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ECON312 Principles Economics Course

ECON312 Principles Economics Course

A+ Entire Course: Assignment Week 1, 2, 3, 5, 6, 7|Homework Week 3|Midterm Exam| Final Exam| Discussions Week 1-7

Quiz Week 1 

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(TCO 1) Economics is the study of (Points : 1)

Increasing the level of productive resources so there is maximum output in society.

Increasing the level of productive resources so there is a minimum level of income.

How people, institutions, and society make choices under conditions of scarcity.
The efficient use of scarce resources paid for at the minimum level of cost to consumers and businesses

(TCO 1) The key economic concept that serves as the basis for the study of economics is (Points : 1)

Inflation

Unemployment.

Money

scarcity
(TCO 1) From an economic perspective, when a student decides to attend another year of college, the student has concluded that the marginal (Points : 1)

Costs of attending college has decreased that year.

Benefits of attending college has increased that year.
Benefits of attending college are greater than the marginal costs.
Costs of attending college will be subsidized by someone else such as parents or the government.

(TCO 1) Which is considered to be an economic resource by economists? (Points : 1)

Rent

Money

Labor

Wages

(TCO 1) If an economy is producing at a point inside a production possibilities curve, then (Points : 1)

The economy is efficient

There is economic growth.

Resources are unemployed.
Resources are fully employed.

(TCO 1) Which statement best describes a command economy? (Points : 1)

The production of goods and services is determined primarily by markets, but the allocation of goods and services is determined primarily by government.

The production of goods and services is determined primarily by government, but the allocation of goods and services is determined primarily by markets.

The production and allocation of goods and services is determined primarily through markets.

The production and allocation of goods and services is determined primarily through government.

(TCO 1) The development of CDs and DVDs that significantly reduced the market for cassette tapes would be an example of (Points : 1)

Specialization.

Derived demand.

Roundabout production.

Creative destruction.

(TCO 1) In the circular flow model, households (Points : 1)

Buy products and resources.

Sell products and resources.

Buy products and sell resources.

Sell products and buy resources.
(TCO 1) In a market system, well-defined property rights are important because they (Points : 1)

Reduce unnecessary investment.
Limit destructive economic growth.

Create economic problems.

Encourage economic activity.

(TCO 1) Consider a barter situation where you have pens and you want pencils. To achieve your objective, there must be a(n) (Points : 1)

Use of capital goods.

Entry and exit from the market.

Large number of sellers.

Coincidence of wants.
(TCO 1) After graduating from high school, Ron Willis plans to go to college. The college tuition is $15,000 a year. But, instead of going to college, Ron could take a full-time job paying $20,000. If Ron decides to go to college, what is his opportunity cost for attending for one year? Show your calculations. (Points : 5)

(TCO 1) Identify some intrinsic qualities of capitalist and command economic systems. Identify two countries that practice each. (Points : 5)

ECON312 Principles Economics Course

Quiz Week 2 

ECON312 Quiz Week 2

(TCO 2) A demand curve (Points : 1)

Shows the relationship between price and quantity supplied

Indicates the quantity demanded at each price in a series of prices.

Graphs as an upsloping line.

Shows the relationship between income and spending.

(TCO 2) Which of the following will not cause the demand for product K to change? (Points : 1)

A change in the price of close-substitute product J

An increase in consumer incomes

A change in the price of K

A change in consumer tastes

(TCO 2) College students living off campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start their careers, their consumption of both goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are (Points : 1)

Inferior goods

Normal goods

Complementary goods

Substitute goods

(TCO 2) Suppose that tacos and pizza are substitutes and that soda and pizza are complements. We would expect an increase in the price of pizza to (Points : 1)

Reduce the demand for tacos and increase the demand for sodas

Reduce the demand for soda and increase the demand for tacos

Increase the demand for both soda and tacos

Reduce the demand for both soda and tacos

(TCO 2) A firm’s supply curve is upsloping because (Points : 1)

The expansion of production necessitates the use of qualitatively inferior inputs.

Mass production economies are associated with larger levels of output

Consumers envision a positive relationship between price and quality.

Beyond some point the production costs of additional units of output will rise

(TCO 2) If the demand for bacon is relatively elastic, a 10% decline in the price of bacon will (Points : 1)

Decrease the amount demanded by more than 10%.

Increase the amount demanded by more than 10%.

Decrease the amount demanded by less than 10%.

Increase the amount demanded by less than 10%.

(TCO 2) The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units. Therefore, demand for X in this price range (Points : 1)

has declined

is of unit elasticity

is inelastic

is elastic

(TCO 2) The concept of price elasticity of demand measures (Points : 1)

The slope of the demand curve.

The number of buyers in a market

The extent to which the demand curve shifts as the result of a price decline

The sensitivity of consumer purchases to price changes

(TCO 2) If the University Chamber Music Society decides to raise ticket prices to provide more funds to finance concerts, the Society is assuming that the demand for tickets is (Points : 1)

Parallel to the horizontal axis

Shifting to the left

Inelastic

Elastic

(TCO 2) The demand for autos is likely to be (Points : 1)

Less price elastic than the demand for Honda Accords

More price elastic than the demand for Honda Accords

Of the same price elasticity as the demand for Honda Accords

Perfectly inelastic

(TCO 2) What is the Law of Demand? Why does the demand curve slope downwards? (Points : 5)

The Law of Demand is the same thing as…

(TCO 2) Suppose the price of widgets rises from $7 to $9 and consumption of widgets falls from 25 widgets a month to 15 widgets. Calculate your price elasticity of demand of widgets. What can you say about your price elasticity of demand of widgets? Is it Elastic, Inelastic, or Unitary Elastic? Why? Use the Midpoint formula and please show your work. (Points : 5)

Relatively Elastic because 2.0 > 1….

ECON312 Principles Economics Course

Quiz Week 3 

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(TCO 3) Which of the following is most likely to be an implicit cost for Company X? (Points : 1)

Forgone rent from the building owned and used by Company X

Rental payments on IBM equipment

Payments for raw materials purchased from Company Y

Transportation costs paid to a nearby trucking firm
(TCO 3) To economists, the main difference between the short run and the long run is that (Points : 1)

The law of diminishing returns applies in the long run, but not in the short run.

In the long run all resources are variable, while in the short run at least one resource is fixed

Fixed costs are more important to decision making in the long run than they are in the short run

In the short run all resources are fixed, while in the long run all resources are variable.

(TCO 3) Economists would describe the U.S. automobile industry as (Points : 1)

Purely competitive

An oligopoly

Monopolistically competitive

A pure monopoly

(TCO 3) If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue (Points : 1)

May be either greater or less than $5.

