Econ 104 Final EXAM 200+
QUESTIONS & ANSWERS / ADVANCED
PHARMACOLOGY FOR CARE OF
FAMILY|AGRADE
In a two-good, two country world, if one country has an absolute advantage in the
production of both goods, it cannot benefit by trading with the other country. -
ANSWER//false
For a person to have a comparative advantage in producing a product, she must be
able to produce that product at a lower opportunity cost than her competitors. -
ANSWER//true
It is possible to have a comparative advantage in producing a good or service without
having an absolute advantage. - ANSWER//true
An increase in the unemployment rate may be represented as a movement from a point
on the production possibilities frontier to a point inside the frontier. - ANSWER//true
The full-employment rate of unemployment is zero. - ANSWER//false
In general, economists rely more heavily on the establishment survey rather than the
household survey to evaluate the state of the labor market. - ANSWER//true
If Ethel sold her 2003 Ford Focus for $2,250 in 2017, the sale of her car contributed
$2,250 to 2017 GDP. - ANSWER//false
If an increase in residential burglaries results in households spending more money on
security systems, GDP will rise. - ANSWER//true
Consumption is negatively related to stock market wealth but positively related to taxes
and tax rates. - ANSWER//false
If aggregate expenditures rise unexpectedly, then inventories will also rise
unexpectedly. - ANSWER//false
Services are the most interest rate sensitive component of consumption. -
ANSWER//false
Investment is the least cyclical component of aggregate expenditures. - ANSWER//true
The 'job-loss' recovery occurred following the 2001 recession. - ANSWER//true
,Positive real interest rates imply that if you save today, you can purchase a smaller
basket of goods and services in the future, relative to the basket you could have
consumed today. - ANSWER//false
The higher the marginal propensity to consume the more powerful tax policy is to
influencing consumption. - ANSWER//true
According to the results of the estimated consumption function, consumption is less
sensitive to changes in stock market wealth relative to changes in real estate wealth. -
ANSWER//true
The sensitivity parameter in the consumption function that measures how sensitive
consumption is to changes in consumer confidence is referred to as the marginal
propensity to consume. - ANSWER//false
In a consumption function with income (Y) on the horizontal axis and consumption (C)
on the vertical axis, a fall in the real rate of interest (all else constant) will cause a shift
upward of the consumption function. - ANSWER//true
In a consumption function with income (Y) on the horizontal axis and consumption (C)
on the vertical axis, a rise in the price level (all else constant) will cause a shift upward
of the consumption function. - ANSWER//false
A increase in tao, the effective tax rate on capital will result in the investment demand
function shifting to the right. - ANSWER//false
The slope of the investment demand function indicates how sensitive investment is to
changes in real interest rates. The 'steeper' the investment demand function, the less
sensitive investment is to changes in the real rate of interest, all else constant. -
ANSWER//True
A rise in exports, all else constant, will increase net exports. - ANSWER//true
If the US is growing faster than the rest of the world, then all else constant, the trade
deficit will widen (get more negative assuming we were running a trade deficit to begin
with). - ANSWER//true
If the inflation rate rises in China so that it exceeds that of the US, then net exports for
the US should increase, all else constant. - ANSWER//true
If the exchange rate between the US dollar and Japanese yen changes from $1 = 100
yen to $1 = 120 yen, then US exports to Japan will become more expensive to
Japanese importers. - ANSWER//true
We argued that cash flow (CF) increased during the Great Recession and thus, had a
positive effect on investment. - ANSWER//false
, In a consumption function with income (Y) on the horizontal axis and consumption (C)
on the vertical axis, a rise in stock market wealth, all else constant, will result in a
movement along the consumption function. - ANSWER//false
The weaker the US dollar is relative to the rest of the world, all else constant, the larger
the net exports in the US. - ANSWER//true
A fall in the tax rate on capital will cause the aggregate expenditure curve to shift up and
the aggregate demand curve to shift to the left, all else constant. - ANSWER//false
One reason that the aggregate demand curve slopes downward is that when prices rise,
say in the US, the relative price of imports fall and thus, US citizens substitute away
from domestically produced goods toward imported goods and thus, GDP in the US will
fall (all else constant). - ANSWER//true
Suppose the value of the US dollar changes from $1 = 1.2 euros to $1 = 1.30 euros.
