Exam 1 #3

Birmingham Steel sells steel to Winston Golf Club Manufacturers for $300,000. Winston sells its golf clubs to Academy Sports for $1,000,000. Academy Sports sells Winston golf clubs for $1,500,000. If inventories are everywhere unchanged, how much is added to GDP?

A) $1,500,000

Based on information from text and handouts, evaluate the following statements then choose the best answer. 1) 7 of the 10 US recessions since 1950 have lasted less than a year, and all have lasted less than 1 1/2 years. 2) Of the 10 US expansions since 1950 all except three have lasted more than 3 years. 3) Leaving out the most recent expansion (which has not yet ended), the longest period of expansion since 1950 lasted 10 years (120 months).

A) All three of the statements are correct.

Alfred Marshall is the originator of:

C) standard supply and demand model.

Suppose an economy produces only the four goods listed in this table. All of the country's tomatoes are used in the production of pizzas and all of its shovels are purchased by foreign firms that produce landscaping services only in their country. What is the value of GDP in this country?

B) $7,200

In the equation S = 130 - 2T, where S is hot chocolate sales and T is temperature, the slope is:

B) -2.

Which of the definitions below best defines Gross Domestic Product?

B) Gross Domestic Product is the market value of all final goods and services produced within a country in a year.

Which of the following statements is true?

B) Nominal GDP is calculated at existing prices, while real GDP is adjusted for inflation.

The portion of women in the workforce has essentially doubled since 1950. What effect does this have on GDP?

B) The GDP in 1950 is underestimated relative to today.

By the definition given in lecture, a model is

B) a logical structure and collection of ideas for thinking about a problem or answering a question.

The Scandinavian countries of Europe:

B) allow a large role for government services.

Public goods are difficult to provide in the private market because they have the characteristics of:

B) nonrivalry and nonexclusivity.

Suppose you accept a job in Mexico after college, your income will be part of GNP in

B) the U.S. only.

Markets are efficient when:

B) total surplus is maximized.

Evaluate the following statements, then choose the best answer. 1) The 1980 recession was triggered by a sharp increase in interest rates to combat the inflation of recent years. 2) The 2001 recession was triggered by large increases in oil prices leading to reduced spending on energy using products. 3) The 1973 recession was triggered by oil prices rising to four times previous levels plus a stock market crash.

C) Only statements 1 and 3 are correct.

Here are the starting years (and ending years if different) for each US recession since 1950....unless there are errors: 1953-54, 1957-58, 1960-61, 1969-70, 1973-75, 1981- 82, 1990-91, 2001, 2007-09.

C) The list is complete and correct except that one recession is not listed.

In economics, the term "land" includes:

C) all natural resources.

If a restaurant that traditionally has served only lunch and dinner wants to open for breakfast, which of the following factors should be considered?

C) cost of the additional food

A good example of a government imposed price floor is:

C) minimum wage.

When prices fall below equilibrium:

C) producer surplus falls and it is uncertain what happens to consumer surplus.

When society produces the mix of goods and services that are most desired and produces them at the lowest cost possible:

C) production and allocative efficiency are achieved.

If both demand and supply decrease, but the decrease in supply is greater than the decrease in demand, then the equilibrium price ________________ and equilibrium output ______________.

C) rises; falls

Which pair are MOST likely substitute goods?

C) soft drinks and lemonade

All of the following events occurred in 2008. Which ones will contribute to GDP for 2008?

D) None of these transactions counts towards GDP for 2008.

A decrease in nominal GDP implies:

D) a decrease in the price level, output, or both.

Which is one of the four major reasons why markets fail?

D) asymmetric information

(Repeat your answer on Scantron lines 38 and 39.) In the diagram below, a move from equilibrium at point 1 to equilibrium at point 2 would involve (if more than one answer is correct, select the answer containing more information):

D) bothAandC

The basic postulates of economics indicates that changes in incentives influence the:

D) choices of individuals with regard to a wide range of activities, including those generally perceived as social or political.

(Figure: Interpreting PPF Shifts 2) The graph describes a situation in which:

D) only Industry 2 has had a technological improvement.

According to the text market failure means that:

D) the market has not provided a socially optimal amount of goods and services.

(Figure: Determining Surplus) In the graph, which shape represents consumer surplus?

D) the triangle hik

Here are the starting years (and ending years if different) for each recession since 1950....unless there are errors: 1953-54, 1957-58, 1960-61, 1969-70, 1973-74, 1980, 1981-82, 1990-91, 2001, 2007-09.

E) The list is complete and correct except that one ending year is incorrect.

Choose the best answer. GDP is equal to:

E) consumption + gross investment + government spending + exports - imports