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ECO 102 Macroeconomics Unit 1 Challenge 1 and 2
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Unit 1 Challenge 1
Which of the following statements describes macroeconomics?
·       A.)
It is an academic discipline that looks at variables that affect the quality of human life.
·       B.)
It considers the behavior of individuals and firms on an individual level.
·       C.)
It looks at the overall ups and downs of the economy.
·       D.)
It looks at how individuals and entities optimize the decisions they make.
Macroeconomics would include the study of __________.
·       A.)
prices of individual goods
·       B.)
national infrastructures
·       C.)
household spending
·       D.)
small firms
Microeconomics involves decisions made by __________.
firms and households
governments and societies
countries and International organizations
governments and economies
Studying macroeconomics helps us learn about the value and limitations of __________, which occurs across nations, typically involving foreign exchange transactions.
fiscal policy
business cycles
economic indicators
global trade
Macroeconomists look at __________ to study the overall health of the economy.
capital flow
monetary policy
global trade
economic indicators
Which of the following topics can macroeconomics help a person understand?
How to handle your personal finances responsibly
The impact of global trade
What makes a good investment
Decision making on an individual level
In the Circular Flow diagram, households __________.
purchase final goods and services
place taxes on goods and service
purchase factors of production
act only as consumers
In the Circular Flow model, what do firms purchase?
Final goods and services
Labor from households
Goods from tax revenue
Factors of production from the government
In the Circular Flow model, governments __________
consume intermediate goods, before they are taxed
produce some final goods and services
do not interact with firms and households
act as only consumers of goods and services
GDP per capita is often used to measure the ______.
GDP adjusted for inflation
standard of living
overall GDP growth rate for an economy
gross national product
GDP is best described as __________.
the amount of intermediate goods produced in a country in a given year
the value of economic activity by all U.S. citizens around the world
the amount of goods and services produced in a country in a given year
the value of economic activity that takes place in a country in a given year
Which statement below is NOT true about GDP?
It is one of the most common measures of the health of the macroeconomy.
There are different ways to calculate GDP.
It includes value from leisure.
It attempts to measure all economic activity that takes place inside a country in a given year.
In 2009, the yearly tuition at a state university is $20,000. In 2017, the yearly tuition at the same state university is $31,000.
Using the price of tuition for reference, the inflation rate of the U.S. dollar increased by a factor of __________ in eight years.
1.65
1.55
0.65
0.35
In January 2008, a bag of rice cost five million Zimbabwean dollars. Several months later, the same bag of rice cost 250 million Zimbabwean dollars.
Using the price of rice for reference, the inflation rate of the Zimbabwean dollar increased by a factor of __________ in just a few months.
50
20
5
2
In 2010, the average cost of a house in France is 126,000 euros. In 2018, the average cost is 154,000 euros.
Using the price of the average house for reference, the inflation rate of the Euro increased by a factor of __________ in eight years.
0.22
0.18
0.82
1.22
When GDP growth is at its maximum, given current resources, the business cycle is said to be in which phase?
Peak
Expansion
Trough
Contraction
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The business cycle period in which the economy shows growth is the __________.
peak
trough
expansion
contraction
A _________ is a decline in economic activity that lasts more than a few months and is visible in _________.
trough; real GDP
recession; expansion
recession; real GDP
trough; expansion
The business cycle period in which the economy shows growth is the __________.
peak
trough
expansion
contraction
A _________ is a decline in economic activity that lasts more than a few months and is visible in _________.
trough; real GDP
recession; expansion
recession; real GDP
trough; expansion
If the government takes on a program of increased spending and tax cuts, which combination below correctly describes these policies?
Expansionary monetary
Contractionary monetary
Expansionary fiscal
Contractionary fiscal
Which of the following policies is implemented when the economy is growing too quickly?
A tax increase by the government
A spending increase by the government
Lowered interest rates by a central bank
Lowered reserve requirement by a central bank
If a central banking authority lowers interest rates in order to encourage more borrowing, which of the following combinations describes this type of policy?
Expansionary monetary
Expansionary fiscal
Contractionary monetary
Contractionary fiscal
Which of the following choices is a form of government sponsored automatic stabilizers in the U.S.?
Progressive income tax
National defense
Monetary policy
Police protection
Almost all of the theories regarding the proper role of government suggest that it should provide __________ such as national defense. One of the most important tools the government can use to stabilize the economy is __________.
income redistribution; spending
public goods; spending
public goods; GDP growth
income redistribution; GDP growth
Multiple theories exist about the proper role/functions of government.
Many suggest that the government should promote __________, which is funded through ___________.
income redistribution; progressive taxation
transfer payments; GDP growth
public goods; progressive taxation
progressive tax; GDP growth
Unit 1 Challenge 2
When quantity supplied and quantity demanded are the same, a market is said to be in __________.
equilibrium
a surplus
a downturn
a shortage
An increase in income, and thus consumption, would cause which of the following to occur?
