Instructions: The Final Exam is open book, open note. In the Course Materials forum, please find an Excel file: ECO372AnswerForm.xls. The Excel file will be the file you submit to be graded – it will serve the purpose of an answer form. There are 50 (one spot for each question) numbered response fields on the answer form. For example for question “1”, there is the space on the Excel file: 1 a. b. c. d. e. If you think the best response for question “1” is “e”, place an “x” in the box to the immediate right of the letter “e”. 1 a. b. c. d. e. x Placing an “x” by the letter “e” indicates that you think that “e” is the best response for question “1”. Place an “x” by the letter of the option on the corresponding field which you think best answers the question for each of 50 questions. Be certain to write your name in the space on line 4 of the Excel file. Please do not change the formatting of the answer sheet. I intend to print your sheet for grading. Thanks and good luck! 1. Any economic system: a. can eliminate scarcity. b. addresses the questions what is produced, how it is produced, and for whom it is produced. c. provides all the goods people want and desire. d. provides equal distribution of well-being among its participants. 2. Deion Sanders is a two sport athlete who plays both pro football and baseball. He could earn $1,000,000 playing either. Troy Aikman is also a two sport athlete who plays both football and auto racing. He could earn $1,000,000 playing football or $200,000 racing cars. Garo Yepremian can play both football and soccer. He could earn $1,000,000 playing football or $50,000 playing soccer. Assuming that all three men have only two options for work, and can only pursue one sport full-time, who has the highest opportunity cost of playing football? a. Deion Sanders b. Troy Aikman c. Garo Yepremian d. their opportunity costs are the same 3. Microeconomics and macroeconomics are: a. not related because they are taught as separate courses. b. virtually identical, though one is much more difficult than the other. c. interrelated because what happens in the economy as a whole is based on individual decisions. d. interrelated because both are taught by the same teacher. 4. Services make up about what percentage of the U.S. economy? a. 10 percent. b. 25 percent. c. 50 percent. d. 80 percent. 5. E-commerce is expected to increase competition for all of the following reasons except that it: a. increases the amount of information available to consumers. b. brings together a larger number of buyers and sellers in one virtual location. c. increases the importance of first-mover advantage in establishing name brand recognition. d. increases the potential marketplace. 6. Some argue that Sweden's generous welfare benefits, which pay people who lose their jobs as much as 80 percent of previous incomes for three years, has resulted in too-high unemployment. This can be seen as an example of: a. market failure due to unfair conditions produced by the labor market b. government not correcting externalities produced by the market c. government failure in fostering a competitive market environment d. globalization causing hardworking youth to emigrate 7. Assume the graph above reflects demand in the automobile market. Which arrow best captures the impact of increased consumer income on the automobile market? a. A b. B c. C d. D 8. Refer to the graph above. At a price of 60 cents per dozen: a. there is a surplus of 2,000 dozen eggs per week. b. the market is in equilibrium c. there is a shortage of 3,000 dozen eggs per week. d. there is a shortage of 2,000 dozen eggs per week. 9. Refer to the graph above. At a price of 90 cents per dozen: a. there is a shortage of 2,000 dozen eggs per week. b. there is a surplus of 2,000 dozen eggs per week. c. quantity demanded is just equal to quantity supplied. d. there is a shortage of 1,000 dozen eggs per week. 10. European Union subsidizes its farmers in the amount of about 43 billion euros per year. How do these subsidies make it difficult for farmers in developing economies to compete in the world farm market? The subsidies a. set a price ceiling for EU farm goods, keeping prices below the market equilibrium, lowering the price developing country farmers can receive for their produce. b. shift the supply of EU farm goods to the right, lowering world prices of farm goods and the price developing country farmers can receive for their produce. c. function as a tariff, causing imports from developing countries to become artificially expensive, thus denying European consumers the benefits of cheap imported food d. create ethical problems for Europeans who want to buy farm products from developing countries since the subsidies are raising the price of developing country produce. 