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ECON 2133: Final
A market economy cannot produce a socially desirable outcome because individuals are motivated by their own selfish interests.
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FALSE
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In a negative externality:
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More of a product is produced than optimal.
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When the "invisible hand" guides economic activity, prices of products reflect
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only the values that society places on those products.
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The assumption that people do not intentionally make decisions that would leave them worse off is known as the economic welfare assumption.
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false.
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The short-run tradeoff between inflation and unemployment implies that, in the short run,
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a decrease in the growth rate of the quantity of money will be accompanied by an increase in the unemployment rate.
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A Microeconomist would study all the following issues EXCEPT:
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the effect of a change in income taxes on the nation's rate of unemployment.
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In the circular-flow diagram, firms own the factors of production and use them to produce goods and services.
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false.
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The opportunity cost of attending college might best be described as:
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the most-valued alternative use of the student's time.
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The scientific method is
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the dispassionate development and testing of theories about how the world works.
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Which of the following is (are) normative statement(s)?
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An increase in consumer income will cause a rise in the demand for beef. A lower income tax rate should encourage more savings. As society increases its wealth , the problem of scarcity disappears.
All of the above
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When a country has a comparative advantage in producing a certain good,
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None of the above.
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Belarus has a comparative advantage in the production of linen, but Russia has an absolute advantage in the production of linen. If these two countries decide to trade,
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Belarus should export linen to Russia.
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Assume that Sue and Tom can switch between producing corn and producing beef at a constant rate.
Minutes Needed to Make 1
Bushel of Corn Pound of beef
Sue 20 12
Tom 15 10
13. Refer to the above table- Assume that Sue and Tom each has 360 minutes available. If each person divides his time equally between the production of corn and beef, then total production is
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21 bushels of corn and 33 pounds of beef.
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Refer to the above table. What is Sue's opportunity cost of producing one bushel of corn?
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5/3 pounds of beef
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It is possible for the U.S. to gain from trade with Germany even if it takes U.S. workers fewer hours to produce every good than it takes German workers.
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true.
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It has been noted that some resources are better suited to produce certain goods than other resources. This implies
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A Bowed shape PPF
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The ability to organize economic activity among individuals, nations or economies to ensure greater productivity is known as:
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efficiency
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If trade makes a country better off, then everyone in this country has to be better off as well.
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false.
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An economy's production possibilities frontier is also its consumption possibilities frontier
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when the economy is self-sufficient.
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If an economy has 60,000 labor hours available to produce cars and butter. If one car can be produced using 125 labor hours and one pound of butter can be produced using 25 labor hours, what is the maximum number of cars that this economy can produce?
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480 cars
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In the above problem , if the economy splits its resources evenly between the production of the 2 goods,, what is the maximum number of pounds of butter that can be produced?
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1200 lbs
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If you can cook a meal in one hour and fold a laundry basket in 2 hours. Whereas your roommate can cook a meal in one hour and fold a laundry basket in 3 hours, which of the following is true.
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You have a comparative advantage in laundry folding.
You have an absolute advantage in laundry folding.
Both of you have an absolute advantage in cooking a meal.
All of the above.
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The gains from trade take place because of:
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Comparative advantage
Specialization
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The theory of comparative advantage is attributed to David Ricardo
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true.
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Two individuals engage in the same two productive activities. In which of the following circumstances would neither individual have a comparative advantage in either activity?
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One individual's opportunity costs are the same as the other individual's opportunity costs.
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The rationality assumption in economics implies;
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that people don't make decisions that will intentionally make them worse off.
that people should weigh the marginal costs to the marginal benefits of their actions.
that people should systematically and purposefully do the best they can to achieve their objectives.
All of the above.
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If the government offers to reduce your property taxes by 10 percent if you install solar heating
for your home, this would be an example of a(an)
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incentive.
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In a market economy resources are allocated through
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the invisible hand
the decentralized decisions of many consumers and producers.
the signaling role of prices
all of the above.
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In a positive externality more of a good is produced than economically warranted.
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FALSE
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In a market failure prices signal the true value and cost of goods and services to society, therefore the government can play a pivotal role in improving market outcomes.
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FALSE
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A country's standard of living depends mainly on:
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Productivity
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In economics, inflation;
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is the increase in the general price level.
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Organizing economic activity means all of the following except:
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Who gets the output produced.
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The role of government in a market economy is to enforce property rights.
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TRUE
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The PPF illustrates the concepts of:
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Scarcity
Tradeoff
Efficiency
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Which one of the following is an example of a normative statement?
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A camera makes a good wedding gift.
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All of the following are examples of macroeconomic problems EXCEPT
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consumers deciding to buy more fish and less beef because of concerns about a healthier diet.
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In the markets for factors of production, in the circular-flow diagram, households are buyers and firms are sellers.
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FALSE
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In the circular flow model:
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The flow of real goods and services is equivalent to the flow of income.
A $ spent, generates a cycle of income flows.
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All of the following are assumptions of the PPF except;
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technological improvements occur over the production period.
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As a policy advisor, the economist employs the scientific method in order to explain the world around him.
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FALSE
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In economics, human capital is:
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an input to the production process.
the accumulated training and education of labor.
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The PPF shows the possible combination of output that the economy should produce given a certain level of resources and technology.
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true.
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Any point outside the PPF represents;
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an unattainable point.
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The AD curve slopes downward due to the
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Wealth effect.
Interest rate effect.
Exchange rate effect.
All of the above.
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Other things the same as the price level rises,
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the dollar depreciates.
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If international speculators speculate against a currency,
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The exchange rate appreciates, exports fall and AD curve shifts to the left.
