upward and they accept lower wages and p rices 52 In a closed economy what is the relationship between savings and investment A lnvestment may be greater or smaller than savings B Savings is greater than investment C D investment is greater than savings lnvestment is equal to savings 53 If during a deposit expansion not all money gets redeposited into the banking system and some leaks out as currency then the real world multiplier is A smaller than lRR B not related to lRR C larger than lRR D equal to lRR 54 In order to be binding a price floor A must lie above the free market equilibrium price B must be high enough for firms to earn a profit C must lie below the free market equilibrium price D must coincide with the free market equilibrium price 55 Which of the following transactions would be included in the official calculation of GDP A You illegally download music off the lntemet to put on your new iPod B You buy a new iPod C Firestone sells 2 million worth of tires to General Motors A student buys a used textbook at the bookstore You wash and wax your father39s car as a favor to him m0 Table 272 George fuck Lawns Mowed 10 6 Gardens 5 4 Cultivated Table 272 shows the output per day of two gardeners George and Jack They can either devote their time to mowing lawns or cultivating gardens 56 Refer to Table 272 Which of the following statements is true A Jack has an absolute advantage in both tasks B Jack has an absolute advantage in garden cultivating and George in lawn mowing C George has an absolute advantage in both tasks D Jack has an absolute advantage in lawn mowing and George in garden cultivating 57 Refer to Table 272 What is Jack39s opportunity cost of mowing a lawn A half a garden cultivated DU two lawns mowed C tworthirds of a garden cultivated D one and a half lawns mowed 58 Refer to Table 272 Which of the following statements is true A George has a comparative advantage in both tasks B Jack has a comparative advantage in garden cultivating and George in lawn mowing C Jack has a comparative advantage in both tasks D Jack has a comparative advantage in lawn mowing and George in garden cultivating pigm 15 71 mm m Ihnr A 5 s 7 GumW m lhuv d135ram7 A There Wm be amuvementalnng me curve a The curve wm shft up c D Naming beeeuse labur s pmduchvnyhas mt changes A 55 a m c ZEdmhes D M dmhes Answer Key Testnarne EXAM3 1 A Diff 2 Page Ref 710290 Topic Loanable funds Skill Conceptual 2 B Diff 1 Page Ref 827407 Topic Stagflation Skill Definition 3 A Diff 3 Page Ref 8484 Topic Changes in equilibrium demand shift Skill Analytical 4 C Diff 2 Page Ref 8484 Topic Changes in equilibrium demand shift Skill Analytical 5 C Diff 2 Page Ref 871451 Topic Open market operations Skill Conceptual 6 A Diff 2 Page Ref 349349 Topic Costs in the Long Run Skill Conceptual 7 D Diff 3 Page Ref 900480 Topic Effects of monetary policy on real GDP and the price level an initial look Skill Analytical 8 A Diff 2 Page Ref 486486 Topic Does Monopoly Reduce Economic Efficiency Skill Analytical 9 A Diff 2 Page Ref 638218 Topic Gross private domestic investment Skill Conceptual 10 D Diff 2 Page Ref 649229 Topic Gross National Product Skill Conceptual 11 C Diff 2 Page Ref 149149 Topic Government Policies to Deal With Externalities Skill Conceptual 12 A Diff 1 Page Ref 346346 Topic Graphing Cost Curves Skill Analytical Answer Key Testname EXAM3 D Diff 3 Page Ref 8947547475 Topic Relationship between Treasury Billprices and their interest rates Skill Analytical D Diff 2 Page Ref 873453 Topic Quantity theory of money Skill Conceptual D Diff 2 Page Ref 813393 Topic Aggregate demand Skill Conceptual A Diff 1 Page Ref Topic Production Possibilities