Final Exam Question 1: Which Of The Following Does Not Shift

Final Examquestion 1which Of The Following Does Not Shift The Aggregat

Final Exam question 1: Which of the following does not shift the aggregate demand curve? Choose one answer: a) an increase in the supply of money; b) an increase in GDP in Japan; c) a decrease in taxes; d) a decrease in the price level.

Question 2: Is anything that serves as a medium of exchange; is anything that is widely accepted as a means of payment; occurs when goods are exchanged directly for other goods; a consistent means of measuring the value of things; an item that holds value over time; the sum of all past federal deficits, minus surpluses; the actions of a central bank or regulatory authority that determine the size and rate of growth of the money supply, affecting interest rates; the use of government expenditures and taxes to influence economic activity.

Question 3: Indicate whether each is a microeconomic or macroeconomic topic: The impact of higher oil prices on steel production; increased demand for exotic dietary supplements; late 2000s surge in Asian economic activity; US employment and output increases between 2003-2007; preservation of wilderness areas' impact on logging and lumber prices.

Question 4: Adam Smith used the metaphor of the invisible hand to explain how __________. Choose one answer: a) markets mismatch buyers and sellers; b) the butcher and the baker are benevolent; c) people acting in self-interest promote societal interest; d) the production possibilities frontier illustrates efficiency.

Question 5: Which of the following is a macroeconomic question? Choose one answer: a) relationship between inflation and unemployment; b) demand for computer programmers next year; c) automobile production next year; d) union membership percentage.

Question 6: Who authored The General Theory of Employment, Interest, and Money? Choose one answer: a) John Maynard Keynes; b) Karl Marx; c) Adam Smith; d) Milton Friedman.

Question 7: Which is an example of an economic indicator? Choose one answer: a) Unemployment Rate; b) GDP; c) Inflation rate; d) All of the above.

Question 8: Money is __________. Choose one answer: a) anything used in transactions; b) necessary for transactions; c) facilitates specialization; d) has value.

Question 9: To be unemployed, a person must __________. Choose one answer: a) not have a job; b) not have a job and have looked for work; c) not have a job and be actively seeking; d) work less than desired.

Question 10: Income after taxes is known as __________. Choose one answer: a) tax-free income; b) marginal income; c) disposable personal income; d) sheltered income.

Question 11: A tariff is a __________. Choose one answer: a) quantity limit on imports; b) tax on imports; c) export limit agreement; d) health law enforcement.

Question 12: Macroeconomics is best described as the study of __________. Choose one answer: a) large issues; b) individual household choices; c) the entire economy; d) inflation and wage inequality.

Question 13: If coal external costs are considered and a pollution tax is imposed, the __________. Choose one answer: a) supply curve shifts left; b) supply shifts right; c) demand shifts left; d) both demand and supply shift left.

Question 14: GDP counts only final goods/services because __________. Choose one answer: a) they are the only transactions; b) counting all causes double counting; c) intermediate goods have hard-to-measure prices; d) intermediate quantities are hard to calculate.

Question 15: Countries participating in global trade can consume more than in isolation. Answer: True / False.

Question 16: Economics is best defined as the study of __________. Choose one answer: a) financial decisions; b) consumer choices; c) choices faced with scarcity; d) inflation, unemployment, growth.

Question 17: The study of the aggregate economy is known as __________. Choose one answer: a) microeconomics; b) political science; c) macroeconomics; d) labor economics.

Question 18: The business cycle measures the growth of __________ over time. Choose one answer: a) output; b) prices; c) employment; d) inflation.

Question 19: Match key terms: real GDP is the total value of final goods/services produced in a year, adjusted for prices; economic indicators include unemployment rate, GDP, inflation rate; inflation is an increase in average prices; deflation is a decrease; hyperinflation exceeds 200%; a price index reflects price changes; unemployment rate measures the percentage unemployed; current value of output.

Question 20: The four stages of the business cycle in order are __________. Choose one answer: a) trough, expansion, peak, recession; b) trough, expansion, recession, peak; c) trough, peak, expansion, recession; d) trough, recession, expansion, peak.

Question 21: List three unemployment instances, classify each as frictional, structural, or cyclical.

Question 22: A country has a comparative advantage if it can produce a good with fewer raw materials than others. Answer: True / False.

Question 23: Match stabilization policies: increase real GDP; reduce GDP; use government/central bank tools; active policies to reach potential output.

Question 24: The relationship between price level and real GDP supplied is __________. Choose one answer: a) aggregate supply; b) market supply; c) aggregate demand; d) market demand.

Question 25: A quota __________. Choose one answer: a) imposes a tax; b) limits quantity entering a country; c) limits output; d) subsidizes exports.

Question 26: Explain the four components of GDP.

Question 27: The aggregate demand curve is __________. Choose one answer: a) downward sloping; b) upward sloping; c) vertical at potential; d) horizontal at current prices.

Question 28: A decrease in income tax rate __________ the multiplier. Choose one answer: a) has no effect; b) may increase or decrease; c) increases; d) decreases.

Question 29: The opportunity cost of something is __________. Choose one answer: a) labor cost; b) best alternative sacrificed; c) price charged; d) search cost.

Question 30: Which is microeconomic? Choose one answer: a) worker productivity increase; b) apple prices decreased; c) Cambodia output increased; d) unemployment rate.

Question 31: Tomatoes grow well in Kansas. Why do Kansas residents buy tomatoes from Florida, Mexico, California? Opportunity cost?

Question 32: Match economic theories to schools: long-term market forces (classical); short-term fiscal focus (Keynes); sticky prices/stabilization (New Keynesian); money supply cause (monetarist).

