Exam that is already on Homework market

Final Exam ECON 201 OL1-US1 Fall 2013

Weight of each multiple choice questions is 2 points. Weight of each short answer question is 4 points. Totally 100

points.

Name___________________________________

I. MULTIPLE CHOICE (40 questions 2 points each). Choose the one alternative that best completes the statement or answers the question.

1) Economics is best defined as the study of: 1) _______

A) inflation, unemployment, and economic growth.

B) financial decision-making.

C) choices made by people faced with scarcity.

D) how consumers make purchasing decisions.

2) Scarcity can best be defined as a situation in which: 2) _______

A) there are not enough goods to satisfy all of the buyers demands.

B) there is more than enough money to satisfy consumers wants.

C) resources are limited in quantity and can be used in different ways.

D) there are no buyers willing to purchase what sellers have produced.

3) Printing presses, forklifts and assembly plants are examples of which factor of production? 3) _______

A) entrepreneurship B) physical capital

C) human capital D) labor

4) Consumption Expenditures can be broken down into three categories: 4) _______

A) durable goods, nondurable goods and services.

B) luxury goods, normal goods and inferior goods.

C) land, labor and capital.

D) food, shelter and appliances.

5) Based on statistics on unemployment, which group of workers experience the highest unemployment rates? 5)

_______

A) White, 16-19 years old B) African American, 16-19 years old

C) unmarried men D) women maintaining families

6) Of the four countries with the highest level of GNP per capita (the United States, Japan, Italy, and the United

Kingdom), during the 1960-2008 period, the fastest growing country was: 6) _______

A) Japan. B) the United States.

C) the United Kingdom. D) Italy.

7) In growth accounting, the three sources of growth for a country are capital, labor and: 7) _______

A) natural resources. B) technological progress.

C) trade. D) land.

8) Which of the following is not considered investment in human capital? 8) _______

A) the government expands its programs to improve health care

B) the government increases the level of unemployment benefits

C) a firm engages in on-the-job training

D) an individual decides to enroll in a vocational training program

9) Which of the following is not considered a fiscal policy? 9) _______

A) the 2001 economic stimulus package in 2001

B) the Troubled Assets Relief Program (TARP) in 2008

C) the $787 billion economic stimulus package in 2009

D) All of the above are fiscal policies.

10) A "bank run" occurs when panicky depositors simultaneously: 10) ______

A) deposit their funds in a bank offering high deposit interest rates.

B) withdraw their funds in order to invest in Treasury bills.

C) chase a bank owner who has fled the country.

D) withdraw their funds from a bank they believe will fail.

11) The Federal Reserve System: 11) ______

A) is different than the central bank of the United States.

B) includes 12 district federal reserve banks.

C) is a private profit-making commercial banking system.

D) implements fiscal policy.

12) The Fed's management of public expectations is sometimes hindered by its own: 12) ______

A) difficulty in communicating the direction of future policy actions.

B) inside lags.

C) internal disagreements about the course of future monetary policy.

D) inability to conduct effective open market operations.

13) When Bob receives a 5 percent nominal wage increase in a period where inflation is also 5 percent, then we say that he

experiences no money illusion when: 13) ______

A) he believes that his real wage decreased.

B) when he believes that his real wage did not change.

C) he believes that his real wage increased.

D) All of the above are correct.

14) Which of the following is a factor that economists have identified that can shift the natural rate of unemployment?

14) ______

A) changes in labor productivity B) institutional changes

C) changes in demographics D) All of the above are correct.

15) An economic model is 15) ______

A) a simplified representation of an economic environment.

B) a small but completely working economy.

C) any graph.

D) all of the above.

16) Microeconomic analysis can be used to: 16) ______

A) evaluate the merits of public policies. B) better understand how markets work.

C) make personal or managerial decisions. D) All of the above are correct.

17) Suppose that the CPI in 2000 was 102 and the CPI in 2001 was 104. The rate of inflation between 2000 and 2001 was:

17) ______

A) 2.24%. B) 4.22%. C) 1.96%. D) 2.42%.

18) Zambia, a country in Africa, experienced an average GNP per capita growth rate of -0.83 percent between 1960 and

2008. Based on this information, which of the following is true? 18) ______

A) GNP per person in 1960 is higher than in 2008.

B) GNP per person in 1960 is lower than in 2008.

C) Population in 1960 is higher than in 2008.

D) GNP in 1960 is higher than in 2008.

19) A decrease in government purchases shifts the ________ curve to the ________ . 19) ______

A) aggregate demand; right B) aggregate supply; right

C) aggregate demand; left D) aggregate supply; left

20) In the long run, output is determined by: 20) ______

A) the size of the capital stock. B) the state of technology.

C) the size of the labor force. D) all of the above.

21) Which of the following will cause output to increase in the long-run? 21) ______

A) an increase in income taxes

B) a decrease in government spending

C) a decrease in the money supply

D) None of the above will increase output in the long run.

22) Federal spending consists of: 22) ______

A) discretionary federal spending and debt payments.

B) federal government purchases and transfer payments.

C) defense and social security programs.

