Final MacroEcon

What would you expect to happen to the demand for a luxury good today, if the government announces it will stop taxing that luxury good next year?

The demand for the luxury good will shift to the left today

(Table: Measuring GDP). In the table, GDP is equal to:

$1,095 billion

Consider the data shown in the table. Assume that the economy produces only frozen fish. What is the average price between the two years?

$1,825

Consider the data shown in the table. Assume that the economy produces only frozen fish. What is the nominal GDP for last year?

$180,000

Consider the data shown in the table. Assume that the economy produces only frozen fish. Using average price, what is the real GDP for last year?

$182,500

Consider the data shown in the table. Assume that the economy produces only frozen fish. Using average price, what is the real GDP for this year?

$191,625

Consider the data shown in the table. Assume that the economy produces only frozen fish. What is the nominal GDP for this year?

$194,250

Gary Parkers is willing to pay $700 for a new iPad.Apple (the producer of iPads) is selling a new iPad for $600.It costs Apple $400 to produce this iPad.How much economic surplus does Apple receive if Gary purchases this iPad.

$200

Nerida Kyle is thinking of buying a car to avoid taking Lyft to work. She is using the cost-benefit principle to evaluate this decision and is calculating the costs and benefits to owning the car over the next year. She's gathered the following information to help her make her decision: The car costs $15,000 to purchase, but she can resell it after a year of use for $13,500. She thinks gas will cost her about $1,200 for the year. The annual insurance premium for her car is $800. Maintenance and repairs will cost about $300 for the year. Using Lyft to get to work would cost her $4,000 for the year. The cost of the car for the year is:

$3,800

Kevin Williamson goes to a local coffee shop and orders a medium-sized latte. His willingness to pay for that latte is $6. The price of the latte is $2. The cost to the coffee shop to produce the latte is $1. How much economic surplus does Kevin gain when he purchases the latte?

$4

In 2017, Canada's GDP was approximately $1.57 trillion, and its population was about 36.96 million. What was Canada's approximate GDP per person in 2017?

$42,590

The table below shows data for Central African Republic (CAR). What was this country's real GDP per person in 2011?

$504.75

The table below shows data for Central African Republic (CAR). What was the real GDP per person in 2012?

$528.13

Use the table to answer the question. At what price does this market experience a shortage of 100 units?

$60

Fill in the blanks below using the following choices: (A) If the congestion effect of using a highway increases, then the demand for that highway __________. (B) If the network effect of using a social media platform increases, the demand for advertising by businesses on that platform ________.

(A) decreases; (B) increases

The aggregate production function Y = f(L, H, K) shows that economic growth can occur if: (i) human capital increases. (ii) labor productivity falls. (iii) the capital stock in the country depreciates. (iv) the depreciation rate increases.

(i) only

The moral of the story of the Solow growth model is that:

capital accumulation alone cannot lead to sustainable economic growth.

A market consists of ten similar suppliers that are making the same supply decisions. To find the market supply of these ten suppliers, you:

multiply the individual supply of one of the suppliers by ten.

The opportunity cost principle states that the true cost of something is the

next best alternative you have to give up to get it.

When you calculate marginal costs, they should include:

only variable costs.

In California,there has been a drought, and rural communities are fighting with urban areas over water. Which economic concept does this statement BEST represent?

Scarcity

Which of the following countries enjoyed significant catch-up economic growth in the second half of the twentieth century?

South Korea

Amul Food Factory in India makes ice cream and produces processed and condensed milk. In the factory, the firm's employees use raw milk and sugar. The firm runs on electricity and purchases raw milk every day. Large robotic assembly lines fill and package the ice cream containers. Large industrial freezers store the ice cream. Based on this scenario, can you identify the fixed costs for Amul Food Factory?

The cost of building the factory, purchasing the robotic assembly lines and industrial freezers.

Researchers have found a new strain of canola (a grain used to produce canola oil) that is resistant to pesticides and drought while yielding more canola oil. Holding all else constant, this research will:

shift the supply curve for canola oil rightward.

Suppose there is a surplus of qualified architects in the United States. Over time, we would expect:

the salaries of qualified architects to fall.

If a store runs a sale on a product to clear out its stock, we can conclude that:

there was a surplus of the product in the store

Physical capital refers to:

tools, machinery, and structures.

The price of coffee at a local coffee shop is $3. Cheryl is willing to pay $6 for her first cup of coffee each day. The marginal benefit to her of each additional cup of coffee falls by $2. How many cups of coffee should Cheryl purchase?

two

Variable costs are the costs that

vary with the quantity of output produced.

An equilibrium in a market occurs

when quantity supplied equals quantity demanded

Human capital refers to:

worker skills and knowledge.

