Find study materials for any course. Check these out:
Browse by school
Make your own
To login with Google, please enable popups
To login with Google, please enable popups
Don’t have an account?
To signup with Google, please enable popups
To signup with Google, please enable popups
Sign up withor
At the time of Alyssa’s 10 year high school reunion she was making $25,000 and the CPI was 70. Now that it is time for her to attend her 20 year high school reunion, Alyssa’s income has risen to $65,000 and the CPI is 210. At her 20 year reunion, can Alyssa rightfully brag that her nominal and real income have risen since the last time she saw her former classmates ten years ago?
1) Yes, Alyssa's nominal and real income rose during that 10 year period
2) No, Alyssa's nominal and real income remained constant during that 10 year period
3) No, Alyssa's real income fell although her nominal income rose during that 10 year period
4) No, Alyssa's nominal and real income fell during that 10 year period
5) It is impossible to determine what happened to Alyssa's real income
Based on the table below, which country has a higher standard of living and why?
(1) Sweden has a higher standard of living because their GDP is higher.
(2) Ireland has a higher standard of living because
their GDP per capita is higher.
(3) Sweden has a higher standard of living because their GDP per capita is higher.
(4) Ireland has a higher standard of living because growth in GDP is greater in Ireland than in Sweden.
(5) Sweden and Ireland have the same standard of living because their GDPs are similar.
(billions of dollars)
Population (millions of people)
(2) Ireland has a higher standard of living because
their GDP per capita is higher.
1) 50/1.1 + 50/1.1^2 + 50/1.1^3 + 1000/1.1^3 = $876
2) 1150/1.1^3 = $864
3) 50x1.1 + 50x1.1^2 + 50x1.1^3 to 1000x1.1^3 = $1513
4) 115- x 1/1^3 = $1530
5) 50/1.1 + 50/1.1x2 + 50/1.1x3 + 1000/1.1x3 = $386
(1) Car dealerships provide warranties on used cars sales. Buyers of used cars require inspections by a mechanic
prior to purchase.
(2) Firms spend a lot of money on advertising to signal product quality to buyers and provide a generous return
policy for the purchase.(3) Highly competent workers get college degrees to signal their quality to employers.
(4) Auto insurance companies charge lower premiums to drivers willing to accept larger deductibles – they are
most likely the safer drivers.(5) Health Insurance Companies do not require physical exams before selling policies.
Consider the following data for a closed economy: Y = $12 trillion
C = $8 trillion
G = $2 trillion TR = $2 trillion T = $3 trillion
I= $2 trillion
Based on the information above, what is the level of private saving in the economy?
1) 3 trillion
2) 4 trillion
3) 5 trillion
4) 2 trillion
5) 1 trillion
(1) Demand- pull inflation may occur when the cost of raw materials such as energy inputs increase abruptly.(2) When a country saves a smaller portion of its GDP, it will have more capital and higher productivity.
(3) The Dow Jones Industrial Average has been computed regularly since 2000. With respect to the stock market,
the acronym IPO stands for Internal Public Offering.(4) Countries without well-developed financial systems are able to sustain high levels of economic growth.
How are corporate profits taxed in the United States?
(1) Earnings are taxed first by state sales taxes and then as corporate profits at the Federal level.
(2) Earnings are taxed first as personal income then as corporate profits at the Federal level.
(3) Earnings are taxed first as corporate profits then as personal income after dividends are paid. (4) Corporate profits are not taxed at all.
(5) Only the retained earnings are taxed at the Federal level.
(5) The equilibrium interest rate would fall and the quantity of loanable funds may rise or fall based on whether household saving increases or decreases as a result of the change from an income tax to a consumption tax.
(1) slow economic growth because he is reducing the amount of funds available for investment.(2) slow economic growth because he is increasing the amount of funds available for investment.
Which of the following would encourage economic growth through increases in the capital stock?