11. If scalping was legalized, the most likely effect on the resale value of Final Four tickets would be: a. an increase in the secondary-market price of the tickets since more people would be willing to sell their tickets with no risk of being arrested. b. a decrease in the secondary-market price of the tickets since more people would be willing to sell their tickets with no risk of being arrested. c. no change in the secondary-market price of the tickets since legalization of scalping would not change the number of seats available. d. a decrease in the secondary-market price of the tickets since fewer people would be willing to sell their tickets with no risk of being arrested. 12. Refer to the graphs below. A recent report indicates that the device known as the right heart catheter used to diagnose heart conditions poses more risks than previously thought. The effect of the report on the market for right heart catheters is best shown by which of the graphs above? a. I b. II c. III d. IV 13. GDP is the: a. market value of an economy's production of final goods and services in a one year period. b. sum of coins, bills, and demand deposits circulating in an economy one year period c. total expenditures of the federal government over the period of one year. d. market value of an economy's production of all goods and services in a one year period. 14. According to the aggregate accounting identity: a. GNP equals GDP. b. aggregate income equals aggregate production. c. assets equal liabilities. d. supply equals demand. 15. Calculate GDP using the information above. a. 6,400 b. 7,500 c. 9,400 d. 10,470 16. Fluctuations around the long-term growth rate are called: a. recessions. b. depressions. c. expansions. d. business cycles. 17. What is the NBER? a. National Bureau of Economic Research, a nonprofit, private organization b. National Board of Economic Recovery, part of the Department of Commerce c. National Business Education Roundtable, part of the Federal Reserve d. National Budget Estimation Review, part of the Congressional Budget Office 18. Leading indicators are: a. used to gauge current economic conditions. b. used to roughly approximate future economic conditions. c. exact indicators of future economic conditions. d. excellent at predicting expansions and recessions. 19. Structural unemployment is caused by: a. a general downturn in the economy. b. people quitting a job just long enough to look for and find another one. c. people over 65 who don't really want to work. d. people losing a job when their skills become obsolete due to technological innovations. 20. In Zimbabwe, inflation rose from an annual rate of 32% in 1998 to 900% in 2006. Ignoring the many other problems that face the citizens of Zimbabwe, and considering only the effects of this unexpected inflation, which of the following are helped by the inflation? a. Debtors b. People living on fixed pensions c. The unemployed d. No one; inflation hurts everyone. 21. The Rule of 72 implies that a country with a growth rate of 2 percent: a. will never double its income. b. will double its income in about 7 years. c. will double its income in about 36 years. d. will double its income in about 50 years. 22. The effect of economic growth generally has been to make: a. the poor poorer and the rich richer. b. the poor richer and the rich poorer. c. all income levels richer. d. the rich richer but not affect the poor. 23. In the early 2000s, it was feared that low academic achievement in math in the United States may reduce U.S. economic growth by as much as a half percentage point a year. In terms of factors leading to growth, the low math scores indicate that the U.S. may be at a disadvantage in terms of: a. social capital. b. human capital. c. growth-compatible institutions. d. technology. 24. Keynesian economists believe: a. government policies do not affect economic activity. b. government can implement policy proposals that can positively impact the economy. c. most government policies would probably make things worse. d. the economy ought to be left to market forces. 25. Laissez-faire economists believe: a. government policies do not affect economic activity. b. government can implement policy proposals that can positively impact the economy. c. most government policies would probably make things worse. d. government intervention in the market is necessary for a smoothly operating economy. 26. Refer to the graph above. The economy is in a short-run equilibrium at: a. point A. b. point B. c. point C. d. no point in the graph. 27. The total level of expenditures in an economy equals: a. C + I + G + M. b. C + I + G - M. c. C + I + G + X. d. C + I + G + X - M. 28. Refer to the graph above. The equilibrium level of real income is: a. $200 b. $600 c. $800 d. $1,000 29. The interest rate is the price paid for the use of a: a. real liability. b. real asset. c. financial liability. d. financial asset. 30. In some countries the financial sector maintains private reserves in addition to the required reserves. These reserves do not go back to the circular flow of the economy. In this case, this economy most likely will experience: a. expansion. b. more investment. c. inflation. d. recession. 