ECON Midterm prep

GDP is the market value of:

all final goods and services produced in the economy in a given year

Which of the following could cause consumption to shift up from C to C'?

an increase in asset values

Inflation is defined as:

an increase in the overall level of prices

The recurring ups and downs in the level of economic activity extending over time are referred to as:

business cycle

The term indicating that all other influences, other than the observed determinants of a model, will be held as constant is known as:

ceteris paribus

The multiplier is useful in determining the:

change in GDP resulting from a change in spending.

A headline states "Real GDP Falls Again as the Economy Slumps." This condition is most likely to produce what type of unemployment?

cyclical

The ability to read, work with, analyze, and argue with data is known as

data literacy

If the United States wants to increase its net exports in the short term, it might take steps to:

depreciate the dollar compared to foreign currencies.

Which economic change will most likely happen given the economic situation depicted by point b the graph below ?

employees begin requesting wage increases

In calculating the unemployment rate, "discouraged" workers who are not actively seeking employment are:

excluded from the labor force

Core inflation refers to the inflation picture after stripping away the:

food and energy prices

Which of the following is a component of the Aggregate Demand curve?

government purchases

Which of the following would cause Investment to decline?

higher interest rates

The circular flow model helps us to see a visual representation of the economic transactions between which groups of the economy?

households, firms, government and international trade

If the MPC is .70 and investment increases by $3 billion, the equilibrium GDP will

increase by $10 billion

If government increases its purchases by $15 billion and the MPC is 2/3, then we would expect the equilibrium GDP to:

increase by $45 billion.

If the price of Gatorade increases, the equilibrium price of Powerade, a substitute good, will ________ because of a shift in ________.

increase; demand

Something is an inferior good if the demand for the good

increases as the consumer's income decreases

If a person's nominal income increases by 5% while the price level increases by 2%, then that person's real income:

increases by 3%

Supply factors in economic growth include the following, except:

increases in purchases of output

the three statistics that are the main focus for those measuring maceconomic health are:

real GDP, inflation and unemployment

Kevin has lost his job in an automobile plant because the company switched to robots for its welding step in the assembly line. Kevin plans to go to technical school to learn how to repair microcomputers. The type of unemployment Kevin is faced with is:

structural

If the price of a good decreases, holding all else constant,

the demand for that good's complements will increase.

A nation's real GDP was $250 billion in 2013 and $265 billion in 2014. It's population was 122 million in 2013 and 125 million in 2014. What was the growth rate in real GDP per capita?

3.4%

In the 1920s, Germany after the First World War experienced an economic condition which can best be described as:

Hyperinflation

Why does the short run aggregate supply curve become increasingly steeper as it crosses to the right of long run aggregate supply?

the marginal costs of production rise, such as paying overtime to employees

Suppose you have four choices—go to a movie, read a book, watch television, or go to a concert. You choose to go to a movie. The opportunity cost of the movie is

the value of the activity that you would have selected if you hadn't gone to the movie

Before the Industrial Revolution, living standards in the world:

were relatively stagnant for long periods of time

As a good economist, you calculated the economic cost of getting a four-year college degree. Suppose that at your university, you will pay $12,000 each year for tuition, $2,000 each year for textbooks, and $8,000 per year for room and board. Before you left for college, your boss from your high-school job offered to pay you $20,000 per year for full-time work. Assume that if you decided not to go to college, your parents would not let you live at home. What is the total economic cost of this college degree?

$136,000

If 40,000 worker-hours produced a total output of $600,000 in the economy, then the labor productivity is:

$15/worker-hour

A nation's real GDP was $250 billion in 2017 and $265 in 2018. Its population was 120 million in 2017 and 125 million in 2018. What is its real GDP per capita in 2018?

$2,120 per person

Use the information below to determine the equilibrium point in this market.

$20

The following are national income account data for a hypothetical economy in billions of dollars: gross private domestic investment ($320); imports ($35); exports ($22); personal consumption expenditures ($2,460); and, government purchases ($470). What is GDP for this economy?

$3,237 billion

If real GDP in a year was $3,668 billion and the price index was 112, then nominal GDP in that year was approximately:

$4,108 billion

Refer to the below table. What was real GDP in Year 2? (Numbers are reported in billions of dollars.)

$4,911 billion

Use the graph below to answer the question: A binding price floor would occur at?