(1) a change from an income tax to a consumption tax
(2) an increase in household saving
(3) a decrease in the government deficit
(4) all of the above
(5) none of the above
Suppose that Dustin Johnson is an economic consultant for the US Department of Defense. The US is considering whether to build a Border fence that will cost current taxpayers $25 billion. If the total benefit of having the Border fence is spread out over the next twenty years and the prevalent interest rate is 5% per year, what should Dustin advise the US government to do?
(1) Build the fence if the total benefit is greater than 25 billion X (1+0.05)20.
(2) Do not build the fence if the total benefit is greater than 25 billion X (1+0.05)20. (3) Do not build because it is too expensive to tax payers.
(4) Build the fence because it will create jobs.
(5) Build the fence because it will prevent drug smuggling from Mexico.
(1) Horizontal equity is achieved when taxes are collected from those who benefit from the government
expenditure of the tax revenue.(2) Incentives to work and save are reduced when Income taxes are higher.
(3) A tax is efficient if it imposes a small excess burden relative to the revenue it raises. As tax laws become more
complex, the administrative burden of taxes increase. U.S. taxpayers spend many hours during the year maintaining records for tax purposes and preparing their income tax returns. This administrative cost is part of the deadweight loss of taxation.(4) Tax revenue can increase as the tax rate decreases if the increase in the tax base is bigger than the decrease in the tax rate
Suppose that Derek and Ellen live together in Missouri and face a tax structure that has the following marginal tax rates: 0 percent on the first $30,000, 30 percent on the next $30,000 and 50 percent on all additional income. Derek earns $70,000 per year and Ellen earns $70,000 per year. If Derek and Ellen get married, the "marriage penalty" will be
Consider a system in which a person earning $10,000 pays $1,000 in taxes, a person earning $25,000 pays $2,000, and someone earning $60,000 pays $4,000. What type of tax is this?
(5) one based on the benefits principle of taxation
Many economists believe that by making health care coverage mandatory for all individuals, the demand for medical services will likely ________, which will ________ the costs of health care.
(1) increase; increase
(3) decrease; increase
(4) decrease; decrease
(5) decrease; not change
The U.S. corporate income tax rate, one of the highest in the world, is levied on company profits. According to research and lecture, who really pays the corporate income tax?
(1) The shareholders of the company.
(2) Workers in the company, in the form of lower wages.
(3) The owners of the company.
(4) Consumers of the company’s product, in the form of higher prices for the company’s product.
(5) All of the above.
Suppose that John purchased one share of Facebook stock for $100 in year 1 and sold that share in year 2 for $200. The inflation rate between year 1 and year 2 was 50%. If the capital gains tax is 50%, what’s John’s after tax-real capital gain if the tax is on nominal gains? What is it if the tax is on real gains?
Consider a used car market in which half the cars are good and half are bad (lemons). Suppose the average price of a good car is $9,000 and the average price of a lemon is $3,000. If rational buyers are willing to pay $6,000 for a used car, then sellers will agree to sell mostly the lemons at this price. What is the term used to describe this situation?
(1) moral hazard
(3) an efficient market
(4) economic irrationality
Typically, the higher the level of income per person in a country, the higher the level of spending per person on health care. This relationship between income and spending indicates that health care is a
(1) normal good.
(2) inferior good.
Health insurance companies impose deductibles on policies and co-payments on claims
(1) to increase sales.
(2) to reduce moral hazard problems.
(3) to reduces sunk costs and to increase prices.
(4) To reduce the problem of adverse selection.
(5) To reduce the principal-agent problem
According to text, which of the following is False?
(1) Under the Patient Protection and Affordable Care Act (PPACA), insurance companies will be required to
participate in a high-risk pool that will cover individuals with pre-existing medical conditions.(2) The overall mortality rate in the United States has remained fairly constant for the past 30 years.
(3) In the United States from 1981 to 2009, deaths from diabetes increased largely due to the effects of increasing obesity.
