Econ Final Test/Quiz Questions
Based on the data in the table above, what does GDP equal? (in billions of dollars) consumption expenditure-----7,500 investment--------1,300 gov. expenditures on goods and services----1,400 net exports of good and services---- (-200)
$10,000 billion
at a price level of 100, John has savings equal to $20,000. If the price level increases to 130, the buying power of John's savings is approximately
$15,400
jack nelson, a supervisor in the hardware department at Sears, received a $3,000 increase in his annual disposable income. Suppose his marginal propensity to consume is .8. How much of the $3,000 increase will jack spend on consumption?
$2,400
Suppose the working-age population is 220 million, the labor force is 150 million, and the unemployment rate is 10 percent. The number of unemployed people is
15 million
Using the table above, the working age population is Total population-----250 Less than 16 years old----30 institutionalized---15 U.S. arm forces---10
195 million
Scott and Cindy both produce only pizza and tacos. In one hour, Scott can produce 20 pizzas or 40 tacos. In one hour, Cindy can produce 30 pizzas or 40 tacos. Cindy's opportunity cost of producing 1 taco is
3/4 of a pizza
the bubby gum factory produces bubble gum. Joanne is one of the employees, and she produces 10 packs per hour. Her money wage rate is $12 per hour. If a pack of bubble gum sells for $1 then
Joanne is creating a $2 per hour loss for the firm
Everything else the same, if consumption expenditure increases by $200 billion and imports increase by $200 billion, then GDP
does not change
if the demand and supply both increase equally, then the equilibrium price ____ and the equilibrium quantity _______
does not change; increases
in the stock market, the price of a share of stock might fall one day and rise the next. This fluctuation indicates that
either demand or supply changed from one day to the next
to increase its economic growth, a nation should
encourage education because that increases the quality of labor
if the economy is on its short run phillips curve at the natural unemployment rate, then in the AS-AD model, real GDP is definitely
equal to potential GDP
U.S. GDP
excludes the value of underground production and leisure time
which of the following best describes comparative advantage?
forgoing the fewest units of one production to produce a unit of another product
Mary has decided that she does not like Iowa and has decided to quit her job as a medical technician and move to Arizona. Mary's unemployment as she searches for a new job is best classified as frictional.
frictional
over the business cycle, factors such as the quantity of capital, human capital and technology
grow but do not fluctuate as much as the quantity of labor employed
the trade off exhibited by the short run fillips curve is
higher unemployment with lower inflation
the US possesses a large amount of human capital. As a result of this fact, in the US there is a
highly skilled and educated labor force
economics try to isolate the effect of one variable at at time. They do so by
holding all other relevant factors the same
GDP is measured by
adding the market value of total final production
if firms' expectations about the future become pessimistic so that they think future profits will be lower, then
aggregate demand decreases and the AD curve shifts leftward
which of the following could lead the production possibilities frontier to shift inward?
an earthquake that destroys factories
By donating $1,000 to the Salvation Army, Caroline reduces her taxable income. To Caroline, the reduction in her taxable income is
an incentive
using the aggregate expenditure model, the equilibrium model, the equilibrium level of the aggregate expenditure can occur when the economy is producing
at full employment, above full employment, or below full employment
the largest share of total production in the United States is
consumption goods and services
which of the following directly contributes to people's standard of living?
consumption goods and services
the decisions of firms and households are
coordinated by markets
Hank requires 1 hour to cut the grass and 3 hours to clean the house. His sister Holly requires 1 hour to cut the grass and 4 hours to clean the house. Which of the following statements is true?
holly has a comparative advantage in cutting the grass
Consumption expenditures are defined as spending on good and services by
households
scarcity exists because
human wants exceed the resources available to satisfy them
which of the following statements is correct about potential GDP? i. actual real GDP equals potential GDP when the economy is at full employment ii. real GDP can be less than potential GDP iii. when real GDP equals potential GDP, it also equals nominal GDP
i and ii
economic growth depends upon which of the following? i. improving the quality of labor ii. technological advancement iii. increasing the amount of capital
i, ii, and iii
which of the following is correct i. a surplus puts downward pressure on the price of a good. ii. a shortage puts upward pressure on the price of a good. iii. there is not surplus or shortage at equilibrium.
i, ii, and iii
which of the following changes aggregate supply and sifts the aggregate supply curve? i. change in the price level ii. change in the potential GDP iii. change in the money wage rate
ii and iii
capital (not human capital) is the productive resource that
includes machinery and tools
"during 2005, the higher price of gasoline led to a decrease in demand for gasoline" holding other thing constant, this statement is
incorrect, because as the price increases, the quantity demanded decreases, not the demand.
mother against drunk driving campaigned to increase the legal penalties of drunk driving. This successful campaign ________ of drunk driving
increased the marginal cost
an increase in technology _________ potential GDP and __________ aggregate supply
increases; increases
the long run phillips curve is the relationship between
inflation and unemployment when the economy is at full employment
autonomous expenditure includes
investment, gov. expenditures on good and services, and exports
If the economy is at ful employment, then the unemployment rate
is equal to the natural unemployment rate
the benefit someone gets from consuming one more glass of lemonade is known as the
marginal benefit
what typically happens to benefits as the amount of an activity is increased?
marginal benefit decreases
The cost of a one-unit increase in an activity is called the
marginal cost
Teenagers drink more soda than other age groups. If the number of teenagers increases, everything else remaining the same,
market demand for soda increases
having an absolute advantage
means being able to produce more of each product than the trading partner
In the united states, a reason for the increase of the labor force participation rate for women is that
more women pursued a college education and received higher wages upon graduation
which of the following is true about income of the world?
most people live in countries that have average income levels below the world average.