Frontier and Opportunity Costs Skill Conceptual D Diff 2 Page Ref 684264 Topic Does inflation impose costs on the economy Skill Conceptual B Diff 1 Page Ref 1167711677 Topic Economic impact of taxes Skill Analytical B Diff 2 Page Ref 668248 Topic Frictional unemployment and job search Skill Conceptual C Diff 2 Page Ref 669249 Topic Full employment Skill Conceptual A Diff 1 Page Ref 896476 Topic Federal funds rate Skill Definition D Diff 2 Page Ref 486486 Topic Does Monopoly Reduce Economic Efficiency Skill Conceptual B Diff 2 Page Ref 517 Topic Using fiscal policy to influence aggregate demand A more complete account Skill Analytical D Diff 2 Page Ref 890470 Topic Monetary policy targets Skill Analytical Answer Key Testname EXAM3 A Diff 1 Page Ref 106106 Topic Deadweight loss Skill Conceptual B Diff 2 Page Ref 647227 Topic Comparing Real GDP and Nominal GDP Skill Conceptual B Diff 2 Page Ref 5223 Topic Fiscal policy multipliers Skill Analytical A Diff 2 Page Ref 819399 Topic Long run aggregate supply Skill Conceptual B Diff 3 Page Ref 858438 Topic Definitions of M1 and M2 Skill Conceptual C Diff 3 Page Ref 5201 Topic Comparison of government purchases and tax multipliers Skill Analytical B Diff 2 Page Ref 515 Topic Expansionary and contractionary fiscal policy An initial look Skill Analytical C Diff 2 Page Ref 678258 Topic Using Price lndices Skill Analytical A Diff 2 Page Ref 711291 Topic Explaining movements in interest rates Skill Analytical D Diff 2 Page Ref 415415 Topic How a Monopolistically Competitive Firm Maximizes Profits in the Short Run Skill Analytical A Diff 2 Page Ref 717297 Topic The effect of the business cycle on the inflation rate Skill Factual A Diff 2 Page Ref 77 Topic Three key economic ideas Skill Analytical Answer Key Testname EXAM3 37 38 A Diff 3 Page Ref 1837418374 Topic The Relationship between Price Elasticity of Demand and Total Revenue Skill Analytical D Diff 1 Page Ref 510 Topic Fiscalpolicy Skill Definition C Diff 1 Page Ref 670 Topic Structural unemployment Skill Conceptual B D Diff 2 Page Ref 871451 Topic Open market operations Skill Fact Diff 3 Page Ref 672252 To ic Minimum wage Skill Conceptual A Diff 1 Page Ref 660240 Topic The Household Survey Skill Conceptual A Diff 2 Page Ref 394394 Topic quotIf Everyone Can Do It You Can39t Make Money at Itquot 7 The Entry and Exit of Firms in the Long Run Skill Conceptual D Diff 1 Page Ref 635215 Topic GDP measurement Skill Definition A Diff 1 Page Ref 700280 Topic The rule of 70 Skill Analytical B Diff 2 Page Ref 1167711677 Topic Economic impact of taxes Skill Analytical A Diff 2 Page Ref 161161 Topic Public Goods and Common Resources Skill Analytical D Diff 2 Page Ref 486486 Topic Does Monopoly Reduce Economic Efficiency Skill Analytical Answer Key Testname EXAM3 D Diff 2 Page Ref 754334 0 ic Enhancing property rights and the rule of law Skill Conceptual D Diff 3 Page Ref 680260 Topic Real interest rate Skill Analytical C Diff 2 Page Ref 826406 To ic Long run macroeconomic equilibrium Skill Conceptual C Diff 2 Page Ref 707287 Topic Saving investment and the financial system Skill Conceptual A Diff 2 Page Ref 868448 Topic Simple deposit multiplier Skill Conceptual A Page Ref 108108 Topic Price floor Skill Conceptual B Diff 2 Page Ref 635215 To ic GDP measurement Skill Conceptual C Diff 1 Page Ref 4545 Topic Comparative Advantage and Trade Skill Conceptual C Diff 2 Page Ref 4545 Topic Comparative Advantage and Trade Skill Conceptual B Diff 3 Page Ref 4545 Topic Comparative Advantage and Trade Skill Analytical B Diff 1 Page Ref 537537 Topic The Demand for Labor Skill Analytical D Diff 1 Page Ref 537537 Topic The Demand for Labor Skill Analytical