Will also be $5

Will be less than $5

Will be greater than $5

(TCO 3) Which of the following is a characteristic of pure monopoly? (Points : 1)

Close substitute products

Barriers to entry

The absence of market power

“Price taking”

(TCO 3) Confronted with the same unit cost data, a monopolistic producer will charge (Points : 1)

The same price and produce the same output as a competitive firm

A higher price and produce a larger output than a competitive firm

A higher price and produce a smaller output than a competitive firm

A lower price and produce a smaller output than a competitive firm

(TCO 3) Under monopolistic competition entry to the industry is (Points : 1)

Completely free of barriers

More difficult than under pure competition but not nearly as difficult as under pure monopoly

More difficult than under pure monopoly

Blocked

(TCO 3) The term oligopoly indicates (Points : 1)

A one-firm industry

Many producers of a differentiated product

A few firms producing either a differentiated or a homogeneous product

An industry whose four-firm concentration ratio is low

(TCO 3) Which of the following is a unique feature of oligopoly? (Points : 1)

Mutual interdependence

Advertising expenditures

Product differentiation

Nonprice competition

(TCO 3) Concentration ratios measure the (Points : 1)

Geographic location of the largest corporations in each industry

Degree to which product price exceeds marginal cost in various industries

Percentage of total industry sales accounted for by the largest firms in the industry

Number of firms in an industry

(TCO 3) What is the LAW OF DIMINISHING RETURNS, and why is this law considered a short-run phenomenon? (Points : 5)

The law of diminishing returns assumes that technology is…

(TCO 3) Identify the primary characteristics of monopolistic competition and oligopoly. Give examples of each. (Points : 5)

A monopolistic competition represents the opposite…

ECON312 Principles Economics Course

Antitrust Practices and Market Power Homework Week 3 

Click Here: ECON312 Antitrust Practices Market Power

Research authoritative articles using the news and the DeVry Online Library for a recent case of antitrust investigation. You are free to choose a case from any industry and any part of the world. Based on the case you have selected, answer the following questions.

1. Why was/were the firm(s) investigated for antitrust behavior?
2. Identify some of the costs (pecuniary and nonpecuniary) associated with the antitrust behavior (firms having power in the market). Additionally, note the specific antitrust act (Sherman Act, Clayton Act, etc.) under which the violation was investigated.
3. Given your research and findings, are monopolies and oligopolies (firms demonstrating power) always bad for society? Be sure to provide real world examples of where this may be the case to strengthen your position.
4. Provide at least one example of a case where having a monopoly or oligopoly may actually benefit the society.

Preview:

1. Antitrust Cases: Standard Oil and Google

Up until 1909-1911, Standard Oil was considered as the biggest, most dominant and most profitable oil business in the United States of America owned through a…

2. Why were the firms found in violation / being investigated for antitrust behavior?

Given the above sample cases, one might ask, so what is wrong with being the biggest, most dominant, or richest company in any…

3. Identify some of the costs (pecuniary and nonpecuniary) associated with the antitrust behavior (firms having power in the market). Additionally, note the specific antitrust act (Sherman Act, Clayton Act, etc.) under which the violation was investigated.

Among the primary activities prohibited under antitrust laws are monopolies, price fixing, and predatory practices (i.e., pecuniary).  It also covers…

4. Given your research and findings, are monopolies and oligopolies (firms demonstrating power) always bad for society? Be sure to provide real world examples of where this may be the case to strengthen your position.

Monopoly is a market structure dominated by one firm whereas oligopoly–with few firms. Due to a firm’s market dominance, it is…

5. Provide at least one example of a case where having a monopoly or oligopoly may actually benefit the society.

In some cases, there are certain industries that require intensive capital investment that only few firms are able to…

ECON312 Principles Economics Course

Midterm Exam 

Click Here: ECON 312 Midterm Exam

(TCO 1) As a consequence of the condition of scarcity (Points : 3)

There is never enough of anything

Production has to be centrally planned

Things which are plentiful have relatively high prices

Individuals and communities have to make choices from among alternatives

(TCO 1) The opportunity cost of constructing a new public highway is the (Points : 3)

Money cost of hiring contractors and construction workers for the new highway

Value of other goods and services that must be sacrificed to construct the new highway

Expected cost of constructing the new highway in a future year

Value of shorter driving times and distances when the new highway is completed

(TCO 1) A nation can increase its production possibilities by (Points : 3)

Shifting resources from investment good production to consumer good production

Shifting resources from private goods to public goods

Improving labor productivity

Eliminating discrimination

(TCO 1) Which expression is another way of saying “marginal benefit”? (Points : 3)

Benefits given up

Unintended gain

Employment benefits

Extra benefit

(TCO 1) Which would not be considered as a capital resource of a business by an economist? (Points : 3)

A van used by a mother to transport the family around

An office computer used by an accountant

A crane used by a building contractor

A razor used by a barber

(TCO 1) The Soviet Union economy of the 1980s would best be classified as (Points : 3)

A market system

Pure capitalism

Laissez-faire capitalism

A command system

(TCO 1) Markets in which firms sell their output of goods and services are called (Points : 3)

Resource markets

Product markets

Command markets

Mixed markets

(TCO 1) By free enterprise, we mean that (Points : 3)

Products are provided free to those who can’t afford to buy them

Individuals may obtain resources, organize production, and sell the resulting output in any legal way they choose

Individual producers are free to produce whatever the government decides is needed by the society.
Individuals are free to buy whatever products will satisfy their needs the most

(TCO 1) Which is one of the five fundamental questions that need to be dealt with in any economic system? (Points : 3)

What makes the rate of unemployment low?

Who will be the richest group in the economy?

What goods and services will be produced?

How high should the prices of goods and services be?

(TCO 1) A major problem with state ownership of resources is that it does not (Points : 3)

Allow for the full use of central economic planning

Let state enterprises buy resources used to make products

Let state enterprises sell products produced with those resources

Give incentives for individuals to make the best use of those resources

(TCO 2) An increase in product price will cause: (Points : 3)

Quantity demanded to decrease

Quantity supplied to decrease

Quantity demanded to increase

The supply curve to shift to the left

(TCO 2) At the point where the demand and supply curves intersect (Points : 3)

The buying and selling decisions of consumers and producers are inconsistent with one another.

The market is in disequilibrium.

There is neither a surplus nor a shortage of the product

Quantity demanded exceeds quantity supplied

(TCO 2) If an effective price ceiling is placed on hamburgers then (Points : 3)

The quantity demanded will exceed the quantity supplied

A black market for hamburger may evolve

Consumers may want government to ration hamburger

All of these are likely outcomes

(TCO 2) An increase in demand for oil along with a simultaneous increase in supply of oil will (Points : 3)

Decrease price and increase quantity

Increase price and decrease quantity

Increase quantity, but whether it increases price depends on how much each curve shifts

Increase price, but whether it increases quantity depends on how much each curve shifts

(TCO 2) Two months ago, the Marbury Shirt company sold 200 shirts at $30 per shirt.  Last month, the company raised its price to $35 per shirt and sold 300 shirts.  Evidently the company experienced a(n) (Points : 3)

Decrease in demand

Increase in demand

Decrease in supply

Increase in supply

(TCO 2) When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent.  In this range of prices, demand for this product is (Points : 3)

Elastic

Inelastic

cross-elastic

unitary elastic

(TCO 2) Demand is said to be inelastic when (Points : 3)

An increase in price results in a reduction in total revenue

A reduction in price results in an increase in total revenue

A reduction in price results in a decrease in total revenue

The elasticity coefficient exceeds one

(TCO 2) The price elasticity of demand increases with the length of the period considered because (Points : 3)

Consumers’ incomes will increase over time

The demand curve will shift outward as time passes

All prices will increase over time

Consumers will be better able to find substitutes

(TCO 2) If the demand for a product is elastic, then (Points : 3)