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If an investment tax credit expires then the AD curve will;
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shift to the left.
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An increase in US interest rates will;
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discourage borrowers, but will attract investors.
lower investment spending
shift AD curve to the left.
all of the above.
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The liquidity preference theory help explain;
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The interest rate effect.
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All things equal, a change in the aggregate price level causes;
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A movement along the AD curve.
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The natural rate of output is known as equilibrium output.
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false.
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If the reserve requirement is 10%, then a $100 deposit in the bank can increase money supply in the economy by:
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$1000
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M1 is defined as:
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Currency in circulation and demand deposits.
Travelers checks and other checkable deposits.
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In a fractional reserve banking system, banks don't have the ability to affect the size of the money supply.
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false.
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If First National Bank has Assets of $20 and liabilities of $200, then the value of the money multiplier is;
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10
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The federal Reserve System consists of:
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The Board of Governors.
The Federal Open Market Committee.
The Fed Regional Banks.
All of the above.
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If you deposit $150 in your checking account with First South bank, and the Federal Reserve Requirement is 5%, what is the minimum amount that money supply could increase.
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zero
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To increase money supply, the Fed;
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Buys government bonds.
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When the Fed lowers the discount rate;
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It encourages banks from borrowing from it.
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The Federal Funds Rate is the interest rate on loans the Fed makes to banks.
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FALSE
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The Federal Reserve is a lender of last resort.
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TRUE
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When the Fed sells government bonds in the open market,
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It increases the federal funds rate.
It reduces the supply of federal funds in the market.
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The function(s) of Money include;
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Medium of exchange.
Store of value.
Unit of account.
All of the above.
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Unemployment data is produced by;
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The Bureau of Labor Statistics.
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Discouraged workers;
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would like to work , but have given up looking for work
are not in the labor force.
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The labor force is defined as;
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The total number of employed and unemployed workers in the economy.
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If there were 28.19 million people over the age of 16, 11.73 million of whom were employed and 1.04 million were unemployed. What is the labor-force participation rate?
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45.30%
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Structural unemployment is caused by:
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Wage rates that are artificially higher than the equilibrium wage rate in the market.All of the above.
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The natural rate of unemployment is the normal rate of unemployment around which the unemployment rate fluctuates.
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The natural rate of unemployment is the normal rate of unemployment around which the unemployment rate fluctuates.
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74. Minimum wage laws;
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Increase the quantity of labor supplied and lower the quantity of labor demanded.
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75. U.S. GDP includes the market value of rental housing, but not the market value of owner-occupied housing.
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FALSE
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76. National income could be measured using:
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the spending approach
the factor income approach
the expenditure approach
all of the above
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77. The Investment component of GDP measures;
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capital equipment
inventories
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78. When an American doctor opens a practice in Bermuda, his production there is part of the US;
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GNP
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Stagflation results from continued decreases in aggregate demand.
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FALSE
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Changes in the price of oil
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change the economy principally by changing aggregate demand.
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Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, we would expect
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the price level to fall and real GDP to rise.
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If total spending rises from one year to the next, then the economy must be producing a larger output of goods and services.
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FALSE
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Suppose an apartment complex converts to a condominium, so that the former renters are now owners of their housing units. Suppose further that a current estimate of the value of the condominium owners' housing services is the same as the rent they previously paid. What happens to GDP as a result of this conversion?
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GDP is unaffected because previously the rent payments were included in GDP and now the rent payments are replaced in GDP by the estimate of the value of housing services.
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Activities of the underground economy are mostly illegal and hence they are excluded from GDP calculations.
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FALSE
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A steel company sells some steel to a bicycle company for $150. The bicycle company uses the steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute
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$250 to GDP.
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Which of the following events would cause GDP for 2007 to increase?
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In February 2007, Amanda buys a ticket to visit a zoo in Florida. She visits the zoo in April 2007.
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Consider two cars manufactured by Chevrolet in 2007. During 2007, Chevrolet sells one of the two cars to Sean for $24,000. Later in the same year, Sean sells the car to Kati for $19,000. The second automobile, with a market value of $30,000, is unsold at the end of 2007 and it remains in Chevrolet's inventory. The transactions just described contribute how much to GDP for 2007?
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54,000
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If Kim bought last year's computer model for $1000 to use in her office, then;
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Current GDP will not be affected
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The GDP deflator is a better inflation measure than the CPI
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FALSE
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Indexation refers to
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using a law or contract to automatically correct a dollar amount for the effects of inflation.
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In the economy of Lexington in 2008, consumption was $6000, exports were $1000, GDP was $10,000, government purchases were $2000, and imports were $600. What was Lexington's investment in 2008?
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1,600
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Suppose an economy's production consists only of corn and soybeans. In 2005, 20 bushels of corn are sold at $4 per bushel and 10 bushels of soybeans are sold at $2 per bushel. In 2004, the price of corn was $2 per bushel and the price of soybeans was $1 per bushel. Using 2004 as the base year, it follows that, for 2005,
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nominal GDP is $100, real GDP is $50, and the GDP deflator is 200.
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Real interest rate :
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Is the Nominal interest rate minus inflation.
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Problem with the CPI include(s);
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Calculating a current basket of goods and services.
Not accounting for quality changes in goods and services
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A good indicator of the economic well being of the average person is;
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Real GDP per capita
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If the nominal interest rate is 1.5 percent and the rate of inflation is -0.5 percent, then the real interest rate is
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2 percent
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According to the theory of liquidity preference, the interest rate adjusts to balance the supply of, and demand for, loanable funds.
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FALSE
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