Week 8 + Weekly Quiz Practice

c To an economist, the field of industrial organisation answers which of the following questions? a) Why are consumers subject to the law of demand? b) Why do firms experience falling marginal product of labour? c) How does the number of firms supplying a market affect prices and the efficiency of market outcomes? d) Why do firms consider production costs when determining product supply? d Average total cost is increasing whenever: a) Marginal cost is increasing. b) Total cost is increasing. c) Marginal cost is less than average total cost. d) Marginal cost is greater than average total cost. d The graph below is.a set of cost curves reflecting information about the cost structure of a firm. Output Q is in 1,00's and cost curves are in $/unit. This particular firm is necessarily experiencing diminishing marginal product when: a. Black line is falling. b. Blue line is rising c. Green line is rising d. Black line is rising. 1/9 b A monopolist produces: a) More than the socially efficient quantity of output, but at a higher price than in a competitive market. b) Less than the socially efficient quantity of output, but at a higher price than in a competitive market. c) The socially efficient quantity of output, but at a higher price than in a competitive market. d) Possibly more or possibly less than the socially efficient quantity of output but definitely at a higher price than in a competitive market. d Price discrimination requires the firm to: a) possess some market power. b) prevent customers from engaging in arbitrage. c) separate customers according to their willingness to pay. d) do all of the above. d Which of the following transactions has a direct and immediate effect on GDP? a) An unemployed worker gets unemployment compensation. b) You sell your used car to a friend. c) You buy some IBM stock. d) A customer buys a glass of wine in a restaurant. b In the land of Waterfall, polished stones and red roses are produced. From 2016 to 2017, the prices of both stones and roses increased and the quantity of stones produced decreased while rose production remained unchanged. Which of the following statements is true? a) Nominal GDP may have increased or decreased and real GDP increased. 2/9 b) Nominal GDP may have increased or decreased and real GDP decreased. c) Nominal GDP increased but real GDP may have increased or decreased. d) Nominal GDP decreased but real GDP may have increased or decreased. d Keynes was motivated to create a macroeconomic theory different from classical theory because: a) he believed in government invention in the economy. b) he believed in the idea of the invisible hand. c) monetary policy was more important than the classical acknowledged. d) Classical theory was inconsistent with the Great Depression. c If there are 200,000 working-age people, the labour force has 160,000 people and 152,000 have jobs, compute the unemployment rate: a) 4% b) 8% c) 5% d) 24% e) 80% d If there are 200,000 working-age people, the labour force has 160,000 people and 152,000 have jobs, compute the labour force participation rate: a) 4% b) 8% c) 5% d) 24% e) 80% 3/9 b Now suppose, using the information from the previous problem, that the number of people who have jobs falls to 99,000 and the labour force falls to 100,00 then: a) the unemployment increases. b) the unemployment rate declines. c) the labour force participation rate increases. d) the employment to population ratio increases. e) none of the above. d Which of the following best illustrates the medium of exchange function of money? a) You keep some money hidden in your shoe. b) You keep track of the value of your assets in terms of currency. c) You pay for your tall latte using using currency. d) You note that the price of a tall latte is the same as a double chocolate muffin. e) None of the above is correct. d The inflation tax taxes holders of money by: a) shrinking the real value of the money government owes or has obligated itself to pay in the future. b) shrinking the real value of private savings held as money. c) incentivising consumers to spend money quickly by making money less valuable (in terms of quantities of goods and services) in the future. d) all of the above. Deflation: a) Increases the ability to pay debts and raises the value of money. b) Increases the ability to pay debts and 4/9 c lowers the value of money. c) Reduces the ability to pay debts and raises the value of money. d) Reduces the ability to pay debts and lowers the value of money. b According to the Fisher effect, an increase in the rate of inflation will: a) increase both the real and nominal interest rates. b) increase the nominal interest rate and not change the real interest rate. c) increase the real interest rate and not change the nominal interest