A higher tax on the product will generate more tax revenue

A higher tax on the product will generate less tax revenue

Total revenue will decrease as price decreases

Total revenue will remain constant as price increases

(TCO 2) When universities announce a large tuition increase and follow it with an announcement that more financial aid will be available, they are assuming that students who pay full tuition (Points : 3)

Have elastic demand and students who use financial aid have inelastic demand

Have inelastic demand and students who use financial aid have elastic demand

View a college education as an inferior good and students who use financial aid view it as a normal good

View a college education as a normal good and students who use financial aid view it as an inferior good

(TCO 3) Suppose that you could prepare your own tax return in 15 hours, or you could hire a tax specialist to prepare it for you in two hours.  You value your time at $11 an hour.  The tax specialist will charge you $55 an hour.  The opportunity cost of preparing your own tax return is (Points : 3)

$40
$55

$110

$165

(TCO 3) If a firm’s revenues just cover all its opportunity costs, then (Points : 3)

Normal profit is zero

Economic profit is zero

Total revenues equal its explicit costs

Total revenues equal its implicit costs

(TCO 3) In the short run (Points : 3)

A firm cannot vary its output level

All factors of production can be varied

A firm can change its fixed inputs

Output is raised or reduced by changing the levels of variable inputs

(TCO 3) Fixed costs are those costs which are (Points : 3)

Zero if the firm produces no output in the short run

Unchanging through time

Independent of the rate of output

Implicit to a competitive firm

(TCO 3) The phrase “don’t cry over spilt milk” could be rephrased in economic terms by saying (Points : 3)

“Sunk costs are irrelevant to a decision.”

“Real resources have opportunity costs.”

“There are economies and diseconomies of scale.”

“The law of diminishing returns applies to everything.”

(TCO 3) If you know that total fixed cost is $200, total variable cost is $600, and total product is four units, then average total cost must be: (Points : 3)

$200

$250

$800

$3200

Page 2

(TCO 3) In which market model would there be a unique product for which there are no close substitutes? (Points : 3)

Monopolistic competition

Pure competition

Pure monopoly

Oligopoly

(TCO 3) In which two market models would advertising be used most often? (Points : 3)

Pure competition and monopolistic competition

Pure competition and pure monopoly

Monopolistic competition and oligopoly

Pure monopoly and oligopoly

(TCO 3) The steel and automobile industries would be examples of which market model? (Points : 3)

Monopolistic competition

Pure competition

Pure monopoly

Oligopoly

(TCO 3) In pure competition, the demand for the product of a single firm is perfectly (Points : 3)

Elastic because the firm produces a unique product

Inelastic because the firm produces a unique product

Elastic because many other firms produce the same product

Inelastic because many other firms produce the same product

(TCO 3) Let us suppose Harry’s, a local supplier of chili and pizza, has the following revenue-and-cost structure:

(Points : 3)

Harry’s should stay open in the long run

Harry’s should shut down in the short run

Harry’s should stay open in the short run

Harry’s should shut down in the short run but reopen in the long run

(TCO 3) If a purely competitive firm is producing at an output where marginal revenue exceeds marginal cost, the firm will increase its profit by (Points : 3)

Reducing production to the point where variable costs are minimized

Reducing production to the point where unit costs are minimized

Reducing its output and simultaneously increasing its price

Increasing its output

(TCO 3) The short-run supply curve for a competitive firm is the (Points : 3)

Entire MC curve

Segment of the MC curve lying below the AVC curve

Segment of the MC curve lying above the AVC curve

Segment of the AVC curve lying to the right of the MC curve

Goods and resources, respectively

Money incomes and output, respectively

Output and money incomes, respectively

Resources and goods, respectively

(TCO 2) Refer to the diagram.  A decrease in demand is depicted by a

(Points : 3)

move from Point x to Point y

shift from D1 to D2

shift from D2 to D1

move from Point y to Point x

(TCO 2) Refer to the information and assume the stadium capacity is 5,000.  If the Mudhens’ management charges $7 per ticket

(Points : 3)

Some fans who want to see the game will find that tickets are not available

There will be 2,000 empty seats

There will be 1,000 empty seats

The game will be sold out

(TCO 2) Which of the following goods (with their respective income-elasticity coefficients in parentheses) will most likely suffer a decline in demand during a recession?(Points : 3)

Dinner at a nice restaurant (+1.8)

Chicken purchased at the grocery store for preparation at home (+0.25)

Facial tissue (+0.6)

Plasma-screen and LCD TVs (+4.2)

(TCO 3) In the figure, Curves 1, 2, 3, and 4 represent the

(Points : 3)

ATC, MC, AFC, and AVC curves, respectively

MC, AFC, AVC, and ATC curves, respectively

MC, ATC, AVC, and AFC curves, respectively

ATC, AVC, AFC, and MC curves, respectively

(TCO 1) Refer to the diagram.  Points A, B, C, D, and E show

(Points : 3)

That the opportunity cost of bicycles increases, while that of computers is constant

Combinations of bicycles and computers that society can produce by using its resources efficiently

That the opportunity cost of computers increases, while that of bicycles is constant

That society’s demand for computers is greater than its demand for bicycles

ECON312 Principles Economics Course

(TCO 3) Any activity designed to transfer income or wealth to a particular individual or firm at society’s expense is called (Points : 3)

Patent protection

X-inefficiency

Price discrimination

Rent-seeking

(TCO 3) a.) What is the relationship between economies of scale and a natural monopoly?  b.) Why is the level of output at which marginal revenue equals marginal cost the profit-maximizing output? (Points : 25)

In those extreme cases where there are extensive economies of scale across the full range of potential output for market demand, it may be…

(TCO 2) Evaluate how the following situations will affect the demand curve for iPods.

(a) Income statistics show that income of 18–25-year-olds have increased by 10 percent over the last year.

(b) Efforts of music artists wanting greater protection of their music result in more stringent enforcement of copyrights and the shutdown of numerous illegal downloading sites.

(c) Believing that it has significant control of the market for portable digital music players, Apple decides to raise the price of iPods with the goal of increasing profits.

(d) The price of milk decreases.

(Points : 25)

(a) Since 18-to-25-year-olds are the main users of portable digital music players, this will increase the demand for iPods….

ECON312 Principles Economics Course

Quiz Week 5 

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(TCO 6) Discretionary fiscal policy refers to (Points : 1)

Any change in government spending or taxes that destabilizes the economy

The authority that the President has to change personal income tax rates.

Intentional changes in taxes and government expenditures made by Congress to stabilize the economy

The changes in taxes and transfers that occur as GDP changes.

(TCO 6) An economist who favors smaller government would recommend (Points : 1)

Tax cuts during recession and reductions in government spending during inflation.

Tax increases during recession and tax cuts during inflation.

Tax cuts during recession and tax increases during inflation.

Increases in government spending during recession and tax increases during inflation.

(TCO 6) The financing of a government deficit increases interest rates and, as a result, reduces investment spending. This statement describes (Points : 1)

The supply-side effects of fiscal policy.

Built-in stability.

The crowding-out effect.

The net export effect

(TCO 5) Which of the following would not shift the aggregate supply curve? (Points : 1)

An increase in labor productivity

A decline in the price of imported oil

A decline in business taxes

An increase in the price level

(TCO 6) Menu costs (Points : 1)

Increase during recession

Decrease during recession.