$8

The economy is currently in the situation depicted in the graph below and is experiencing a gap of $75 billion. In an attempt to stabilize the economy government cuts taxes by $35 billion. Household optimism rising and increases spending by $10 billion. What must the MPC be for the economy to result at potential output? (round to the nearest tenth)

.6

Your Career Research project introduced you to the research process. Which of the following represents the correct steps to the research process?

1)Identify the Research Question, 2) Survey the literature, 3) Analyze the problem, 4) Test the analysis, 5) Interpret the results; and, 6) Communicate the results.

With no inflation, a bank would be willing to lend a business firm $5 million at an annual interest rate of 6%. But if the rate of inflation was anticipated to be 4%, the bank would most likely charge the firm an annual interest rate of:

10%

Consumers in an economy buy only three general types of products, A, B, and C. Changes in the prices of these items over a period are shown below: Using year 1 as the base year, and given the data below, the country's price index in year 2 is:

106.3

Jane has $10 to buy on organic apples. Organic apples cost $2.50 per pound. Jane values the first pound of apples at $10, the second pound of apples at $5, the third pound of apples at $1.50. All additional pounds of apples she values at $1. How many pounds of apples will Jane buy?

2

The economy has an annual inflation rate of 3.5%. It will take approximately how many years for the price level to double?

20 years

A nation's average annual real GDP growth rate is 2.5%. Based on the "rule of 70", the approximate number of years it would take the nation's real GDP to double is:

28 years

If the natural rate of unemployment is 4.5 percent and the actual unemployment rate is 6.5 percent, then Okun's Law indicates that the GDP gap would be:

4%

A nation has a population of 260 million people. Of these, 60 million are retired, in the military, institutionalized or under 16 years of age. There are 188 million people who are employed and 12 million who are unemployed. what is the unemployment rate?

6.0

Which point on the below PPF graph is inefficient?

A

Which of the following would reduce GDP by the greatest amount?

A $20 billion decrease in government spending

If government were to set a minimum price which may be charged in this market at $30, what would happen?

A binding price floor

Which of the following would not have an impact on the supply of auto tires?

A decrease in household incomes

An economy experiences an MPC of 0.75. Interest rates rise in the economy causing initial change(s) in spending of $5 billion. Simultaneously, net taxes fall by $7 billion. What is the net change to real GDP as a result of these initial impacts on the economy?

A decrease of $19 billion in real GDP

The long-run aggregate supply curve is:

A depiction of the economy's full employment output

A temporary disruption of oil supplies to the United States caused by geopolitical events would have which of the most likely impacts?

A short-run adverse supply shock

Which area on the graph depicts consumer surplus?

ABC

The e-cigarette company, Juul, has been criticized for misrepresenting their target audience. What evidence is there that the "number and composition" of consumers aged 40 and above is not their only target audience?

All of the listed items are evidence

The change in Juul vaping products occurring between the years 2015 to 2019, can best be described as:

An increase in demand caused by number and composition of consumers

Which of the following is included in GDP?

Annual service fees received by stock brokers

Which of the following is an example of the law of demand?

At a price of $1, I'll buy 20 units, but at a price of $2, I'll buy 10 units

The National Income Product Accounts reporting Gross Domestic Product and the sub-accounts are compiled by the:

Bureau of Economic Analysis

Households change their spending by $10 billion due to a decrease in net wealth. The country's marginal propensity to consume is 0.8. What impact will this have on real GDP?

Consumption spending will decrease by $50 billion

Inflation caused by a rise in the prices of inputs used in production is referred to as:

Cost Push Inflation

Inflation caused by an increase in aggregate demand spending is referred to as:

Demand pull inflation

Mollie just graduated from college and is now looking for work. She has had three job interviews in the past month, but still has not gotten a job offer. What type of unemployment is Mollie experiencing?

Frictional

A friend is weighing the costs and benefits of going to college. She shows you the list of direct costs for her education and data regarding the possible salary earned from employment requiring the college degree she'll earn. From an economic perspective, what would be the best thing to say to her?

Great start but you should also include the opportunity cost of your education for a more accurate analysis. This is the earnings you'll give up by going to school rather than working

How is a reduction in the national unemployment rate (more people employed) represented in a nation's production possibilities frontier (PPF)?

It will move production outward, to a point closer to or on the PPF.

If a $20 billion increase in government expenditures increases equilibrium GDP by $50 billion, then

MPC for this economy is .6

Would an increase in the value (strengthening) of the dollar help to correct the situation depicted by point B in the graph below?