Question 33: Federal Reserve actions to influence GDP are __________. Choose one answer: a) monetary policy; b) fiscal policy; c) cyclical policy; d) procyclical policy.

Question 34: Difference between Fiscal and Monetary Policy? Answer part included

Question 35: Barter transactions occur only when __________. Choose one answer: a) no money exists; b) no comparative advantage; c) double coincidence of wants; d) money lacks store of value.

Question 36: A firm’s total revenue equals __________. Choose one answer: a) revenue minus costs; b) revenue from selling marginal units; c) price times total quantity; d) price times marginal cost.

Question 37: A good synonym for elasticity is __________. Choose one answer: a) change; b) demand; c) responsiveness; d) stickiness.

Question 38: Explain the key difference between classical and Keynesian views. How would you choose if advanced conflicting advice?

Question 39: Which statement about the Consumer Price Index is true? Choose one answer: a) excludes imported goods prices; b) basket of goods does not change; c) excludes used goods; d) understates inflation.

Question 40: Name some services or goods produced at home counted in GDP, or not counted.

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Paper For Above instruction

Introduction

Economics, as a discipline, encompasses a broad range of concepts and theories that explain how societies allocate scarce resources to fulfill unlimited wants. The questions provided cover fundamental topics in macroeconomics and microeconomics, including aggregate demand, GDP, unemployment, inflation, fiscal and monetary policies, and international trade. Understanding these core principles is vital for analyzing economic phenomena and formulating effective policies.

Understanding Aggregate Demand and Macroeconomic Indicators

The first question asks which factor does not shift the aggregate demand curve. The correct answer is the decrease in the price level (option d), because a change in the price level typically results in a movement along the aggregate demand curve rather than a shift. In contrast, factors like an increase in the money supply or fiscal policies do shift the curve, affecting overall economic activity.

Macroeconomic indicators such as GDP, unemployment rate, and inflation rate serve as crucial metrics of economic health (Question 7). These indicators guide policymakers and economists in assessing economic stability and growth prospects. For example, GDP measures total output, while the unemployment rate provides insight into labor market conditions.

Microeconomic vs. Macroeconomic Perspectives

Questions regarding specific industries or individual markets, such as the impact of oil prices on steel production, are microeconomic topics. Conversely, aggregate economic phenomena like the surge in Asian economies or U.S. employment trends are macroeconomic topics (Question 3). Distinguishing between these perspectives is fundamental in economic analysis.

Foundational Economic Principles and Theories

Adam Smith's metaphor of the invisible hand illustrates how individual self-interest can lead to societal benefits through efficient market functioning (Question 4). Similarly, the classical and Keynesian schools differ significantly: classical economics emphasizes free markets and long-term equilibrium, while Keynesian economics advocates active government intervention to manage economic fluctuations (Question 38).

The concept of comparative advantage explains why countries benefit from specialization and trade, producing goods with fewer resources (Question 22). This principle underpins the rationale for free trade and global economic integration.

Government Policies and Interventions

Fiscal policy involves government spending and taxation to influence economic activity, whereas monetary policy pertains to central bank actions affecting the money supply and interest rates (Questions 33 and 34). For example, a government might increase spending to stimulate growth or raise interest rates to control inflation.

Stabilization policies aim to smooth out economic fluctuations. An expansionary policy increases GDP and employment, while contractionary measures reduce overheating or inflation (Question 23). Tools such as taxes, transfer payments, and government purchases are utilized to modulate economic activity.

Taxation, tariffs, and quotas are trade policy instruments. Tariffs are taxes on imports, used to protect domestic industries, while quotas limit the quantity of goods entering a country (Questions 11 and 25). These tools can impact prices, production, and trade balances.

Measuring Economic Performance

The calculation of GDP involves summing the value of all final goods and services to avoid double counting of intermediate transactions (Question 14). GDP components include consumption, investment, government spending, and net exports, each reflecting different facets of economic activity (Question 26).

Inflation measurement, through indexes like the Consumer Price Index (CPI), tracks price changes over time. The CPI's composition and constant basket help assess true inflation levels, guiding monetary policy decisions (Question 39).

International Trade and Comparative Advantage

Open economies can consume more than they produce domestically by engaging in international trade (Question 15). Countries exploit their comparative advantage to maximize global efficiency, producing goods more efficiently than others and gaining from trade.

Trade policies such as quotas limit import quantities, protecting domestic producers yet potentially raising domestic prices and reducing consumer choices (Question 25). Balancing protectionism and free trade is critical for sustainable economic growth.

Business Cycles and Economic Fluctuations

The business cycle encompasses periods of expansion and recession, with key stages namely recession, trough, recovery, and peak, occurring in a specific sequence (Question 20). Understanding these phases enables policymakers to implement timely interventions to stabilize the economy.

The rate of growth of output, employment, and prices characterizes the cycle's dynamics. Effective monitoring of these indicators guides fiscal and monetary policy responses to mitigate downturns.

Conclusion

In sum, the array of questions examined reflects the complexity and interconnectedness of economic concepts. From microeconomic principles like opportunity cost and elasticity to macroeconomic tools such as fiscal and monetary policies, mastery of these topics provides vital insights for economists, policymakers, and students alike. Developing a nuanced understanding of these foundational issues is essential for fostering economic stability and growth in a dynamic global landscape.

References

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• Sargent, T. J. (2020). Rational Expectations and Inflation. Princeton University Press.
• Friedman, M. (1962). Capitalism and Freedom. University of Chicago Press.
• Keynes, J. M. (1936). The General Theory of Employment, Interest, and Money. Macmillan.
• Samuelson, P. A., & Nordhaus, W. D. (2010). Economics (19th ed.). McGraw-Hill Education.
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