Are the costs to firms of changing prices and communicating them to customers

Are sunk costs and therefore should be disregarded

(TCO 6) The consumption schedule directly relates (Points : 1)

Consumption to the level of disposable income

Saving to the level of disposable income.

Disposable income to domestic income.

Consumption to saving.

(TCO 6) The size of the MPC is assumed to be (Points : 1)

Less than zero

Greater than one.

Greater than zero, but less than one.

Two or more.

(TCO 5) Refer to the graph. Which of the following factors will shift AD1 to AD2? 

(Points : 1)

A decrease in the general price level

An increase in real interest rates

An increase in national incomes abroad

A decrease in the value of financial assets

(TCO 6) The practical significance of the multiplier is that it (Points : 1)

Equates the real interest rate and the expected rate of return on investment.

Magnifies initial changes in spending into larger changes in GDP.

Keeps inflation within tolerable limits.

Helps to stabilize the economy.

(TCO 5) The Federal budget deficit is found by (Points : 1)

Subtracting government tax revenues plus government borrowing from government spending in a particular year.

Subtracting government tax revenues from government spending in a particular year.

Cumulating the differences between government spending and tax revenues over all years since the nation’s founding.

Subtracting government revenues from the noninvestment-type government spending in a particular year.

(TCO 5) What effect would each of the following have on aggregate demand or aggregate supply? Explain.

1. A decrease in real interest rates paid by the consumer
   b. An increase in Labor Productivity as a result of a better-educated population

(Points : 5)

(TCO 6) Why do some economists believe that tax cuts are critical to help revive an economy experiencing a recession? (Points : 5)

ECON312 Principles Economics Course

Homework Assignment Week 6 

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Question: What is the “current macroeconomic situation” in the U.S. (e.g. is the U.S. economy currently concerned about unemployment, inflation, recession, etc.)? What fiscal policies and monetary policies would be appropriate at this time?

Preview:

Based on the recent report of Bureau of Economic Analysis (BEA), US’ GDP declined slightly in the first quarter of 2015 by 0.7 percent, compared to its fourth quarter growth in 2014 of 2.2 percent.  The decline is attributed to: (a) goods exports, specifically capital…

ECON312 Principles Economics Course

Quiz Week 6

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(TCO 7) If you place a part of your summer earnings in a savings account, you are using money primarily as a (Points : 1)

Medium of exchange

Store of value

Unit of account

Standard of value

(TCO 7) Currency held in the vault of First National Bank is (Points : 1)

Counted as part of M₁

Counted as part of M₂, but not M₁

Only counted as part of M₁ if it was deposited into a checking account

Not counted as part of the money supply

ECON312 Principles Economics Course

(TCO 7) Answer the question on the basis of the following list of assets:

• 1. Large-denominated ($100,000 and more) time deposits
• 2. Noncheckable savings deposits
• 3. Currency (coins and paper money) in circulation
• 4. Small-denominated (less than $100,000) time deposits
• 5. Stock certificates
• 6. Checkable deposits
• 7. Money market deposit accounts
• 8. Money market mutual fund balances held by individuals
• 9. Money market mutual fund balances held by businesses
• 10. Currency held in bank vaults

Refer to the above list.  The M₁ definition of money comprises item(s)

(Points : 1)

6 only

3, 4, and 6

3 and 6.

3, 6, and 10

(TCO 7) Assume Company X deposits $100,000 in cash in Commercial Bank A.  If no excess reserves exist at the time this deposit is made and the reserve ratio is 20 percent,  Bank A, by itself, can initially increase the money supply by a maximum of (Points : 1)

$50,000

$180,000

$80,000

$500,000

(TCO 7) A bank temporarily short of required reserves may be able to remedy this situation by (Points : 1)

Borrowing funds in the federal funds market

Granting new loans

Shifting some of its vault cash to its reserve account at the Federal Reserve

Buying bonds from the public

(TCO 7) Money is destroyed when (Points : 1)

Loans are made

Checks written on one bank are deposited in another bank

Loans are repaid

The net worth of the banking system declines

(TCO 7) The transactions demand for money is most closely related to money functioning as a (Points : 1)

Unit of account

Medium of exchange.

Store of value

Measure of value

(TCO 7) If the quantity of money demanded exceeds the quantity supplied (Points : 1)

The supply-of-money curve will shift to the left

The demand-for-money curve will shift to the right

The interest rate will rise

The interest rate will fall.

(TCO 7) Which of the following is not a tool of monetary policy? (Points : 1)

Open market operations

Changes in banking laws

Changes in the amount of reserves available at the term auction facility

Changes in the reserve ratio

(TCO 7) A restrictive monetary policy is designed to shift the: (Points : 1)

Aggregate demand curve rightward

Aggregate demand curve leftward

Aggregate supply curve rightward

Aggregate supply curve leftward

(TCO 7) Explain what is meant by fractional reserve banking. Relate this to money creation and risk to the bank. (Points : 5)

(TCO 7) Identify the four major instruments of monetary policy. (Points : 5)

ECON312 Principles Economics Course

Quiz Week 7 

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(TCO 8) The United States’ most important trading partner quantitatively is (Points : 1)

China

Canada

Mexico

Japan

(TCO 8) The World Trade Organization (Points : 1)

Is also known as the International Monetary Fund (IMF).

Is also known as NAFTA.

Was established to resolve disputes arising under world trade rules.

Enhances world trade by providing interest rate subsidies to foreign borrowers who buy exports on credit.

(TCO 9) Which of the following is not included in the current account of a nation’s balance of payments? (Points : 1)

Its goods exports

Its goods imports

Its net investment income

Its purchases of real assets abroad

(TCO 9) If the dollar price of the yen rises, then (Points : 1)

The yen price of dollars also rises

The dollar depreciates relative to the yen

The yen depreciates relative to the dollar

The dollar will buy fewer U.S. goods

(TCO 9) In recent years, the United States has had large (Points : 1)

Current account surpluses

Capital and financial account deficits

Balance-of-trade deficits

Balance-of-payments surpluses

(TCO 9) When the U.S. dollar decreases in value relative to foreign currencies the: (Points : 1)

Demand for U.S. exports will decrease

Supply of U.S. exports will decrease

Demand for U.S. exports will increase

Supply of U.S. exports will remain constant

ECON312 Principles Economics Course

(TCO 8) Other things equal, economists would prefer (Points : 1)

Free trade to tariffs and tariffs to import quotas

Free trade to import quotas and import quotas to tariffs

Import quotas to tariffs and tariffs to voluntary export restrictions

Import quotas to free trade and free trade to tariffs

(TCO 8) Refer to the graphs below.  Stanville has a comparative advantage in producing

(Points : 1)

Product A

Product B.