(4)Based on the current rate of growth, health care spending as a percentage of GDP through Medicare,
Medicaid, and other U.S. government programs is expected to more than double over the next 40 years.
(5) The Patient Protection and Affordable Care Act (PPACA) is scheduled to be fully implemented by 2019, at which point more than 30 million additional individuals are expected to have health care coverage.
(2) producer price index or whole sale price index
(3) consumer price index
(4) household price index
Suppose the price of a box of chocolate rises from $2.50 to $3 and the price of a cup of chicken cordon blue rises from $2 to $3. If the CPI rises from 120 to 150, then people likely will buy
(1) More chocolates and more chicken cordon blue.
(2) More chocolates and less chicken cordon blue.
(3) Less chocolates and more chicken cordon blue.
(4) Less chocolates and less chicken cordon blue.
(5) No chocolates and more chicken cordon blue.
(2) $6; $10; 150
(3) $5; $10; 2
(1) The real value has remained unchanged at $100,000.
(2) The real value has increased.
(3) The real value has decreased.
(4) The real value has increased to $145,000
Suppose Michael lives in a country with a 10% inflation rate, while Emily lives in a country with a 20% inflation rate. Both countries have the same real interest rates and have a 15% tax on nominal income. Which of the followings are correct?
(1) Michael will be less likely to save
(2) Emily will be more likely to save
(3) Higher inflation in Emily’s country will tend to encourage saving
(4) The after-tax real return on saving is lower in Emily’s country than in Michael’s
Imagine that Dan borrows $5,000 from Tim for one year and at the end of the year Dan repays the $5,000 plus $600 of interest to Tim. If the inflation rate was 5%, what was the real interest rate Dan paid to Tim?
(1) 17 percent
(2) 12 percent
(3) 7 percent
(4) 6 percent
(5) 2 percent
(1) Looking at several web sites to check prices
(2) Changing price tags
(3) Re-printing menus
(4) The wear and tear on your car from additional trips to the bank
If the inflation rate is higher than expected in the U.S., which of the following person(s) in the U.S. would be most likely to gain?
(1) Chloe, who borrowed $10,000 at a 6 percent interest rate from Tiger Union to purchase a HyunDai Elantra. (2) Commerce bank, who lent $10,000 to Chloe at a 6 percent interest rate.
(3) Kellie, who is holding a large amount of cash
(4) A retired couple, Mr. and Mrs. Bush, who are living on a fixed pension in Texas.
(5) Dr. Lee, who has a contract with the University of Missouri without a cost of living adjustment in her salary.
The substitution bias in the consumer price index refers to the idea that consumers _______ the quantity of products they buy in response to price, and the CPI does not reflect this and ________ the cost of the market basket.
(1) change; over-estimates
(3) do not change; over-estimates
(4) do not change; under-estimates
(5) increase; do not change
According to text, Botswana's rapid growth can be explained by
(1) protection of private property and avoiding political instability.
(2) investment in human capital from 1960 through 2009.
(3) the movement of workers from the agricultural sector to the manufacturing sector.
(4) an increase in labor force participation.
(5) All of the above.
(1) The GDP deflator and the CPI will both decrease.
(2) The GDP deflator will increase and the CPI will be unchanged.
(3) The GDP deflator will be unchanged and the CPI will increase
(4) The GDP deflator and the CPI will both unchanged.
(1) The Bureau of Labor Statistics is in charge of constructing and reporting the value of the CPI on a monthly basis.
(2) The CPI is used as a policy target to measure inflationary tendencies in the economy, to index payments and to
translate nominal value to real value.
(3) The benefits for many retired workers, social security recipients, government pensioners, and union workers’
wage contracts are fully indexed to the inflation rate using the CPI.
(4) Unemployment and inflation are not related.(5) The CPI is the most widely used price index in the US and it uses the Reference Base Period 1982-1984 = 100.
(1) If inflationary expectations are increasing, we would expect that the nominal interest rate would also be
increasing, holding all else constant.(2) Nominal income is equal to real income if the CPI is less than 100.