A movement down along the demand curve
The demand curve to shift to the right
A movement up along the demand curve
The demand curve to shift to the left
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Movements along the supply curve are a result of changes in __________.
resource access
price
input prices
regulations
When a good is unit elastic, the absolute value of the elasticity is ___________.
equal to one
greater than one
less than one
greater than 10
If income elasticity is positive, but less than one, this good is considered to be a __________.
luxury good
normal good
inferior good
public good
Cross-price elasticity refers to changes in demand that happen due to changes in price of related goods.
If this value is negative for two goods or services, then they are __________.
If this value is positive, then they are __________.
inferior; luxury
luxury; inferior
substitutes; complementary
complementary; substitutes
In 2007, the government attempted to end inflation by enforcing a price freeze on basic commodities such as corn, sugar and eggs. This led to runs on grocery stores and other places that sold such items, since in some cases the prices were rolled back to almost 50% of what they had been. A shortage occurred because people rushed to stock up on these items as much as they could.
In this example, the freeze on prices is known as a government enforced __________, with businesses forbidden to charge more than the price set by the government. These government enforced price constraints are binding because they are lower than the __________.
price floor; price ceiling
price ceiling; equilibrium price
price floor; equilibrium price
price ceiling; price floor
Minimum wage is a type of __________ that enforces a lower limit on wages. When these occur, they create a __________ of labor, because there are more people who want to be paid at this rate than there are firms that are willing to pay them.
price ceiling; surplus
price ceiling; shortage
price floor; surplus
price floor; shortage
If a price floor is set below the equilibrium price (P) above, which of the following will occur?
The market will incur a deadweight loss.
Nothing, as this price floor would not be binding.
A surplus will result.
A shortage will result.
If demand is inelastic, the _________ will bear more of the burden of the tax.
consumer
government
producer
unemployed
What happens on a graph for a good when a tax is imposed?
The supply curve shifts to the left.
The supply curve shifts to the right
The demand curve shifts to the left.
The demand curve shifts to the right.
When the government pays money to encourage production, this is known as a __________.
tax incidence
transfer payment
subsidy
revenue stream
The price for borrowing money is known as the __________.
exchange rate
interest rate
time deposit
deposit rate
The value of an item in monetary terms at a specific point in time is the __________.
price
interest rate
inflation
money supply
When prices increase over time, this is known as __________.
price level
stagflation
inflation
nominal interest rate
Jim can't find a job because the store where he was manager just closed due to a recession.
What type of unemployment does this represent?
Frictional
Natural
Cyclical
Structural
Unemployment as a result of people's skills not matching those needed for jobs in a changing economy is known as __________ unemployment.
frictional
cyclical
full
structural
Which of the following examples corresponds with frictional unemployment?
This type of unemployment occurs only during a recession.
This type of unemployment occurs when the economy changes and people with skills that were once desirable can no longer find work.
This type of unemployment occurs only when the economy is at a peak.
This type of unemployment occurs when college students graduate and look for full time work.
Which of the following is a reason why the aggregate demand curve slopes downward?
Balance of payments
Trade surplus
Solow growth curve
Interest rate effect
When a domestic currency depreciates, what happens to the purchases of imports and exports?
Imports decrease and exports increase.
Imports increase and exports decrease.
Imports and exports both increase.
Exports and imports both decrease.
Which of the following statements corresponds with the wealth effect?
As the price level falls, demand stays the same.
As the price level falls in other countries, Americans buy more goods abroad.
As the price of borrowing declines, purchases of durable goods (cars, houses) increase and so do investments.
As the price level falls, people feel as if they have more money and purchase more goods.
If the demand for a country's currency increases, what happens to the currency?
It will not change; money supply is fixed.
It will appreciate.
It is impossible to predict.
It will depreciate.
Which of the following is true regarding exchange rates?
It is easy to predict what the exchange rate will be.
The exchange rate between two currencies never changes.
It is subject to the stability in one country as compared to another.
All countries express the exchange rate in the same way.
Which of the following is true regarding exchange rates?
Exchange rates are stable and predictable.
Exchange rates are set by governments and do not change often.
Economics models can accurately pinpoint changes in exchange rates using economic indicators.
Exchange rates are influenced by the market and subject to volatility.
Select the true statement about international trade.
A country that has a current account trade surplus will have a currency that depreciates over time, all else equal.
A country with a trade surplus will have a currency that stabilizes over time, all else equal.
A country that has a current account trade deficit will have a currency that depreciates over time, all else equal.
A country with a trade deficit will have a currency that appreciates over time, all else equal.
Investment and financial activity is shown on a country's __________.
current account
trade surplus
capital account
trade deficit
When the Current Account and the Capital Account are added together, __________.
the sum will be negative
the sum will be positive
the sum will be zero
it is impossible to predict, given changes in trade patterns
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