Both Product A and B

Neither Product A nor B

(TCO 9) Which one of the following is not one of the so-called G8 Nations? (Points : 1)

Japan

Canada

United States

China

(TCO 8) In recent years the United States has (Points : 1)

Exported more services abroad than it has imported

Had a small goods trade surplus with Japan

Had a large goods trade surplus with the rest of the world

Maintained an overall trade surplus (goods and services combined) with the rest of the world

(TCO 8 and 10) Evaluate this argument for a trade barrier: “The U.S. needs protection from cheap foreign labor.” Include some reasons why this might be an invalid statement. (Points : 5)

The argument is flawed on several grounds.  First, U.S. consumers benefit from being able to…

(TCO 9) What are the economic effects of a depreciation of the US dollar on US trade balances? (Points : 5)

Depreciation means that it takes more dollars to buy foreign currencies.  This means that…

ECON312 Principles Economics Course

Discussions Week 1-7 All Students Posts – 590 Pages 

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Week 1 All Students Posts – 95 Pages 

Click Here: ECON312 Course Discussions Week 1

Opportunity Cost – 48 Pages 

Click Here: ECON312 Opportunity Cost Course Discussions

Give an example of how the Principle of Opportunity Cost applies to your life. Think of a recent decision you made. It could be a decision as simple as whether to eat out or cook your own dinner, or it could be a decision to quit your job and go back to school. What alternatives did you consider? How did you arrive at your final decision? Did you implicitly weigh marginal cost and marginal benefit? How does the concept of opportunity cost apply to production possibilities curve (PPC) analysis? How can we use PPC analysis to examine what we do?

When I decided to start my business I made the decision to enroll in college. This was a cost of time and potential money for education.  The opportunity cost was losing potential income from my business but the curve of having the basic text book understanding of running a hotel would bring much more by increasing future opportunity cost…

Economic Systems – 47 Pages 

Click Here: ECON312 Economic Systems Course Discussions

Think of a business firm you recently visited (such as Walmart, Home Depot, Red Lobster, Barnes & Noble, McDonald’s, etc.). What motivated the producers of all the individual products in the store to make them and offer them for sale? How did the producers decide on the best combinations of resources to use? Who made those resources available, and why? How does the market determine who will get the goods and services? Who decides whether these particular products should continue to be produced and offered for sale? How do these decisions differ between capitalist and socialist systems?

All businesses, no matter the size, begin in a similar way. If there is a demand for a type of service or product there is a business opportunity to supply that service or product. Wal-Mart Super centers for example provide “low price” products ranging from household furniture and supplies, to groceries and apparel items. In order for Wal-Mart to provide these items for customers there are many factors at play. Firstly they must take into account the environment and societal demands before stocking their stores with products. Something that may sell well in a small town in Arizona may not provide the same profits being sold in a metropolitan city in Colorado. Supply and demand of the location of any business is important when factoring the supply and demand for said business. Once the supply and demand are understood, contact to the producers that can provide the products needed. Compare and contrast between product, quantities, and resources needed vs. available must be taken into account. Leading up to the products supplying the shelves inside any Wal-Mart store, the producers that provide said products also follow the same process of supply and demand, resources necessary, government and/or state laws, regulations, and/or subsides. Many factors take place in the market for that product to be produced and offered for sale to individuals within any area. Supply and demand being the first to take into account, following then with changes in demand or detriments of supply could then cease a particular product of continuing production because the profits no longer benefit any parties involved. The opposite could also take place where any change in supply and demand can shift to increase, and potentially go up in cost over time. This can differ between capitalist and socialist systems because whereas capitalist systems ultimately rely on market value and overall profits to determine quantity and price, whereas socialist systems tend to focus more towards keeping prices lower to aid lower income based communities, while charging higher prices in higher based communities…

ECON312 Principles Economics Course

Week 2 All Students Posts – 95 Pages 

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Demand, Supply, and Market Equilibrium – 47 Pages 

Click Here: ECON312 Demand Supply and Market Equilibrium

Think about a product that you have purchased recently (e.g. soda, diapers, takeout meals, milk, shoes, manicure/pedicure, video game, etc.). Explain how the law of demand affected your purchase. Give specific examples of how the determinants of demand and supply affect this product (T-I-P-E-N and P-R-E-S-T). What happens to the demand curve and the supply curve when any of these determinants change? Give examples of scenarios that would cause a change in demand versus a movement along the same demand curve and supply curve for this product. Discuss the new equilibrium price and quantity that result from these changes. Can you demonstrate some of these changes graphically?

All department stores have periodic sale days during which prices are reduced substantially. The purpose of this price reduction is to get rid of old merchandise and stimulate the buying by customers (who may purchase many other items as well). Thus, stores take advantage of the law of demand: merchandise which would otherwise be hard to sell, is sold because customers are willing to pay a lower price. When a housewife goes to the supermarket to buy groceries and finds that one of the products she intended to buy, was reduced in price because of a special sale, it makes her feel wealthier. Indeed, she can buy more with the money she started with. This is the income effect…

Price Elasticity of Demand – 40 Pages 

Click Here: ECON312 Price Elasticity of Demand

Think of another good that you have purchased recently (or you could continue with the good you selected in TDA I). Be specific (e.g. is it breakfast cereal in general or Cheerios cereal specifically). If the price of this item increases, how would this affect the quantity of the good that you consume? Is the Demand for this good Price elastic or Price inelastic? Justify your classification by talking about the determinants of elasticity as they apply to this product. Say price is on the rise for this product and you are the manager of a store, would you be thrilled to be selling this product? Under what circumstances would you want to own a business that sells this product? In other words, how does an increase in price for this good affect your Total Revenue? Using specific examples, relate the concepts of Cross Elasticity and Income Elasticity to this product.

When Coke is no longer on sale at any market in my surrounding area, I will still purchase it but in a much smaller quantity and I tend to hide it more at home so that my family does not consume it too quickly.  Then when the stores place it back on sale, I will tend to try to stock up on it, although in my home that is futile because we just end up drinking more of it.  For me I would consider this item to be elastic.  I could always purchase something else that is on sale or cheaper for my family to drink, or just drink water.  Therefore if I was the manager of a store, I would do what my local stores appear to be doing, which is making me (the consumer) feel like I am getting a great deal on the product because it is on sale and the price points for the same product with different packaging is higher priced.  Even though the store appears to be offering a “sale”, in fact they are charging the regular price for the item, while making it appear to be discounted.

Again referring to the article in Time that talks about this same method but in this article they are talking about the new smaller quantity cans that are priced at a higher per unit amount than the larger size.  Consumers are falling for these marketing tricks because of apparent sale prices and the consumers not doing their research or checking and comparing the per unit pricing…

ECON312 Principles Economics Course

Week 3 All Students Posts – 76 Pages 

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A Firm’s Shut Down Decision – 44 Pages 

Click Here: ECON312 Firms Shut Down Decision

Say you are the manager of a perfectly competitive firm selling a product. Your business is making a loss because total revenue is less than total costs. What would you do–shut down or continue to operate? Use hypothetical numbers to explain. Information you need to provide include–state the product you are selling, the price of the product, the quantity of the product you produce, fixed costs, total cost, figure out total revenue, total and average variable costs. Then go ahead and make your decision. Explain carefully why it makes better sense to shut down rather than continue to operate or to continue to operate rather than shut down, as the case may be. How do fixed costs play a role in your analysis? What is the difference between shutting down and going out of business?

