Exam 2
The construction of demand and supply curves assumes that the primary variable influencing decisions to produce and purchase goods is
price
The demand curve shows the relationship between:
price and quantity demanded
The law of demand states, other things equal,
price and quantity demanded are inversely related
Banks and other financial institutions:
promote economic growth by helping to direct household saving to businesses that want to invest.
If we say that a price is too high to clear the market, we mean that:
quantity supplied exceeds quantity demanded
When economists refer to "investment," they are describing a situation where:
resources are devoted to increasing future output
If products C and D are close substitutes, an increase in the price of C will:
shift the demand curve for D to the right
If the price of gasoline increases significantly, then we'd expect the demand curve for large trucks and SUVs to
shift to the left
If the price of product L increases, the demand curve for close-substitute product J will:
shift to the right
Shocks
situations in which they were expecting one thing to happen but then something else happened
economic investment
spending that pays for the production of newly created capital goods like factories..
An increase in the price of product B leads to an increase in the demand for product C. This indicates that products B and C are
substitute goods
Real GDP measures
value of final goods and services produced within the borders of a country, adjusted for price changes.
An increase in the price of a product will reduce the amount of it purchased because
consumers will substitute other products for the one whose price has risen
Savings are generated whenever:
current income exceeds current spending.
The relationship between quantity supplied and price is ______ and the relationship between quantity demanded and price is ______.
direct; inverse
A surplus indicates that the quantity demanded is greater than the quantity supplied at that price (T/F)
false
Along a supply curve, product price and producer surplus are inversely related (T/F)
false
Any person without a job is considered to be unemployed. (T/F)
false
Buying 100 shares of Google stock is an example of economic investment(T/F)
false
Economists and policymakers are generally more concerned about nominal GDP than real GDP. (T/F)
false
If Ford Motor Company purchases factory equipment previously used by General Motors, this would be considered an economic investment(T/F)
false
Real GDP is calculated using current prices of outputs (T/F)
false
Shocks occur when actual events do match expectations. (T/F)
false
Surpluses drive market prices up; shortages drive them down. (T/F)
false
The business cycle is primarily concerned with changes in the level of overall prices over time. (T/F)
false
Toothpaste and toothbrushes are substitute goods(T/F)
false
Business cycle
fluctuation in output and employment
Higher rates of unemployment are linked with:
higher crime rates as the unemployed seek to replace lost income.
A market is in equilibrium
if the amount producers want to sell is equal to the amount consumers want to buy.
Suppose that goods A and B are close substitutes. If the price of good A falls, then we would expect an
increase in the quantity demanded A and a decrease in the quantity demanded B
Which of the following would and economist consider to be investment?
Boeing builds a new factory Oprah buys a $10 million home from a fellow celebrity A stockbroker buys $10,000 shares of Starbucks stock All of these choices are correct ANSWER: Boeing builds a new factory
Which of the following is an example of a demand shock: A) Hurricane Harry knocks out oil drilling platforms in the Gulf of Mexico B) Floods in the Midwest destroy crops C) The federal government unexpectedly requires automobile producers to raise fuel efficiency standards D) Consumers become worried about job loss and buy fewer goods and services than expected
Consumers become worried about job loss and buy fewer goods and services than expected
At the end of the summer driving season, the demand for gasoline typically declines. This is an example of a negative demand shock. (T/F)
False
In 2017, China's GDP per person was almost as high as that of the United States(T/F)
False
If an economy wants to increase its current level of investment, it must
Sacrifice current consumption
Higher unemployment rates are linked with higher crime rates and higher rates of physical and mental illness (T/F)
TRUE
financial investment
The purchase of a financial asset or real asset or the building of such assets in the expectation of financial gain. EX) stock purchasing
If the newspapers report that there is a shortage of strawberries, it must mean that the current price of strawberries Is below the equilibrium price. (T/F)
True
In order to achieve modern economic growth, a nation's output must grow faster than its population (T/F)
True
In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by
a change in buyer tastes
If two goods are complements:
a decrease in the price of one will increase the demand for the other.
Unemployment describes the condition where:
a person cannot get a job but is willing to work and is actively seeking work.
Inflation is defined as
an increase in the overall level of prices
Markets, viewed from the perspective of the supply and demand model:
assume many buyers and many sellers of a standardized product
If the price of Pepsi decreases, other factors constant, then we'd expect to see a consequent shift of the demand curve for
coke to the left
Increased present saving
comes at the expense of reduced current consumption.
Blu-ray players and Blu-ray discs are:
complementary goods
Running shoes and staplers are
independent goods.
If there is a surplus of a product, its price:
is above the equilibrium level.
A market
is an institution that brings together buyers and sellers
Which of the following is most closely related to recessions?
negative real growth in output
The term "recession" describes a situation where
output and living standards decline
Other things equal, which of the following might shift the demand curve for gasoline to the left? A) the discovery of vast new oil reserves in Montana B) the development of low-cost electric automobile C) an increase in the price of train and air transportation D) a large decline in the price of automobiles
the development of low-cost electric automobiles
Macroeconomics is mostly focused on
the economy as a whole
If there is a shortage of product X, and the price is free to change:
the price of the product will rise
When the price of Nike soccer balls fell, Ronaldo purchased more Nike soccer balls and fewer adidas soccer balls. Which of the following best explains Ronaldo's decision to buy more Nike soccer balls?
the substitution effect
A government subsidy per unit of output increases supply (T/F)
true
A government tax per unit of output reduces supply. (T/F)
true
Along a demand curve, product price and consumer surplus are inversely related (T/F)
true
Citizens living in the richest nations today have material standards of living that are on average more than 50 times higher than people living in the poorest countries (T/F)
true
If there is a surplus in a market, competition among the sellers will drive the price down (T/F)
true
Inflation refers to an increase in the overall level of prices (T/F)
true
Savings are generated when current consumption is less than current income(T/F)
true
The development of a new production technique that lowers the cost of producing 3-D movies will shift the supply curve of 3-D movies to the right. (T/F)
true