According to text, since 1900, real GDP per capita has ________ and this measure ________ the actual growth in standards of living in the United States over this time.
(2) increased; overstates
(3) grown; is an accurate measure of
(3) 2.8 percent
If inflation is positive and is perfectly anticipated,
(1) those that borrow money lose.
(2) those that lend money lose.
(3) those that hold paper money lose.
(4) no one in the economy loses.
(5) Everyone in the economy loses.
Growth in potential GDP in the United States is estimated to be about
(1) 9% per year.
(4) there is no difference in the impact of the recession on its profits as compared to firms that do not produce
durable goods.(5) All of the above are possible.
Increasing the amount of consumption spending and reducing the amount of savings ________investment expenditures, and ________ long-run economic growth in the economy.
(1) decreases; increases
(3) decreases; decreases
(4) increases; increases
(5) do not affect; do not change
GDP (Y) = $12 trillion Consumption (C) = $8 trillion Investment (I) = $2 trillion
Government Purchases (G) = $2 trillion Transfer (TR) = $2 trillion
Taxes (T) = $3 trillion
Based on the information above, what is the level of public saving?
(2) $1 trillion
(3) $2 trillion
(4) $3 trillion
(5) - $1 trillion
Suppose that the tires of a certain tire manufacturer are discovered to be defective. Other things the same, this news would likely cause:
(1) The demand for stock of this company to decrease, so the price would rise.
(2) The demand for stock of this company to decrease, so the price would fall.
(3) The supply of stock of this company to decrease and the price would fall.
(4) The supply of stock of this company to decrease and the price would rise.
(5) Only Graves is personally responsible for the damages because he was the one who put the potted plant in the
A scholarship gives you $10,000 today and promises to pay you $15,000 two years from today. What is the present value of these payments?
(1) $25,000/(1 + r).
(2) $25,000/(1 + r)2.
(3) $10,000(1 + r) + $15,000(1 + r)2
(4) $10,000 + $15,000/(1 + r)2
(5) $10,000/(1 + r) + $15,000/(1 + r)2
Brandon puts $10,000 in an account with an interest rate of 10 percent. How much will he have at the end of 21 years?
(1) About $21,000
(2) About $30,000
(3) About $40,000
(5) About $60,000
(1) increases the risk of buying stock in a corporation.(2) increases the risk of becoming the sole proprietor of a business.
(4) If the government's tax revenues exceeded its expenditures, it would likely sell bonds directly to the public to
raise more funds.(5) In 2010, over 75 percent of the revenue of the U.S. federal government was raised through individual income and social insurance taxes.
(2) A tax is efficient if it imposes a small excess burden relative to the revenue it raises. As tax laws become more
complex, the administrative burden of taxes increase. U.S. taxpayers spend many hours during the year maintaining records for tax purposes and preparing their income tax returns. This administrative cost is part of the deadweight loss of taxation.(3) In the United States, taxpayers are allowed to exclude from taxation a certain amount of income, called the personal exemption.
(1) The poor get ill more often than do the rich.(2) The poor pay higher prices for medicine and drugs than do the rich.
Which of the following are helpful things to consider when making personal finance investment decisions?(1) Buying undervalued stocks
(5) Considering all of the above
(1) An application of the benefits principle of taxation.(2) A violation of horizontal equity.
(1) If revenue from a gasoline tax is used to build and maintain public roads, the gasoline tax may be
justified on the basis of the ability-to-pay principle.(2) Sales taxes and property taxes are important revenue sources for state and local governments.
In the United States, the largest source of funds for public schools is
(1) the federal income tax.
(2) the property tax.
(3) the consumption tax.
(4) sales taxes.
(5) Income tax and social security tax
You put money in Vanguard mutual funds that earns a 6 percent nominal interest rate. The inflation rate is 4 percent, and your marginal tax rate is 50 percent. What is your after-tax real rate of interest?