If you are the manager of this company, you cannot know whether to shut down simply based on the factors that you ask about in this question.  The total revenue and total costs are not the numbers that are used to determine whether to shut a business down.  Instead, you need to determine what your marginal revenue is and what your average variable costs are.  If your MR is less than your AVC, then you shut down.  If your MR is greater than your AVC, you keep producing, regardless of whether your total revenues are lower than your total costs…

Market Structure Classification – 32 Pages 

Click Here: ECON312 Market Structure Classification

Think about a firm that you have done business with recently. What industry does this firm belong to? For example, McDonald’s is a firm in the fast food industry. What market structure would this industry fall under? What are the names of other firms in this industry? Is it monopolistic competition, oligopoly, monopoly, or perfect competition? Justify your classification of the firm. Use the characteristics/features of the different market structure to determine which market structure to classify your chosen firm.

I have recently had the pleasure of dealing with my television and internet provider.  There are a handful of television and internet providers; however this industry is a Monopoly.  I use to work for a major cable company in California, and from my 7+ years’ experience in the industry, they do not allow multiple cable providers to operate in the same territory.  Only Satellite television/internet providers can operate in an area where there is a “land line” cable company.    Cable companies try to say that they are not a monopoly because of the satellite companies, however because Satellite providers are wireless they are in a different class.  If cable companies were in fact NOT a monopoly they there should be no problem with other “land line” cable companies offering their services in the same areas…

ECON312 Principles Economics Course

Week 4 All Students Posts – 92 Pages

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GDP – 44 Pages

Click Here:  ECON312 GDP Course Discussions

Go to the Bureau of Economic Analysis website, www.bea.gov, and access the BEA interactively by selecting “National Accounts” and then “National Income and Product Account Tables.” Select “Frequently Requested NIPA Tables,” and find Table 1.1.1 on GDP. What is the current GDP growth rate for the U.S.? Examine the trend over the past few years. What trends interest you? What stage of the Business Cycle would the U.S. economy be in currently given the trends? Why might GDP not be considered an accurate measure of economic well-being of a country? Identify at least three limitations of GDP as a measure of economic well-being.

The GDP does not take into consideration negative activities such as Divorces or Oil spills. Nor does it take into account for Home schooled or family care children, it will in turn add if those children are placed in daycare or if a Nanny is hired. It will also add the Oil bought, but not the Natural Resources destroyed…

Unemployment and Inflation – 48 Pages 

Click Here: ECON312 Unemployment and Inflation

Go to the Bureau of Labor Statistics website, www.bls.gov/news.release/empsit.toc.htm, and click on “Employment Situation Summary” to get the most up-to-date summary of unemployment in the U.S. or the “Employment Situation Summary Table A. Household data, seasonally adjusted.” What interests or surprises you about the summary table? How does that rate compare with the rate in the previous month or quarter? Discuss the differences in unemployment rates by gender, age, education, etc.

First thing I notices right away was that they separated the unemployment rates by age, sex, and race. That interested me because in the last questions asking to discuss the differences I didn’t think any of this would actually be a factor. It seems that the younger people are most likely to get the job over adults. Also as Jade mentioned the men are more likely to get paid higher than anyone else, but do not necessarily the first to receive a job.  Another thing that interested me was the number of people who are on unemployment for over 27 weeks. I feel that number is strictly just too high…

ECON312 Principles Economics Course

Week 5 All Students Posts – 75 Pages 

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Aggregate Demand and Aggregate Supply – 37 Pages 

Click Here: ECON312 Aggregate Demand Aggregate Supply

Go to the BEA website www.bea.gov. On the left tab under Publications, go to the Interactive Data Tables. Select National Income and Product Accounts. From Table 1.1.6 and 1.1.7 examine all four components of GDP (C, I, G, and Xn). Which of these four components of AD declined the most during the 2007 and 2009 recession? Do you think an increase in government’s spending (G) can boost the Aggregate Demand (AD) in a recession? Analyze why the economy may operate below full-employment GDP in the short run. How can the multiplier have a negative effect? What is the relationship between the multiplier and the marginal propensities? Explain.

The component of aggregate demand (AD) that fell the most during the recession was investment expenditure. As the spreadsheet at the bottom of this post shows, private investment fell much farther than any of the other components of AD. Government spending has a 1 or less than 1 multiplier effect on money multiplication. Government investment also crowds out the private sector. The US government has only borrowed to spend and bet that historically low interest rates will stay low so they can pay it back over the next 30 years. Its a bet no Vegas bookie would every touch. No Aggregate increase in demand seen. If the government cut spending, some public sector workers may lose their jobs. This will cause an initial fall in national income. However, with higher unemployment, the unemployed workers will also spend less leading to lower demand elsewhere in the economy. An increase in the marginal propensity to consume reduces the value of the denominator on the right-hand side of the equation, which then increases the overall value of the fraction and thus the size of the multiplier…

Fiscal Policy – 38 Pages 

Click Here: ECON312 Fiscal Policy Course Discussions

Give an example of an event or incident that has taken place in the U.S. economy which has a major economic impact–be specific, e.g., 9/11 attack, natural disaster, rise or fall in oil prices due to OPEC policies, consumer optimism or pessimism about an expected economic expansion or downturn, increase in government spending on healthcare, tightening of the legal and institutional environment, and so forth. What effect would this event have on AD or AS, other things being constant? What would be the resulting effect on equilibrium price level? Explain. What will be the effect of the different tools of fiscal policy to stabilize the economy? Give an example of a built-in stabilizer and explain how it would work to reduce this rise or fall in the level of AD.

The immediate effect was an increase in aggregate demand without a corresponding increase in aggregate supply. This is an ingredient for an economic disaster which went unrestrained and increased the price of goods and services. The reason for this is that the nation’s energy production has been reduced for some uncertain time and its water freight transportation has been disrupted. A significant amount of crude oil, natural gas and gasoline production has been halted by the hurricane…

ECON312 Principles Economics Course

Week 6 All Students Posts – 84 Pages 

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Money and Banking – 38 Pages 

Click Here: ECON 312 Money and Banking

What is the Federal Reserve (Fed) all about? Which Federal Reserve District Bank is closest to you? Who is the current Chairman of the Fed? Should the Fed remain independent from political authority or should the President and Congress have a say in their operations? Why? Why not? What is FOMC? What is the current Federal Funds Rate? How does the Fed implement monetary policy to manage the economy? At the last meeting of the FOMC, what was done to the federal funds rate–increased, decreased, or no change from previous meeting? Given the current state of the U.S. economy, should the Fed be using expansionary monetary policy or contractionary monetary policy? Why? Why Not?

Expansionary policy, or expansionary monetary policy, is when the Federal Reserve uses tools at its disposal in order to increase the money supply for the purpose of stimulating or growing the economy.
An expansionary policy is typically implemented by the Federal Reserve by enacting one or more of these tactics:

Lowering the federal discount rate:
By lowering the discount rate, the fees it charges banks to borrow from it, the Fed seeks to lower overall interest rates, thereby lowering the cost of money and its availability.

