You will have 180 minutes to complete the final exam This practice exam is designed to be representative of the format and length and is NOT a sufficient study guide for all course material i e You should complete the practice final but if this is the only resource you use to study you will probably not do well Econ101 Practice Final Exam Multiple Choice 120 points 2 points each 1 The natural rate of unemployment is the sum of a frictional unemployment and cyclical unemployment b cyclical unemployment and structural unemployment c frictional unemployment and structural unemployment d frictional unemployment and seasonal unemployment e None of the above 2 When the price of a good is lower than the equilibrium price a A shortage exists b A surplus exists c There is excess supply d Consumers will want to buy less of the good 3 Suppose that the price elasticity of demand for Lady Gaga CDs is 2 and that quantity demanded of Lady Gaga CDs drops from 1 300 to 700 then a D P is elastic b D P 10 c D P 25 d The demand for Lady Gaga CDs is elastic 4 When the expected future price of strawberries increases what happens to the equilibrium price and quantity of strawberries today a P and Q b P and Q c P and Q d P and Q e P and Q 5 What is the Fed a U S Government b U S Central Bank c U S Economic Council d Agency that regulates U S Fiscal Policy technology will a Increase real GDP b Unknown effect on real GDP c Decrease real GDP d No effect on real GDP 6 Assuming an economy begins in long run equilibrium an advancement in production 7 Which of the following could explain a movement from point F to point G in the graph below Assume that the good represented is an inferior good a all of the following are correct b an increase in buyers incomes c a decrease in the expected future price of the good d an increase in the price of the good e an increase in the price of a complement 8 Assume the price level in Mexico has increased 6 since 2014 the base year and prices in the US have increased 2 since 2014 If the nominal exchange rate has increased from 10 pesos USD in 2014 to 12 pesos USD in 2016 what has happened to the real exchange rate a The real exchange rate has increased from 10 39 pesos USD to 12 pesos USD b The real exchange rate has increased from 10 pesos USD to 11 55 pesos USD c The real exchange rate has decreased from 10 6 pesos USD to 10 pesos USD d The real exchange rate has decreased from 12 pesos USD to 10 39 pesos USD 9 In the long run the government expenditure multiplier is a Larger than the multiplier in the short run b Zero c The same as the multiplier in the short run d Between the multiplier in the short run and the very short run 10 Buyers will bear more of the burden of a tax if a The tax is levied on the buyers b The tax is levied on the sellers c Demand is more elastic than supply d Supply is more elastic than demand 11 If the Fed wants to fight inflation they could a Buy bonds b Sell bonds c Decrease interest rates d Decrease the reserve requirement 12 If the government increases spending all of the following will occur in the short run 13 One year after the base year deflation occurs In this year nominal GDP is real EXCEPT a Aggregate demand will increase b Crowding in of investment c Real interest rates will increase d Real GDP will increase GDP and the GDP deflator is a less than greater than 100 b equal to equal to 10 c greater than greater than 100 d less than less than 100 14 In the countries of Twixia and Laysland both produce only chocolate bars and potato chips Their linear PPFs are given in the following table Twixia Chocolate Laysland Chocolate Bars 0 100 200 300 400 500 Potato chips 500 400 300 200 100 0 Bars 0 50 100 150 200 250 Potato chips 375 300 225 150 75 0 The opportunity cost of 1 chocolate bar in Twixia is and the opportunity cost of 1 chocolate bar in Laysland is a 1 bag of chips 2 3 bags of chips b 100 bags of chips 75 bags of chips c 1 bag of chips 0 75 bags of chips d 1 bag of chips 1 5 bags of chips 15 When people determine the quantity of education they will undertake they the external benefits As a result if education were left to an unregulated market people would undertake too education a overvalue little b undervalue little c undervalue much d overvalue much 16 If the demand for a good is unit elastic and the price increases by 10 percent then a Total expenditure by consumers will increase by 10 b Total expenditure by consumers will decrease by 10 c Total expenditure by consumers will increase by less than 10 d Total expenditure by consumers will not change 17 The following figure shows the money market in Flobotia The Central Bank of Flobotia plans to increase the interest rate to 5 percent a year If the money multiplier is 2 and there is no currency drain what open market operation must the Bank undertake Interest Rate MS 6 5 4 3 2 1 0 5 1 5 2 5 MD 3 5 Real Money millions a purchase 1 million of U S treasuries from banks b sell 0 5 million of U S treasuries to banks c purchase 0 5 million of U S treasuries from banks d sell 1 million of U S treasuries to banks 18 Before you leave to study abroad in France you change 1 000 into Euros You only spend half of your money while you re gone so when you return to the U S you need to change your remaining Euros back to dollars While you re gone the dollar depreciated against the Euro a After you change your Euros back to dollars you now have less than 500 b After you change your Euros back to dollars you now have more than 500 c After you change your Euros back to dollars you now have exactly 500 d If the dollar depreciated you would want to hold on to the Euros 19 Which of the following statements is FALSE a If average variable cost is decreasing then marginal cost is also decreasing b In the short run a firm will exit the industry if it cannot cover its variable costs c If banks like to hold more of their deposits as reserves an increase in deposits will cause d The slope of a PPF illustrates the concept of opportunity cost less of an increase in the money supply 20 Which of the following statements …