(1) -1 percent
(2) 2 percent
(3) -2 percent
(4) 4 percent
(5) 5 percent
(1) "Cost disease" refers to the tendency for low productivity in the service sector to lead to higher costs in those
(2) Under the Patient Protection and Affordable Care Act (PPACA), insurance companies will be required to
participate in a high-risk pool that will cover individuals with pre-existing medical conditions.(3) Under the Patient Protection and Affordable Care Act (PPACA), residents who do not have health insurance will not be allowed to seek employment.
Economists who support market-based reforms for health care believe that increased competition among providers of health care would ________ costs and ________ economic efficiency.
(1) increase; increase
(3) decrease; increase
(4) decrease; decrease
(5) increase; create more
In the United States in 2009, the percentage of people with private health insurance was about
Courtney buys home owners insurance and then is less careful to make sure she’s put out her cigarettes. Matt buys health insurance because he knows that he has health risks that wouldn’t be obvious to an insurance company. The example with Courtney
(1) and the example with Matt illustrate adverse selection.
(2) and the example with Matt illustrate moral hazard.
(3) best illustrates adverse selection, the example with Matt best illustrates moral hazard.
(4) best illustrates moral hazard, the example with Matt best illustrates adverse selection.
(5) These are both examples of a smart individual.
Better health allows people to work harder, which raises a country's total income. This indicates that in effect, better health
(1) is a primary cause of price increases.
(2) reduces the incentive to work.
(3) shifts out a country's production possibilities frontier.
(4) increases consumer surplus.
(5) Increases the overall price level.
(4) society should value fuel economy more highly than consumer safety because of the long term environment
benefits generated by less gasoline use.(5) all of the above are true.
(3) Scarcity is a problem that will eventually disappear as technology advances and new resources are
discovered.(4) The opportunity cost of a particular activity varies from person to person.
Russia’s ability to produce better quality vodka using the same amount of resources than the U.S. is called:(1) Comparativeadvantage
(1) Normal trend of economic growth; Intensive growth
(1) governmentpricecontrols(2) centrally planned economies
The income effect of a price change refers to the impact of a change in
(1) a normal good.
(2) income on the price of a good.
(3) demand when income changes.
(4) the quantity demanded when income changes.
(5) the price of a good on a consumer's purchasing power.
Suppose that two events occur simultaneously in the labor market for news journalists: (1) a dramatic improvement in internet technology enables more people to report news from anywhere in the world and (2) the cost of hiring either part- or full- time journalists dramatically rises due to the health insurance mandate. An economist would predict with certainty that:
(1) The wage for journalists will fall.
(2) The wage for journalists will rise.
(3) The number of journalists hired will fall.
(4) The wage for journalists will remain the same.
(5) The number of journalists hired will rise.
Which of the following causes the supply of cowhides to increase?
(1) an increase in the price of leather jackets
(2) a decrease in the price of steaks
(3) an increase in the price of steaks
(4) an increase in the number of motorcycles
(5) an increase in consumer income
Which of the following is the best indicator of the standard of living?
(1) nominal GDP
(2) real GDP
(3) real GDP per capita
(4) Percentage change in real GDP.
(5) Overall price level.
Suppose that the price of Dell Inspiron Duo Convertible Tablet drops from $850 to $550. Kyungsik, a Econ1015 TA, buys a Dell Inspiron Tablet at $550 and he receives consumer surplus of $100 from the purchase. We can conclude that Kyungsik must value his Tablet at:
In a small country, using prices of 2012, GDP in 2012 was $200 and GDP in 2013 was $210. Using prices of 2013, GDP in 2012 was $300 and GDP in 2013 was $330. The country’s BEA will calculate ________ percent as the growth in real GDP between those years.
(1) U.S.; India
(2) U.S.; US
(3) U.S. and German; US and India
(4) German; US
(5) German; India
Investment, as defined by economists, would not include which of the following?
(1) Ford updates its computer system with a high speed.