Lowering reserve requirements:
Reserve requirements are the amount of money banks must keep in reserve.  Lowering these reserves enables banks to have more money available to lend and invest…

Monetary Policy and the Federal Reserve – 46 Pages 

Click Here: ECON312 Monetary Policy and Federal Reserve

What is the Federal Reserve (Fed) all about? Which Federal Reserve District Bank is closest to you? Who is the current Chairman of the Fed? Should the Fed remain independent from political authority or should the President and Congress have a say in their operations? Why? Why not? What is FOMC? What is the current Federal Funds Rate? How does the Fed implement monetary policy to manage the economy? At the last meeting of the FOMC, what was done to the federal funds rate–increased, decreased, or no change from previous meeting? Given the current state of the U.S. economy, should the Fed be using expansionary monetary policy or contractionary monetary policy? Why? Why Not?

ECON312 Principles Economics Course

Week 7 All Students Posts – 73 Pages 

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Free Trade – 37 Pages 

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Are you for or against free trade? Are you for or against NAFTA? What is the economic basis for trade? Explain the underlying facts that support free trade and give an example of a good that you purchased recently that is based on resource differences. What are some examples of goods that the U.S. has comparative advantage in producing? Take a look at the tag of the shirt/dress/pants you are wearing today. Where was it made? Anyone wearing “Made in America” items of clothing today? We sometimes hear people say “Buy American.” Why don’t we? What is the basis of international trade? What are the benefits and the costs? Under what conditions would you advocate for trade restrictions?

I am not genuinely against free trade, notwithstanding I don’t concur on America discovering individuals and items from different nations to be transported her for less expensive. Americas unemployment rate is high, which we talk about in earlier weeks. By having the items made in different nations and transported to America is leaving numerous individuals without employments here in America. The free exchanges permit us as Americans to create items here and offer to different nations helping us all things considered. Importing and trading merchandise is imperative for our economy and for remote economies in light of the fact that there are numerous products that we just can’t make in the U.S. in view of restricted assets. We are likewise ready to offer products to different nations that they are not ready to create. With organized commerce, and without high charges and taxes, shoppers are really ready to bear the cost of numerous foreign items from different nations…

Foreign Exchange – 36 Pages 

Click Here: ECON 312 Foreign Exchange

What is happening to the value of the U.S. dollar these days? What causes the value of the U.S. dollar to rise or fall? Who demands U.S. dollar? Who supplies U.S. dollar? When we purchase German products, does our demand for euro go up or down? What are freely floating exchange rates all about, and how do they work? How can the falling U.S. dollar impact your travel expenses? Why would a cheap dollar relative to other nations’ currencies be good or bad for U.S. trade?

The value of the U.S. dollar is influenced greatly by supply and demand from within our country and foreign countries. If the demand for U.S. goods increases, then they become more valuable. As U.S. goods become more valuable, it causes an appreciation of the dollar. Appreciation is an increase in value, and depreciation is the decrease in value of the U.S. dollar. When the demand for U.S. goods decreases, it will cause depreciation of the dollar.

Inflation is a huge factor in determining the demand for goods. If inflation is low in the U.S. and prices of goods are lower than in other countries, the demand for U.S. goods will increase. The opposite is also true because if inflation is high, prices will rise and the price of those goods will be higher than the same goods sold by other countries. This will cause the demand for U.S. goods to decrease, and less demand will depreciate the value of the dollar.

Interest rates are another factor the affects the value of the dollar. If interest rates in the U.S. are high compared to rates in other countries, it becomes more desirable to deposit money U.S. banks because of a higher rate of return. When that happens the dollar with appreciate. When interest lower, it becomes less desirable to deposit money there, and the dollar will depreciate as a result.

General competitiveness of goods will cause a change in demand, which will affect the value of the dollar. When U.S. goods become more competitive, demand will rise and the dollar will appreciate. Economic growth can have the same effect. A recession can cause depreciation of the dollar, as it did during the great recession in the U.S. this can be attributed to the decline of interest rates…

ECON312 Principles Economics Course

Final Exam 

Click Here: ECON 312 Final Exam

(TCO 1) Opportunity cost is best defined as (Points : 4)

marginal cost minus marginal benefit

the time spent on an economic activity

the value of the best forgone alternative

the money cost of an economic decision

(TCO1) Which is not a factor of production? (Points : 4)

Money

Land

Labor

Capital

(TCO1) A point inside the production possibilities curve is (Points : 4)

Attainable and the economy is efficient

Attainable, but the economy is inefficient

Unattainable, but the economy is inefficient

Unattainable and the economy is efficient

(TCO1) A basic characteristic of a command system is that (Points : 4)

Wages paid to labor are higher

Government owns most economic resources

Free markets are never permitted in a command economy

Government planners play a limited role in deciding what goods will be produced

(TCO 2) Which is consistent with the law of demand? (Points : 4)

A decrease in the price of tacos causes no change in the quantity of tacos demanded

An increase in the price of pizza causes an increase in the quantity of pizza demanded

An increase in the price of hamburgers causes a decrease in the quantity of hamburgers demanded

A decrease in the price of turkey sandwiches causes a decrease in the quantity of turkey sandwiches demanded

(TCO 2) What combination of changes would most likely decrease the equilibrium price? (Points : 4)

When supply decreases and demand increases

When demand increases and supply increases

When demand decreases and supply decreases

When supply increases and demand decreases

(TCO 2) Chuck Grim has a price elasticity of demand for beer of 1.2.  Suppose that the price of beer is increased by 10 percent.  What will happen to the total amount Chuck spends on beer? (Points : 4)

It will not change

It will decrease

It will increase

It is impossible to tell

(TCO 2) Which of the following factors will make the demand for a product relatively elastic? (Points : 4)

There are few substitutes

The time interval considered is long

The good is considered a necessity

Purchases of the good require a small portion of consumers’ budgets

(TCO 2) A purely competitive firm’s output is such that its marginal cost is $4 and marginal revenue is $5. Hint: remember that MR = P for Pure Competition and the Profit Maximizing rule. Assuming profit maximization, the firm should (Points : 4)

Cut its price and raise its output

Raise its price and cut output

Leave price unchanged and raise output

Leave price unchanged and cut output

ECON312 Principles Economics Course

(TCO 2) Which case below best represents a case of price discrimination? (Points : 4)

An insurance company offers discounts to safe drivers

A major airline sells tickets to senior citizens at lower prices than to other passengers

A professional baseball team pays two players with identical batting averages different salaries.

A utility company charges less for electricity used during “off-peak” hours, when it does not have to operate its less-efficient generating plants.

(TCO 3) In the kinked demand model of oligopoly, if one firm increases its price, the most likely reaction of the other firms will be to (Points : 4)

Decrease their prices

Increase their prices

Not change their prices

Reduce their quantity

(TCO 3) The main difference between the short run and the long run is that (Points : 4)

Firms earn zero profits in the long run

The long run always refers to a time period of one year or longer

In the short run, some inputs are fixed

In the long run, all inputs are fixed

(TCO 4) A recession is a decline in (Points : 4)

The inflation rate that lasts six months or longer

The unemployment rate that lasts six months or longer

Real GDP that lasts six months or longer

Potential GDP that lasts six months or longer

(TCO 4) In calculating the unemployment rate, part-time workers are (Points : 4)

Counted as unemployed because they are not working full-time

Counted as employed because they are receiving payment for work

Used to determine the size of the labor force, but not the unemployment rate

Treated the same as “discouraged” workers who are not actively seeking employment

(TCO 4) Adding the market value of all intermediate goods and services to those of final goods and services in an economy in a given year would result in (Points : 4)

The calculation of GDP for that year

The calculation of NDP for that year

An amount less than GDP for that year

An amount greater than GDP for that year

(TCO 4) Nominal GDP differs from real GDP because (Points : 4)

Nominal GDP is based on constant prices

Real GDP is based on current prices

Real GDP is adjusted for changes in the price level

Nominal GDP is adjusted for changes in the price level

(TCO 6) When the federal government uses taxation and spending actions to stimulate the economy it is conducting (Points : 4)

Fiscal policy

Incomes policy

Monetary policy

Employment policy

ECON312 Principles Economics Course

(TCO 6) Refer to the graph.  What combination would most likely cause a shift from AD1 to AD2?