31. The value and functionality of the money are determined by the: a. lack of credibility in other financial assets. b. credibility in other financial assets. c. general acceptability to other people. d. regulations defined by the Fed. 32. Who determines U.S. monetary policy? a. Congress b. The president c. The Internal Revenue Service d. The Federal Reserve 33. Monetary policy is one of the two main macroeconomic tools governments use to control the aggregate economy, the other being: a. fiscal policy. b. foreign policy. c. trade policy. d. immigration policy. 34. Refer to the graph above. Monetary policy that shifts the AD curve from AD0 to AD2 is a. expansionary. b. contractionary. c. neither expansionary nor contractionary since it does not affect output. d. neither expansionary nor contractionary since it does not affect inflation. 35. Social security payments have been adjusted for inflation annually since the late 1970s yet it is sometimes argued that the true cost of living for retirees on social security rises less than the cost of living adjustment used by the government. If this is the case, retirees: a. are hurt by inflation even with the government's inflation adjustment. b. are protected from inflation by the government's inflation adjustment. c. benefit from using the government's cost of living adjustment rather than a more accurate cost of living adjustment. d. would be better off if the government cost of living adjustment more accurately reflected the true cost of living for retirees. 36. Deflation in Hong Kong that began in 1998 lasted for six years. This deflation is: a. a fall in overall prices. b. the same thing as a devaluation of the Hong Kong dollar. c. the same thing as a depreciation of the Hong Kong dollar. d. a change in the price structure. 37. The government's changing taxes and spending with the objective of affecting the level of output in the economy, is called: a. public finance. b. fiscal policy. c. the Ricardian equivalence. d. sound finance. 38. Using fiscal policy to stabilize the economy is difficult because: a. potential income is known. b. the effects of policy changes is known with certainty. c. there are time lags involved in the use of fiscal policy. d. the size of the government debt doesn't matter. 39. According to Adam Smith, individuals are directed to do those things for which they have a comparative advantage by: a. their self interest. b. corporate management. c. government policy. d. the educational system. 40. The Apple iPod was a trendy product in 2004 and 2005. It was designed by Apple in the U.S., manufactured in factories in Asia, and sold throughout the world. Apple's use of Asian manufacturers to produce the iPod is an example of: a. insourcing. b. outsourcing. c. the law of one price. d. nanotechnology. 41. The difference between the value of goods exported and imported is the: a. current account balance. b. financial and capital account balance. c. government financial balance. d. balance of merchandise trade. 42. The exchange rate is the: a. price of one good in terms of another. b. price of one asset in terms of another. c. price of one currency in terms of another. d. rate at which exports are traded for imports. 43. U.S. exports involve an: a. outflow of dollars from the U.S. to foreigners. b. inflow of dollars from foreigners to the U.S. economy. c. outflow of foreign currency from the U.S. to foreigners. d. inflow of foreign currency from foreigners to the U.S. economy. 44. When the euro rose relative to the dollar in the early 2000s, it: a. encouraged European imports and exports. b. discouraged European imports and exports c. encouraged European imports and discouraged European exports. d. discouraged European imports and encouraged European exports. 45. The U.S. can reduce its trade deficit by: a. reducing the value of the dollar. b. strengthening the dollar. c. keeping the dollar fixed. d. either weakening or strengthening the dollar. 46. A weaker dollar would be a good policy if the U.S. government wanted to: a. increase U.S. exports and expand the U.S. economy. b. increase U.S. imports and expand the U.S. economy. c. reduce U.S. exports and slow the U.S. economy. d. reduce U.S. imports and slow the U.S. economy. 47. A budget deficit is defined as: a. a shortfall of revenues compared to expenditures. b. a shortfall of expenditures compared to revenue. c. accumulated deficits minus accumulated surpluses. d. accumulated surpluses minus accumulated deficits. 48. In the long-run framework, deficits reduce _______. a. investment b. government consumption c. taxes d. subsidies 49. External government debt is: a. government debt owed to its own citizens. b. government debt owed to individuals in foreign countries. c. government debt owed by one branch of the government to another. d. debt that individuals in foreign countries owe to the U.S. government. 50. Which of the following would make the impending Social Security problem worse? a. Raising social security taxes. b. Raising the age at which one is eligible to receive payments. c. An increase in the average age at which people die. d. Taxing social security payments received.
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