To help unscramble cause and effect, economists
must use the ceteris paribus assumption
Which of the following expenditure components of GDP can be negative or positive?
net exports of goods and services
a common political statement in the US is that we must strengthen social security. This is an an example of
normative statement
The united auto workers bargained for higher wages and more benefits for autoworkers. As a result of the higher wages and increased benefits, i. the quantity of new automobiles supplied decreases ii. the supply of new automobiles decreases iii. the supply of new automobiles increases
only ii
If you make dinner for yourself
only the market value of ingredients that you purchased this year is added to GDP.
To gain work experience prior to graduating from college, Carol, age 22, started working for her parents on sales calls. In the current population survey, Carol is considered
part of the labor force and employed
In economics, there are two types of statements. One describes what is; the other describes what ought to be. These statements are
positive and normative
the minimum wage is a
possible cause of job rationing because it raises wages above their equilibrium
if the real wage rate decreases from $8 per hour to $7.5 per hour, the
quantity demanded of labor increases
The AD curve is a graph depicting the
relationship between the price level and the quantity of real GDP demanded
Payments to the factors of production are
rent, wages, interest, and profit or loss
states fund their operations through the collection of taxes. The largest single source of tax revenue for a typical state comes from which type of tax?
sales tax
The phrase "a change in demand" most directly implies a
shift of the demand curve
If the number of sellers decreases, then the supply curve ________ and the supply ________.
shifts leftward; decreases
the question of "how are goods and services produced" most closely addresses which of the following issues?
should ford use expensive industrial robots or inexpensive mexican autoworkers to produce SUV's
of the following, the largest expenditure category of the federal government is
social security
to achieve gains from trade, a country
specializes in the producing a good in which it has a lower opportunity cost
Investment is defined as the purchase of
the purchase of new capital goods and additions to inventories
the law of demand refers to how
the quantity demanded changes when the price of the good changes
correlation means
the values of 2 variables movie in a predictable and related way
If the price is below the equilibrium price,
there is a shortage
the fact of increasing opportunity cost when moving on the PPF means that
to increase the production of one product requires larger and larger sacrifices of the other good.
a business cycle has two turning point, which are the
trough and peak
you have chosen to take a trip during spring break. if you had not gone, you would either have worked at a temporary job or studied for exams. the opportunity cost of your trip is
we cannot determine what the opportunity cost is without knowing which alternative you would have preferred
When Ford decides to produce more hybrid cars that run on both gas and electricity, it directly answers the ______ question.
what
The united states produces large amounts of software. based on this observation, it is possible to state that the US has decided that "software" is part of the answer to which economic question?
what goods and services are produced?
positive statements are statements about
what is
which of the following is an example of a sunk cost?
when a movie starts after buying a ticket for it
which of the following is a macroeconomic topic?
why did production and job expand rapidly in 2004
which of the following is a final good or service?
a new replacement muffler installed by midas mufflers
Which of the following most correctly describes GDP? GDP is the sum of the market value of all
Final good and services purchased within a country in a given time period
A measure of a country's production is its
Gross Domestic Product
the colarado ski shop sold 60 jackets to a belgium company is paris. the ski jackets are a
U.S. export
The economic choices made by individuals, businesses, government and the interactions of those choices answer which 3 major questions?
What? How? and for Whom?
a standard definition of recession is
a decrease in GDP that lasts for at least 6 months
suppose the price of leather used to produce shoes increases. As a result, there is _______ in the supply of shoes and the supply curve of shoes _________.
a decrease; shifts leftward
which of the following results in a rightward shift of the supply curve of rutabagas?
a fall in the price of fertilizer used to grow rutabagas.
A slope is measured by
change in the value of y variable divided by the change is the value of x variable
making choices on the margin means
comparing all relevant alternatives systematically and incrementally
for twenty years, Jim had a job as a linotype operator at a small local newspaper. But his newspaper bought a computer with the ability to directly print out a plate from which the newspaper can be printed. Jim was laid off two years ago and has been unable to find a linotype operator's job anywhere. Jim's unemployment is best classified as
structural
If the demand for used cars decreases after the price of a new car falls, used cars and new cars are
substitute goods
if the government increases unemployment benefits, then the labor
supply curve shifts leftward
which of the following is not a normative cost?
teenagers are responsible for most driving fatalities
comparing AS-AD model and the phillips curve, we see that
the AS-AD model uses price level and the phillips curve uses the rate of inflation
An opportunity cost is
the benefits of the highest-valued alternative forgone
the functional distribution of income measures which of the following
the distribution of earnings by the factors of production
for rock concerts, the admission price is set by the promoter. If scalpers are able to sell their tickets for more than the admission price, then
the equilibrium price to the concert must be more than the set admission price
in the circular flow model
the government buys goods and services from firms
in stores, it is common to find products marked as "on sale" at a lower than usual price. what explains this behavior?
the law of demand is being used to increase the quantity of labor demanded
the production possibilities frontier illustrates the
the maximum combination of goods and services that can be produced
the production function is a relationship between the amount of labor employed and
the maximum quantity of real GDP that can be produced
the opportunity cost of a decision is measured in terms of
the next best thing given up