If technology advances:

workers can produce more with fixed amounts of physical and human capital.

An underemployed person is one who is:

working but whose skills are not fully utilized.

King Taco charges the same price for everything on its menu: $5 will buy a taco, a burrito, or nachos. You buy the burrito and think that if you had not purchased the burrito, you would have purchased the taco. The opportunity cost of the burrito is:

your forgone enjoyment of the taco.

The demand curve (i) is a curve that shows the maximum willingness to pay for a product. (ii) is a curve that shows the marginal benefit gained from a product. (iii) is a curve that shows the production cost of a product. (iv) is a curve that shows the relationship between the price of a product and a consumer's willingness to buy at each price.

(i), (ii) and (iv) are correct.

. In order to be considered unemployed, the person must be: (i) over the age of 16. (ii) actively searching for work. (iii) available to work. (iv) skilled.

(i), (ii), and (iii)

Consider the graph of the labor market shown here. A wage rate of $25 could be an example of: (i) an efficiency wage. (ii) a minimum wage. (iii) a wage rate negotiated by a labor union. (iv) hysteresis.

(i), (ii), and (iii)

Refer to the diagram of the circular flow of income. The key lessons from this diagram are that: (i) all flows of resources are matched by flows of money. (ii) the market value of total output must be equal to total spending. (iii) total spending must equal total income. (iv) all inputs are provided by businesses.

(i), (ii), and (iii)

Which of the following is (are) included in investment? (i) military spending (ii) the purchase of an aircraft by a domestic airline (iii) the purchase of $45,000 worth of bonds (iv) the purchase of $32,000 worth of stock (v) social security payments (vi) the construction of a highway by the federal government

(ii) only

The table below shows data for Central African Republic (CAR). What was the economic growth rate between 2011 and 2012?

4.63%

In May 2019, there were approximately 68,980,000 people in Japan's labor force. About 1,650,000 people were unemployed. What was the unemployment rate?

2.4%

In 1945, the United States recorded real GDP growth of -1% and nominal GDP growth of 1.6%. What was the inflation rate in 1945?

2.6%

Consider the data shown in the table. Assume that the economy produces only frozen fish. What is the growth rate of the price of frozen fish rounded to the nearest percent?

3%

Refer to the following table that shows monthly data for Japan. What was the unemployment rate in December 2016?

3%

Consider the data shown in the table. Assume that the economy produces only frozen fish. What is the growth rate of real GDP between the two years using your calculations in the two questions above?

5%

Consider the data shown in the table. Assume that the economy produces only frozen fish. What is the growth rate of the quantity of frozen fish between the two years?

5%

In 2018, there were 111.01 million people aged 15 years and older in Japan. There were also 68.3 million people in the labor force. What was the labor force participation rate?

61.53%

Consider the data shown in the table. Assume that the economy produces only frozen fish. What is the growth rate of nominal GDP rounded to the nearest percent?

8%

Suppose there are only two countries, country A and country B. Country A imports $200 million worth of goods and services from country B. Country B imports $100 million worth of goods and services from country A. Net exports for country _____ equal _____.

A; −$100 million

You purchase a new car (produced this year) for $38,000. After six months, you sell the car for $31,500. How much does GDP rise because of these two transactions?

GDP rises by $38,000.

The aggregate production function connects:

GDP to labor, human capital, and physical capital.

Total spending in the economy is calculated as:

C + I + G + (X - M).

Which statement BEST illustrates the law of demand?

Consumers buy more iPhones because prices have fallen.

Charles McCoy is a manager at a coffee shop, and he has to decide how many workers to hire. One worker can make 20 drinks that sell for $4 on average in one hour. A second worker can make another 16 drinks in one hour. The marginal benefit of each additional worker decreases by four drinks, with each additional hire. Given that workers are paid $15 per hour and have eight-hour shifts, how many employees should Charles hire for each hour?

Five

(Figure: Market for Used Books) Use the figure to answer the question. A campus bookstore sells both new and used books and rents them as well. In a particular semester, the percentage of students who opt for used books and rentals increases, and the percentage of students who opt for new books decreases. Which graph shows the new equilibrium that would result in the market for used books?

Graph A

(Figure: Market for New Housing in Dubai) Which graph shows the effect on the supply curve for new housing in Dubai, if economists predict a decrease in demand for new housing?

Graph B

(Figure: Market for Roses) Which graph shows what will happen to the supply of roses if the price of roses falls?

Graph B

Consider these four graphs of the labor market, showing four different minimum wage levels. Which graph(s) shows a wage level where there is an excess supply of workers?

Graph B

Technological advancement can be shown by which of these production functions?

Graph B

(Figure: Market for Leather Wallets) Fossil has started an aggressive advertising campaign for its wallets. Which graph shows how the demand in the market might change if the advertising campaign is successful?