(Points : 4)

Increases in taxes and government spending

Decrease in taxes and increase in government spending

Increase in taxes and no change in government spending

Decreases in taxes and government spending

(TCO 6) The American Recovery and Reinvestment Act of 2009 included mostly (Points : 4)

Increases in taxes and government spending

Decreases in taxes and government spending

Increases in government spending and decreases in taxes

Decreases in government spending and increases in taxes

(TCO 6) The lag between the time the need for fiscal action is recognized and the time action is taken is referred to as the (Points : 4)

Crowding-out lag

Recognition lag

Operational lag

Administrative lag

(TCO 5) An increase in expected future income will (Points : 4)

Increase aggregate demand and aggregate supply

Decrease aggregate demand and aggregate supply

Increase aggregate supply

Increase aggregate demand

(TCO 5) The long-run aggregate supply curve is (Points : 4)

Upward-sloping and becomes steeper at output levels above the full-employment output

Upward-sloping and becomes flatter at output levels above the full-employment output

Horizontal

Vertical

(TCO 5) If the price of crude oil decreases, then this event would most likely (Points : 4)

Decrease aggregate supply in the U.S.

Increase aggregate supply in the U.S.

Increase aggregate demand in the U.S.

Decrease aggregate demand in the U.S.

(TCO 5) Deflation refers to a situation where (Points : 4)

Price level falls

Price level rises

The rate of inflation falls

The rate of inflation rises

(TCO 6) If a family’s MPC is .7, it means that the family is (Points : 4)

Operating at the break-even point

Spending seven-tenths of any additional income

Necessarily dissaving

Spending 70 percent of its disposable income

(TCO 7) As of January 2010, slightly more than half of the money supply (M1) was in the form of (Points : 4)

Currency

Checkable deposits

Gold coins and bars

Savings deposits

(TCO 7) Which of the following “backs” the value of money in the United States? (Points : 4)

Gold stored in the Federal Reserve Bank of New York

Acceptability of it as a medium of exchange

Willingness of foreign government to hold U.S. dollars

Size of the budget surplus in the U.S. government

ECON312 Principles Economics Course

(TCO 7) How many members can serve on the Board of Governors of the Federal Reserve System? (Points : 4)

Seven

Nine

12

14

(TCO 7) Which of the following is the most important function of the Federal Reserve System? (Points : 4)

Setting reserve requirements

Controlling the money supply

Lending money to banks and thrifts

Acting as fiscal agent for the U.S. government

(TCO 7) The Federal funds rate is the rate that banks pay for loans from (Points : 4)

The Fed

The U.S. Treasury

Other banks

Large corporations

ECON312 Principles Economics Course

(TCO 7) The difference between Fed behavior during the Bank Panics of 1930-1933 and the Financial Crisis of 2007-2008 is that the Fed (Points : 4)

Was very active during the former crisis, while it was basically passive during the latter crisis

Stood idly by during the former crisis, but took dramatic actions during the latter crisis

Was not yet in existence during the 1930s

Was a much bigger institution in the 1930s than it is today

(TCO 7) The purchase and sale of government securities by the Fed is called (Points : 4)

Federal funds market

Open market operations

Money market transactions

Term auction facility

(TCO 7) The Federal Reserve could reduce the money supply by (Points : 4)

Selling government bonds in the open market

Buying government bonds in the open market

Operating the term auction facility

Reducing the discount rate

(TCO 8) Which country is the United States’ largest trading partner in terms of volume of trade? (Points : 4)

Mexico

Japan

China

Canada

ECON312 Principles Economics Course

(TCO 8) The principal concept behind comparative advantage is that a nation should (Points : 4)

Maximize its volume of trade with other nations

Use tariffs and quotas to protect the production of vital products for the nation

Concentrate production on those products for which it has the lowest domestic opportunity cost

Strive to be self-sufficient in the production of essential goods and services

(TCO 8) A tariff is a (Points : 4)

Tax

Price ceiling

Quantity limit

Subsidy

(TCO 8) A key difference between import quotas and voluntary export restraints (VERs) is that the (Points : 4)

Domestic government administers the former, whereas the foreign government administers the latter

Foreign government administers the former, whereas the domestic government administers the latter

One is a tax, whereas the other is a quantity limit

One raises the price of the imported product involved, whereas the other one does not

(TCO 8) When tariffs on imported products are removed by a nation, it will result in (Points : 4)

Higher prices and lower quantities consumed

Higher prices and quantities consumed

Lower prices and quantities consumed

Lower prices and higher quantities consumed

(TCO 8) Which organization meets regularly to establish rules and settle disputes related to international trade? (Points : 4)

The United Nations Commission on Trade Law

The United Nations Conference on Trade and Development

The World Trade Organization

The Federal Reserve Board

ECON312 Principles Economics Course

(TCO 9) U.S. businesses are demanders of foreign currencies because they need them to (Points : 4)

Produce goods and services exported to foreign countries

Pay for goods and services imported from foreign countries

Receive interest payments from foreign governments

Receive interest payments from foreign businesses

(TCO 9) Remittances of Mexican workers in the U.S. to their families in Mexico are included in the U.S. balance of payments as a debit in the section on (Points : 4)

Trade in services

Net international transfers

Financial accounts

Capital accounts

(TCO 9) Comparing everything that the United States owes to other nations, and what they owe to the United States, the United States is currently a(n) (Points : 4)

Net creditor

Net debtor

International banking asset

International banking liability

ECON312 Principles Economics Course

(TCO 9) Foreign exchange rates refer to the (Points : 4)

Price at which purchases and sales of foreign goods take place

Movement of goods and services from one nation to another

Price of one nation’s currency in terms of another nation’s currency

Difference between exports and imports in a particular nation

ECON312 Principles Economics Course

(TCO 9) When the exchange rate between pounds and dollars moves from $2 = 1 pound to $1 = 1 pound, we say that the dollar has (Points : 4)

depreciated

Appreciated

Inflated

Deflated

(TCO 9) Which system would be accompanied by occasional currency interventions by central banks to stabilize or alter rates to avoid persistent balance of payments deficits or surpluses? (Points : 4)

Gold standard

Fixed exchange rates

Flexible exchange rates

Managed floating exchange rates

(TCO 8) a) Define the four basic types of trade barriers.  b) Who gains and who loses from a protective tariff?  Explain. (Points : 40)

A protective tariff is a tariff that is designed…

(TCO 6) a) Identify the four major tools of monetary policy. b) How can monetary policy address the problem of inflation?  (Points : 40)

Monetary policy can either be expansionary or….

ECON312 Principles Economics Course

DeVry