1. T / F When the economy is booming the inflation rate tends to rise.
2. T / F Both final and intermediate goods are counted when measuring GDP.
3. T / F Exchange rates are always set by central banks
4. T / F Investments are determined by consumers.
5. T / F Improvements in technology can shift the entire supply curve to the right.
6. T / F The Consumer Price Index is used to adjust Social Security payments.
7. T / F Government fiscal policies focus on changes in the money supply.
8. T / F A yield curve is a graph that shows the relationship of interest rates to maturities of a financial asset, such as a U.S. Treasury bond..
9. T / F The most important function of money is as a medium of exchange.
10. T / F ATM fees are an example that Americans will pay for convenience.
11. T / F Larry Aircraft, an aerospace engineer in Long Beach, lost his job because of defense cutbacks. Therefore, he is frictionally unemployed.
12. T / F Mary Martin is a Detroit auto worker was laid off because of the sharp decline in GDP, that caused a severe decrease in auto sales. This is a case of cyclical unemployment.
13. T / F When Magic Johnson, a skilled basketball player, in unable to locate work after completing his basketball career and re-entering the job market this is called frictional unemployment.
14. T / F Cyclical unemployment is when Oil Can Boyd, from Texas, finds he can no longer get work in the oil fields because of automated drilling techniques.
15. T / F The revenue from Heidi Fleiss's call-girl operations was included in official GDP.
16. T / F The four factors of production are land, labor, capital and entrepreneurial ability.
17. T / F The total market value of all final goods and services produced in an economy during a one year period is Net National product.
18. T / F Discouraged workers are officially classified as unemployed.
19. T / F Supervising member banks is the most important function of the Fed.
20. T / F The opportunity cost of holding money is lost interest income.
21. T / F Monetary policy is bases on control of the money supply
22. T / F An example of substitutes is ‘butter and margarine’.
23. T / F Consumer tastes cannot shift the demand curve for a good/service.
24. T / F Housing Permits is an example of a leading economic indicator.
25. T / F Cigarette demand is generally considered to be inelastic
We don't do tests for you here. We'll be glad to critique your thoughts on individual questions. You should be able to get 15 of those 26 by using common sense, without cracking a book.
True
Sure! Here are the explanations for each of the questions:
1. True. When the economy is booming, there is increased demand for goods and services, leading to higher overall prices, which results in inflation.
2. False. Only final goods are counted when measuring GDP. Intermediate goods, which are used in the production process, are not included to avoid double-counting.
3. False. Exchange rates are determined by market forces such as supply and demand, rather than being set by central banks. However, central banks can intervene in the foreign exchange market to influence exchange rates.
4. False. Investments are not determined by consumers. Investments are made by businesses and individuals in order to acquire assets or undertake projects that are expected to generate future income or returns.
5. True. Improvements in technology can increase productivity, leading to increased supply of goods and services. This shift in supply can be represented by the entire supply curve shifting to the right.
6. False. The Consumer Price Index (CPI) is a measure of inflation or the change in the average prices of a basket of goods and services over time. It is not used to adjust Social Security payments.
7. False. Government fiscal policies primarily focus on changes in government spending and taxation to influence the overall economy. Changes in the money supply are typically the realm of monetary policy, which is handled by central banks.
8. True. The yield curve is a graphical representation of the relationship between the interest rates and the maturity dates of a financial asset, such as a U.S. Treasury bond.
9. True. One of the main functions of money is to facilitate the exchange of goods and services. Money serves as a medium of exchange, allowing individuals to trade one good or service for another.
10. True. ATM fees are an example of Americans willingly paying for convenience. These fees are charged by banks for the use of automated teller machines and are typically accepted as a trade-off for the convenience they provide.
11. False. Frictional unemployment refers to temporary unemployment that occurs when people are in the process of switching jobs or entering the workforce for the first time. Larry Aircraft's situation is a result of structural unemployment, caused by changes in the defense industry.
12. True. Cyclical unemployment occurs due to the downturns in the business cycle, and Mary Martin's situation aligns with this definition as her unemployment is a consequence of the decline in GDP and auto sales.
13. True. Frictional unemployment is when individuals are between jobs and searching for new employment opportunities. Magic Johnson's inability to find work after retiring from basketball would fall under this category.
14. False. Technological advancements leading to automated drilling techniques causing job loss in the oil fields is an example of structural unemployment.
15. True. If the revenue from Heidi Fleiss's call-girl operations is included as part of the formal economy, then it could potentially be included in the calculation of GDP.
16. True. The four factors of production are land, labor, capital, and entrepreneurial ability. These are the key resources required for production in an economy.
17. False. The total market value of all final goods and services produced in an economy during a one-year period is Gross Domestic Product (GDP), not Net National Product.
18. False. Discouraged workers, who have given up looking for employment due to the belief that there are no suitable jobs available, are not officially classified as unemployed because they are not actively seeking work.
19. False. The most important function of the Federal Reserve (Fed) is to conduct monetary policy, which involves controlling the money supply and interest rates to maintain price stability and promote economic growth. Supervising member banks is one of the Fed's important responsibilities, but not the most crucial one.
20. True. The opportunity cost of holding money is the potential interest income that could have been earned if the money had been invested or deposited in an interest-bearing account.
21. True. Monetary policy is indeed based on the control of the money supply. Central banks, such as the Federal Reserve, use various tools to influence interest rates and the availability of credit through changes in the money supply.
22. True. Butter and margarine are examples of substitute goods. When the price of one increases, consumers may choose to purchase the other as a substitute for the more expensive option.
23. False. Changes in consumer tastes and preferences can indeed shift the demand curve for a good or service. For example, if consumers develop a preference for healthier food options, the demand for organic products may increase.
24. True. Housing Permits is an example of a leading economic indicator. It provides insight into future construction activity, which is a significant component of economic growth and development.
25. True. Cigarette demand is generally considered to be inelastic, meaning that changes in price have a relatively small impact on the quantity demanded. This is because cigarettes are addictive and consumers may be willing to pay higher prices despite price increases.