rate. d) increase the nominal interest rate and decrease the real interest rate. d Which of the following is a function of money? a) A medium of exchange. b) A unit of account. c) A store of value. d) All of the above. d Which of the following is a necessary property of money? a) Has intrinsic value. b) Exchangeable for a fixed quantity of a commodity with intrinsic value. c) Does not depreciate in value. d) Widespread belief that it will be socially accepted in exchange transactions. c If registered banks hold 8% of deposits as reserves, the money multiplier is: a) 1.25 b) 8 c) 12.5 d) 80 5/9 b Suppose A-Bank's optimal reserve ratio is 20% and the bank currently has no excess reserves. If someone deposits an additional $60,000 into the bank, and the bank takes no other action, it will: a) Have $12,000 in excess reserves. b) Have $48,000 in excess reserves. c) Need to raise an additional $20,000 of reserves to meet its optimal reserve ratio. d) None of the above is correct. a The fractional reserve system in commercial banking implies that: a) Commercial banks' choices of reserve ratio strongly influences the money supply. b) The Official Cash Rate determines the money supply. c) The Minister of Finance controls the money supply. d) All depositor funds are kept safely in the vault. a When the RBNZ decreases the OCR, private banks will: a) reduce their settlement balances and lend more to the public. The money supply increases. b) Reduce their settlement balances and lend less to the public. The money supply decreases. c) Increase their settlement balances and lend more to the public. The money supply increases. d) Increase their settlements balances and lend less to the public. The money supply decreases. 6/9 c According to the quantity theory of money, in the long run: a) A decrease in the money supply will increase the price level. b) A decrease in the money supply will not affect the price level. c) An increase in the money supply will increase the price level. d) An increase in the money supply will increase real GDP. d Hyperinflation results when: a) The government issues bonds to finance existing government debt. b) The inflation rate exceeds the money supply growth rate. c) The government relies on the inflation tax as its primary source of revenues. d) All of the above. c If the exchange rate moves from 1.00 US dollar per Euro to 1.25 US dollars per Euro, the the US dollar has ___________ and the Euro has __________. a) Appreciated 20%; depreciated 25%. b) Appreciated 25%; appreciated 25%. c) Appreciated 25%; depreciated 20%. d) Depreciated 20%; appreciated 25%. c In the foreign exchange market as discussed in class, an increase in the domestic interest rate will see: a) An increase in the supply of NZ$ so appreciating the exchange rate. b) A decrease in the supply of NZ$ so appreciating the exchange rate. c) An increase in the demand of NZ$ so appreciating the exchange rate. d) A decrease in the demand of NZ$ so depreciating the exchange rate. 7/9 a Which of the following could be a consequence of an appreciation of the New Zealand real exchange rate? a) John, a French citizen, decides that New Zealand pork has become to too expensive and cancels his order. b) Nick, a New Zealand citizen, decides that this trip to Nepal would be too costly and cancels his trip. c) Roberta, a New Zealand citizen decides to import fewer windshield wipers for her auto parts company. d) Alan, an Australian citizens decides that he prefers a holiday in New Zealand compared to Fiji. e) None of the above. a Suppose that export demand for New Zealand milk powder increases markedly. The initial impact in the foreign exchange market and exchange rate will be _________. a) Increase in demand for the NZ$ and an appreciation. b) Increase in demand and an depreciation of the NZ$. c) Decrease in supply and an appreciation of the NZ$. d) Decrease supply and an depreciation of the NZ$. b Suppose that the inflation rate in New Zealand is higher than that of Japan. With all other things being equal this would mean that: a) The real exchange rate between the New Zealand dollar and the Japanese Yen is appreciating. b) The real exchange rate between the New Zealand dollar and the Japanese 8/9 Yen is depreciating. c) The real exchange rate between the New Zealand dollar and Japanese Yen will not change. d) Cannot be determine. Efficiency of market outcomes? To an economist, the field of industrial organisation answers how does the number of firms supplying a market affect price at the: Marginal cost is greater than average cost Average cost is increasing whenever Marginal cost A particular firm is necessarily experiencing diminishing marginal product when ______________ is rising. Marginal cost The cost of producing an additional unit of a good. A monopolist produces: 9/9