(2) Ford builds another assembly plant in the United States.
(3) Ford buys a new robotic machine (from a plant in Ohio) to assemble cars.
(4) Ford adds 1,000 new cars to inventories.
(5) Ford buys U.S. government bonds.
According to lecture, which component of U.S. household spending has grown the most over the past decade?(1) Taxes
Wages and Salaries = $9 trillion
Rental Income = $1.5 trillion
Profit = $1 trillion
Interest = $0.5 trillion
Government Tax Revenue = $2.5 trillion Interest on Debt =$ 0.1 trillion
mports = $2 trillion
Exports = $1.5 trillion
Consumption Spending = $8 trillion Private Investment Spending = $3 trillion Government Purchases = $1.5 trillion Government Spending = $4 trillion
What is the real GDP of Econland?
(1) $9 trillion
(2) $10 trillion
(3) $11 trillion
(4) $11.5 trillion
(5) $12 trillion
If a consulting firm, You-Can-Be-Awesome2, hires labor for $9,000, pays rent of $4,000, buys raw materials for $14,000, earns profits of $1,200, and sells its output for $42,000, the firm's value added is:
(4) $42,000 - ($9,000 + $4,000 + $14,000)
(5) $42,000 + $1,200 - ($9,000 + $4,000 + $14,000)
Suppose that the population of Baseball-land grows by 3.4 percent and its real GDP grows by 2 percent from last to this
year. The change in the standard of living in Baseball-land, measured by growth in real GDP per person, must be
(3) -1.4 percent
(4) -5.4 percent
1) Sean thinks that he could easily earn $100,000 per year, despite the opinion of the psychiatrist at the
state hospital where he is a patient. The BLS counts him as part of “adult” but “not in the labor force”.
(2) Ashley Dupre works illegally as a prostitute on Wall Street while receiving unemployment compensation checks.
The BLS would count her as unemployed and in the labor force.
(5) Ben, a Ph.D. in English, works in a fast-food restaurant, Taco bell, because he can’t find a faculty position at a
university. The BLS counts him as employed but he would be considered as underemployed.
1) The economy of Jupiter is operating at full employment. It would mean that some unemployment may exist but the
economy is healthy and producing its potential level of output.
Suppose the total population of the land of “Dumb and Dumber” equals 60,000; the civilian non-institutional population equals 49,000; there are 33,000 employed persons and 6,000 unemployed persons. How many people are considered “not in the labor force”?
the opportunity cost of not working, so some job seekers may decide to ________ their job searches.
(1) Higher, reduce, increase
Suppose Macroland has a total population of 150 million, an adult population of 100 million, the labor force participation rate was 62 percent, and there were 6.2 million unemployed people. Which of the following is CORRECT?
(1) The unemployment rate was 6.2%
(2) The unemployment rate was 10%
(3) There were 93.8 million employed workers
(4) The employment to population ratio was 37.2% (5) The natural rate of unemployment was 6.2%
(3) (1.5/30)X100; (4) (1.5/30)X100; (5) (1.5/22.5)X100;
(22.5/30)X100 (22.5/43)X100 (22.5/43)X100
Suppose in MIZZOU land the frictional unemployment rate is 2.5%, the structural unemployment rate is 3%, the cyclical unemployment rate is 4%, and the seasonal unemployment rate is 1.5%. The unemployment rate is
_________ and the natural rate of unemployment is__________ in MIZZOU land.
(1) 11%; 9.5%
(2) 11%; 7%
(3) 11%; 5.5%
(4) 7%; 11%
(5) 7%; 8.5%
(1) That firms pay their workers to attract the most productive and knowledgeable workers and encourage
greater worker productivity.(2) That would make the natural rate of unemployment zero and achieve full employment.
A recent report on “Wall Street Journal” has reported that Uruguay, South American country, has been growing rapidly at 5 percent. If Uruguay sustains a 5 percent per year real GDP growth rate, it will
Sign up for free and study better.
Get started today!