This being the case, imports from the US to Europe, have become less expensive to
European citizens, all else constant. - ANSWER//false
One reason the aggregate demand curve slopes downward is due to the fact that if the
price level falls, real money balances rise, all else constant, interest rates will fall
causing an increase in consumption and investment. - ANSWER//True
Assuming that natural gas for firm X is an important input to the production process, an
increase in the availability of natural gas that lowers the price of natural gas, will result
in a leftward shift of firm X's supply curve. - ANSWER//false
According to the lecture on the cyclical properties of the aggregate supply curve, I
argued that aggregate demand side policy works better, in terms of influencing output,
when the economy is operating at near full employment output relative to when the
economy is operating at levels of output well below full employment. - ANSWER//false
If labor markets become "loose" and wages fall, all else constant, the short run
aggregate supply curve will shift to the left. - ANSWER//false
The more 'sticky' nominal wages and other input costs are, the steeper the slope of the
aggregate supply curve and therefore, the less effective demand side policies in terms
of effecting real output. - ANSWER//false
If the US economy is growing faster than the rest of the world, then we would expect a
surge in US exports. - ANSWER//false
Suppose that expected inflation is 5% and thus, nominal wages rise, along with all other
input prices by 5%. Suppose also, that actual inflation over this period was only 2%. In
terms of the behavior of the short-run aggregate supply curve, it would shift up given the
QUESTIONS & ANSWERS / ADVANCED
PHARMACOLOGY FOR CARE OF
FAMILY|AGRADE
In a two-good, two country world, if one country has an absolute advantage in the
production of both goods, it cannot benefit by trading with the other country. -
ANSWER//false
For a person to have a comparative advantage in producing a product, she must be
able to produce that product at a lower opportunity cost than her competitors. -
ANSWER//true
It is possible to have a comparative advantage in producing a good or service without
having an absolute advantage. - ANSWER//true
An increase in the unemployment rate may be represented as a movement from a point
on the production possibilities frontier to a point inside the frontier. - ANSWER//true
The full-employment rate of unemployment is zero. - ANSWER//false
In general, economists rely more heavily on the establishment survey rather than the
household survey to evaluate the state of the labor market. - ANSWER//true
If Ethel sold her 2003 Ford Focus for $2,250 in 2017, the sale of her car contributed
$2,250 to 2017 GDP. - ANSWER//false
If an increase in residential burglaries results in households spending more money on
security systems, GDP will rise. - ANSWER//true
Consumption is negatively related to stock market wealth but positively related to taxes
and tax rates. - ANSWER//false
If aggregate expenditures rise unexpectedly, then inventories will also rise
unexpectedly. - ANSWER//false
Services are the most interest rate sensitive component of consumption. -
ANSWER//false
Investment is the least cyclical component of aggregate expenditures. - ANSWER//true
The 'job-loss' recovery occurred following the 2001 recession. - ANSWER//true
,Positive real interest rates imply that if you save today, you can purchase a smaller
basket of goods and services in the future, relative to the basket you could have
consumed today. - ANSWER//false
The higher the marginal propensity to consume the more powerful tax policy is to
influencing consumption. - ANSWER//true
According to the results of the estimated consumption function, consumption is less
sensitive to changes in stock market wealth relative to changes in real estate wealth. -
ANSWER//true
The sensitivity parameter in the consumption function that measures how sensitive
consumption is to changes in consumer confidence is referred to as the marginal
propensity to consume. - ANSWER//false
In a consumption function with income (Y) on the horizontal axis and consumption (C)
on the vertical axis, a fall in the real rate of interest (all else constant) will cause a shift
upward of the consumption function. - ANSWER//true
In a consumption function with income (Y) on the horizontal axis and consumption (C)
on the vertical axis, a rise in the price level (all else constant) will cause a shift upward
of the consumption function. - ANSWER//false
A increase in tao, the effective tax rate on capital will result in the investment demand
function shifting to the right. - ANSWER//false
The slope of the investment demand function indicates how sensitive investment is to
changes in real interest rates. The 'steeper' the investment demand function, the less
sensitive investment is to changes in the real rate of interest, all else constant. -
ANSWER//True
A rise in exports, all else constant, will increase net exports. - ANSWER//true
If the US is growing faster than the rest of the world, then all else constant, the trade
deficit will widen (get more negative assuming we were running a trade deficit to begin
with). - ANSWER//true
If the inflation rate rises in China so that it exceeds that of the US, then net exports for
the US should increase, all else constant. - ANSWER//true
If the exchange rate between the US dollar and Japanese yen changes from $1 = 100
yen to $1 = 120 yen, then US exports to Japan will become more expensive to
Japanese importers. - ANSWER//true
We argued that cash flow (CF) increased during the Great Recession and thus, had a
positive effect on investment. - ANSWER//false
, In a consumption function with income (Y) on the horizontal axis and consumption (C)
on the vertical axis, a rise in stock market wealth, all else constant, will result in a
movement along the consumption function. - ANSWER//false
The weaker the US dollar is relative to the rest of the world, all else constant, the larger
the net exports in the US. - ANSWER//true
A fall in the tax rate on capital will cause the aggregate expenditure curve to shift up and
the aggregate demand curve to shift to the left, all else constant. - ANSWER//false
One reason that the aggregate demand curve slopes downward is that when prices rise,
say in the US, the relative price of imports fall and thus, US citizens substitute away
from domestically produced goods toward imported goods and thus, GDP in the US will
fall (all else constant). - ANSWER//true
Suppose the value of the US dollar changes from $1 = 1.2 euros to $1 = 1.30 euros.
This being the case, imports from the US to Europe, have become less expensive to
European citizens, all else constant. - ANSWER//false
One reason the aggregate demand curve slopes downward is due to the fact that if the
price level falls, real money balances rise, all else constant, interest rates will fall
causing an increase in consumption and investment. - ANSWER//True
Assuming that natural gas for firm X is an important input to the production process, an
increase in the availability of natural gas that lowers the price of natural gas, will result
in a leftward shift of firm X's supply curve. - ANSWER//false
According to the lecture on the cyclical properties of the aggregate supply curve, I
argued that aggregate demand side policy works better, in terms of influencing output,
when the economy is operating at near full employment output relative to when the
economy is operating at levels of output well below full employment. - ANSWER//false
If labor markets become "loose" and wages fall, all else constant, the short run
aggregate supply curve will shift to the left. - ANSWER//false
The more 'sticky' nominal wages and other input costs are, the steeper the slope of the
aggregate supply curve and therefore, the less effective demand side policies in terms
of effecting real output. - ANSWER//false
If the US economy is growing faster than the rest of the world, then we would expect a
surge in US exports. - ANSWER//false
Suppose that expected inflation is 5% and thus, nominal wages rise, along with all other
input prices by 5%. Suppose also, that actual inflation over this period was only 2%. In
terms of the behavior of the short-run aggregate supply curve, it would shift up given the