D) discretionary and mandatory spending.

23) Federal discretionary spending consists of: 23) ______

A) all the programs authorized by Congress on an annual basis.

B) interest payments on government debt held by the public.

C) all the spending that Congress authorized by prior laws.

D) all of the above

24) Which of the following is not true? 24) ______

A) The selling of government securities to pay for a deficit spurs private investment spending.

B) Tax revenues move in the same direction as the business cycle.

C) Expenditures on transfer payments move in the opposite direction of the business cycle.

D) The federal budget deficit works as a sort of automatic economic stabilizer.

25) The formula for the tax multiplier is: 25) ______

A) -MPS/MPC. B) -MPC/MPS. C) -1/MPS. D) MPS/MPC.

26) If an economy's marginal propensity to consume is 0.9 and the marginal propensity to import is 0.1, then an increase

in government spending of $2,000 will increase income by: 26) ______

A) $10,000. B) $2,222. C) $20,000. D) $4,000.

27) When 7 of the 8 largest Japanese mortgage lenders in 1995 had gone bankrupt , which of the following events

prevented the collapse of these institutions? 27) ______

A) The decision of U.S. banks to make loans to the 7 bankrupt institutions.

B) The government's decision to bail out all the 7 bankrupt mortgage lenders.

C) The sudden rise in the home values in Japan.

D) The government's decision to let the surviving institution buy out the 7 bankrupt institutions.

28) A monetary system in which gold backs up paper money is called: 28) ______

A) the commodity standard. B) the silver standard.

C) the golden age. D) the gold standard.

29) If the government were to experience a budget surplus in the next three years, the government's total debt would:

29) ______

A) stay the same over the next three years. B) increase over the next three years.

C) would decrease only on the third year. D) decrease over the next three years.

30) The decrease in investment caused by an increase in government borrowing is called: 30) ______

A) monetizing the debt. B) the reshuffle effect.

C) Ricardian equivalence. D) crowding out.

31) An increase in the British interest rate relative to the U.S. interest rate will cause a(n): 31) ______

A) depreciation of the dollar and a depreciation of the British pound.

B) depreciation of the dollar and an appreciation of the British pound.

C) appreciation of the dollar and a depreciation of the British pound.

D) appreciation of the dollar and an appreciation of the British pound.

32) Those who believe that wages adjust quickly to clear the labor market also believe that: 32) ______

A) the AS curve is vertical. B) the AD curve is steep.

C) the AS curve is upward sloping. D) the AD curve is flat.

Recall Application 1, "Falling Home Prices, the Wealth Effect, and Decreased Consumer Spending," to answer the

following questions:

33) According to the application, from 1997-2006, the largest increase in net wealth for most families in the US came from:

33) ______

A) home equity. B) bankruptcy.

C) credit card debt. D) auto loans.

Recall Application 3, "How the U.S. Economy has Coped with Oil Price Fluctuations," to answer the following

questions:

34) According to the application, surge in the price of oil was caused by the increase in the demand for oil by fast growing

countries such as: 34) ______

A) Japan and China. B) Mexico and Iceland.

C) the U.S. and Japan. D) India and China.

Figure 15.1

35) Refer to Figure 15.1. If the wage rate can easily adjust to clear the market, then if the wage rate is currently at $12:

35) ______

A) the wage rate will decline to eliminate the surplus.

B) the wage rate will decline to eliminate the shortage.

C) the wage rate will increase to eliminate the shortage.

D) the wage rate will decline to eliminate the shortage.

Table 5.1

36) Refer to Table 5.1. Assume that this economy produces only two goods: Good X and Good Y. The value for this

economy's nominal GDP in year 1: 36) ______

A) is $110.

B) is $200.

C) is $146.

D) cannot be determined from this information.

37) Refer to Table 5.1. Assume that this economy produces only two goods: Good X and Good Y. If year 1 is the base year,

the value for this economy's real GDP in year 2 is: 37) ______

A) $146. B) $176.

C) $120. D) none of the above

Table 5.3

38) Refer to Table 5.3. Suppose this economy produces only the two goods X and Y. Nominal GDP in year 3 is: 38)

______

A) $510. B) $404. C) $208. D) $350.

Table 6.1

39) Refer to Table 6.1. The unemployment rate is: 39) ______

A) 18.5%. B) 9.09%. C) 15.2%. D) 22.7%.

Table 6.11

40) Refer to Table 6.11. If 1999 is the base year, the price index in 1999 is: 40) ______

A) 100. B) 1998. C) 121.7. D) 138.7.

II. SHORT ANSWER. (5 questions 4 points each). Write the paragraph that best completes each statement or answers the question.

41) Explain the reasons why the US had a budget surplus in the late 1990s. 41) _____________

42) Explain how a budget deficit can lead to inflation. 42) _____________

43) Explain how the U.S. recession in 2007-2009 affected the demand for money. Be sure to specify which demand for

money decreases. 43) _____________

44) List the two ways in which the national debt can place a burden on future generations. 44) _____________

45) Illustrate examples of the countercyclical effects of the automatic stabilizers. 45) _____________