Eco 161 FINAL EXAM TEST ANSWERS
One subject of study for macroeconomics is - ANSWER...-Inflation
In measuring Gross Domestic Product, goods produced by foreign firms in the United
States are - ANSWER...-Counted, but goods produced by American firms in foreign
countries are not counted
Suppose an apple pie sells at a grocery store for $5. Suppose that the grocery store
purchased it from a baking company for $4. Suppose the baking company paid $2 for
ingredients, $1 for labor, and made $1 in profit. What is the GDP contribution of the pie?
- ANSWER...-It is $5
Inflation is measured using _______________ in a price index. - ANSWER...-The
percentage year-to-year increase
If a market basket was defined in 2014 and it cost $10,000 to purchase the items in that
basket in 2014, while it cost $12,000 to purchase those identical goods in 2015, then
the price index for 2015 is - ANSWER...-(12000/10000)*100=120.
Using Table 6.1, from the 1982-1984 base to 2002, price increased - ANSWER...-80.9%
Deflation occurs only when - ANSWER...-The average price level (CPI) falls.
With deflation, people will - ANSWER...-Delay their purchases of goods in hopes prices
will fall further
The consumer price index is computed by - ANSWER...-The Bureau of Labor Statistics
If the inflation rate turns out to be greater than was is expected to be, the clear losers
are - ANSWER...-Borrowers
In Figure 6.1, which area represents an expansion - ANSWER...-E
If a person is laid-off from a job and told that they will be brought back as soon as the
economy picks up and demand for their product rises, then economists call this person -
ANSWER...-Cyclically unemployed
Which of the following can make the unemployment rate fall? - ANSWER...-A decrease
in the number of people who are looking for work and an increase in the number of
people with jobs.
, In a supply and demand model for the market for money, we typically use the
______________ to look at savers' behavior - ANSWER...-Supply curve
Assuming that Figure 7.1 is a market for money that can be borrowed or saved, Box 1 is
- ANSWER...-"r" for interest rate.
An increase in the interest rate will - ANSWER...-Change neither the demand nor the
supply of money; rather it will only affect the quantity demanded and quantity supplied
Interest sensitive consumption is negatively impacted by interest rates because when
you - ANSWER...-Buy something on installments (like a car), your payments are
positively related to the interest rate, so a higher interest rate would mean a higher
payment, and therefore, less interest sensitive consumption.
If people (who used to neither borrow nor save) are now saving for their retirement, then
this will cause the equilibrium interest rate - ANSWER...-To fall
If the inflation rate is 2% and the real interest rate is 1%, then the nominal interest rate
is around - ANSWER...-3%
If the interest rate is positive, the present value of $1000 to be received in ten years is -
ANSWER...-Less than $1000
The interest rate at which the present value of costs equals the present value benefits is
the - ANSWER...-Internal rate of return
If your grandmother gives you a high school graduation gift of $5000, and you do not
spend the gift, but invest it to earn an interest rate of 6% per year compounded
annually, upon your graduation from college after exactly four years, your gift will be
worth - ANSWER...-$5000 x (1.06)^4.
Dividing the number seventy-two by an interest rate yields - ANSWER...-The Rule of 72
The advertised interest rate is the - ANSWER...-Nominal interest rate.
If the interest rate is 10%, the present value of $100 to be paid next year is -
ANSWER...-$100/1.1.
The aggregate supply-aggregate demand diagram models - ANSWER...-The economy
as a whole
The rationale for interest rates determining AD is, with lower interest rates, -
ANSWER...-Firms will borrow more to invest, and consumers will borrow more to buy
durables
When domestic prices rise, - ANSWER...-Exports fall.
One subject of study for macroeconomics is - ANSWER...-Inflation
In measuring Gross Domestic Product, goods produced by foreign firms in the United
States are - ANSWER...-Counted, but goods produced by American firms in foreign
countries are not counted
Suppose an apple pie sells at a grocery store for $5. Suppose that the grocery store
purchased it from a baking company for $4. Suppose the baking company paid $2 for
ingredients, $1 for labor, and made $1 in profit. What is the GDP contribution of the pie?
- ANSWER...-It is $5
Inflation is measured using _______________ in a price index. - ANSWER...-The
percentage year-to-year increase
If a market basket was defined in 2014 and it cost $10,000 to purchase the items in that
basket in 2014, while it cost $12,000 to purchase those identical goods in 2015, then
the price index for 2015 is - ANSWER...-(12000/10000)*100=120.
Using Table 6.1, from the 1982-1984 base to 2002, price increased - ANSWER...-80.9%
Deflation occurs only when - ANSWER...-The average price level (CPI) falls.
With deflation, people will - ANSWER...-Delay their purchases of goods in hopes prices
will fall further
The consumer price index is computed by - ANSWER...-The Bureau of Labor Statistics
If the inflation rate turns out to be greater than was is expected to be, the clear losers
are - ANSWER...-Borrowers
In Figure 6.1, which area represents an expansion - ANSWER...-E
If a person is laid-off from a job and told that they will be brought back as soon as the
economy picks up and demand for their product rises, then economists call this person -
ANSWER...-Cyclically unemployed
Which of the following can make the unemployment rate fall? - ANSWER...-A decrease
in the number of people who are looking for work and an increase in the number of
people with jobs.
, In a supply and demand model for the market for money, we typically use the
______________ to look at savers' behavior - ANSWER...-Supply curve
Assuming that Figure 7.1 is a market for money that can be borrowed or saved, Box 1 is
- ANSWER...-"r" for interest rate.
An increase in the interest rate will - ANSWER...-Change neither the demand nor the
supply of money; rather it will only affect the quantity demanded and quantity supplied
Interest sensitive consumption is negatively impacted by interest rates because when
you - ANSWER...-Buy something on installments (like a car), your payments are
positively related to the interest rate, so a higher interest rate would mean a higher
payment, and therefore, less interest sensitive consumption.
If people (who used to neither borrow nor save) are now saving for their retirement, then
this will cause the equilibrium interest rate - ANSWER...-To fall
If the inflation rate is 2% and the real interest rate is 1%, then the nominal interest rate
is around - ANSWER...-3%
If the interest rate is positive, the present value of $1000 to be received in ten years is -
ANSWER...-Less than $1000
The interest rate at which the present value of costs equals the present value benefits is
the - ANSWER...-Internal rate of return
If your grandmother gives you a high school graduation gift of $5000, and you do not
spend the gift, but invest it to earn an interest rate of 6% per year compounded
annually, upon your graduation from college after exactly four years, your gift will be
worth - ANSWER...-$5000 x (1.06)^4.
Dividing the number seventy-two by an interest rate yields - ANSWER...-The Rule of 72
The advertised interest rate is the - ANSWER...-Nominal interest rate.
If the interest rate is 10%, the present value of $100 to be paid next year is -
ANSWER...-$100/1.1.
The aggregate supply-aggregate demand diagram models - ANSWER...-The economy
as a whole
The rationale for interest rates determining AD is, with lower interest rates, -
ANSWER...-Firms will borrow more to invest, and consumers will borrow more to buy
durables
When domestic prices rise, - ANSWER...-Exports fall.