No, it would increase the contractionary gap

The GDP deflator (aka GDP price index) equals:

Nominal GDP divided by Real GDP

The North-West economy is experiencing a $100 billion gap as depicted in the graph below. MPC for this economy is 0.9. Which of the below would correct this gap to potential output?

None of the options will correct this gap

The largest spending component of GDP is:

Personal Consumption Expenditures

Bev says that "An increase in the tax on beer will raise its price." Polly argues that "Taxes should be increased on beer because college students drink too much." We can conclude that

Polly's statement is normative, but Bev's is positive.

The aggregate expenditures model depicts short run aggregate supply (SRAS) as horizontal to the left of long run aggregate supply. What does this shape of SRAS convey?

Prices are "sticky" downward when the economy produces less than potential output

If contracts for employee wages are renegotiated so that employees receive a raise, what happens initially to the aggregate expenditures model?

SRAS shifts leftward

As new technologies are invented and experience widespread use by businesses in their production of goods and services, what changes would we make to the Aggregate Expenditures model?

SRAS, then LRAS shift rightward

Government purchases in national income accounts would include payments for:

Salaries for current U.S. military officers

Select the best analogy representing the relationship of Microeconomics to Macroeconomics.

Studying a species of tree vs. studying the forest ecosystem

What would happen to the equilibrium price and quantity of new cars if there is a recession where many people lose their jobs?

The equilibrium price and quantity would both fall as demand shifts to the left.

An economist observes that a fan is willing to pay $1000 for Taylor Swift concert tickets, but was able to purchase them on StubHub.com for $200. The economist would be able to state that

The fan's consumer surplus is $800

Refer to the graph below and answer the question: If an individual chooses to move from point B to point C, what has happened?

The individual experiences an increasing opportunity cost of lost academic success

The economy is currently in the situation depicted by the graph below. If minimum wage laws increase the minimum wage, what would be the likely initial impact on the economy?

The price level will rise and real GDP will fall

Which statement is correct?

The production of nondurable consumer goods is more stable than the production of durable consumer goods

When inflation occurs:

The purchasing power of money decreases

A binding price ceiling will have which of the following consequences?

The quantity demanded will be larger than the quantity supplied.

Government increases spending by $50 billion and raises taxes by $50 billion to fund the spending. The economy's MPC is 0.75. What is the impact on the economy of these actions?

There is a $50 billion increase in real GDP

When price falls, which of the following happens?

There is a decrease in the quantity supplied.

If the price of solar panels decreases, what would you expect would happen in the market for solar panels?

There would be a movement to the right downward along the demand curve.

One of the key differences between the neoclassical viewpoint and Keynesian viewpoint for the economy is:

Wages are flexible to neoclassical economists and sticky to Keynesian economists

In a command economy ________ make the decisions regarding what gets produced, how it gets produced, for whom it gets produced, and how to accommodate change. In a capitalistic society these decisions are made by

a central authority; markets

A movement along a consumption function is caused by:

a change in disposable income

Which of the options given would explain the change in demand shown in the below graph?

a decrease in the number of buyers in a market

Which of the following would cause a decrease in consumption spending?

a decrease in transfer payments

Net exports are a positive number when:

a nation's exports of goods and services exceed its imports

Neoclassical economists believe that manipulation of the economy with interest rates, net taxes and government spending may work in the short run, but ultimately only causes

inflation

Which of the following represents one of the factors of production?

labor force participation rate. other factors include: -land -labor -capital -entrepreneurial ability

Which of the following shows the greatest level of confirmation through testing, observation and/or experimentation?

law

Assume there is a fixed rate of interest on contracts for borrowers and lenders. If unanticipated inflation occurs in the economy, then:

lenders are worse off, and borrowers better off

The model used in this unit of study mainly depicts the fine tuning of the economy through the "Keynesian perspective." Neoclassical economists, on the other hand, believe that government policies to support the economy should primarily focus on:

low inflation and low taxes

Business inventories increase when firms produce:

more than they sell, and the inventory increase is added to GDP

In annual percentage terms, investment spending in the United States is:

more variable than real GDP

The full employment rate of unemployment is also called the:

natural rate of unemployment

Which factor of production does AutoCAD software represent?

physical capital

Suppose that an economy's output does not change from one year to the next, but the price level doubles. What happens to real GDP?

real GDP doesn't change

Which of the following is a measure of growth that is most useful for comparing living standards?

real GDP per capita