Graph D

(Figure: Market for Sugar) Stevia is a natural sweetener that is used as a sugar substitute. Which of the following graphs illustrates the impact of a rise in the price of Stevia on the demand for sugar?

Graph D

Consider the following graphs, which are discussed in the textbook. Focus on the graph that looks at the relationship between GDP per person and life expectancy. What can explain this relationship?

Higher income per person allows for better health care, sanitation, and nutrition.

The U.S. government provides a research and development tax credit. How can this policy encourage economic growth?

It encourages firms to engage in innovation and creative practices, which lead to technological advances that spur economic growth.

You have four friends. Which of your friends can be described as "structurally unemployed"?

Marty, who cannot find a job, though he is willing to accept less than the existing wage

(Figure: Market for Steel Bars) Which graph illustrates what will happen in the market for processed, industrial steel bars when the price of raw steel falls?

None of these answers is correct

Butter and ghee (clarified butter) are substitutes in production. What would happen to the supply curve for butter and the supply curve for ghee if the price of butter falls.

None of these answers is correct.

As a part of a market research project, you survey six random people to see how much gas per week they would buy at various prices. The data you collect is in the accompanying table. What is the change in the total demand for gasoline in your survey when the price changes from $2 per gallon to $2.50 per gallon?

The total quantity demanded in the market falls by 14 gallons.

Which statement is TRUE, according to standard economic theory?

The true cost of a choice is what you must give up when choosing between alternatives.

Dale is a stay-at-home-parent whose typical day consists of getting the kids ready for school, doing the laundry, cooking three meals, and cleaning the house. How are Dale's home activities counted in GDP?

They are not counted.

(Figure: Graph) Refer to the graph to answer the question. In the graph, the movement from point W to point P represents:

a decrease in demand

A normal good is:

a good for which higher income causes an increase in demand.

An individual supply curve is

a graph with quantities of a product that a seller is willing to supply at different price points.

Diminishing returns to physical capital imply that, with human capital per worker and technology held fixed, each successive increase in physical capital leads to _____ productivity (or real GDP per worker).

a smaller increase in

The working age population includes people who are:

age 16 or older who are not in the military or institutionalized.

A recent news story reported that the Organization of Petroleum Exporting Countries is expected to increase the supply of oil next summer. Summer is traditionally a time of increased demand for oil because of vacation travel. What would be the combined effect of these two events on the market for gasoline?

an increase in the quantity and an unpredictable change in the price

Rising marginal costs imply

an upward sloping supply curve

Joshua Murphy is planning on studying late into the night for his economics exam. He is contemplating how many coffees to buy tonight. Joshua should not buy an additional coffee during the evening if the marginal

benefit of purchasing one more coffee is less than the marginal cost

A rise in population in a country:

boosts real GDP but not necessarily real GDP per person.

The Rational Rule for Buyers

compares the benefit of buying an additional unit of the item to the cost of that item.

The cost-benefit principle states that _____ are the incentives that shape decisions

costs and benefits

Ivan has inherited his grandmother's 1963 Chevrolet Corvette, which he values at $60,000. Samantha is interested in buying such a car and is willing to pay up to $55,000. Ivan hears Samantha is looking for this particular car and offers to sell it to her for $70,000. A voluntary economic exchange _____ between Ivan and Samantha because _____ positive economic surplus from the transaction.

does not occur, only Ivan receives

Suppose the New York City housing market is in equilibrium. A recession causes local household incomes to decline. At the same time, construction of a series of new apartment buildings has just been completed. Given these two changes, and assuming that apartment housing is a normal good, we can predict that the price of apartments will _____, and the quantity of apartments bought and sold will _____.

fall; rise or fall

Gross domestic product is the value of all _____ produced in an economy over a given period.

final goods and services

The Rational Rule for Sellers says that a seller should sell one more unit of an item if the price is:

greater than or equal to the marginal cost.

The higher the minimum wage, as compared to the equilibrium wage, the:

higher the structural unemployment rate.

In the market for inputs:

households sell resources

The U.S. Department of Education sponsors the i3 program (Investing in Innovation), which provides grants to educational institutions and schools that have a proven track record of high student achievement. This is an example of a government program designed to build:

human capital.

The interdependence principle:

implies that buyers decisions are affected by many factors other than the price of an item.

The principle that your best choice depends on your other choices, the choices others make, developments in other markets, and expectations about the future is known as the _____ principle.

interdependence

The capital stock in an economy stops growing when:

investment equals depreciation.

To acquire human capital, a person would:

learn to use a printing press.

The rational rule suggests you should continue with an activity until your _____ benefit _____ your _____ cost

marginal; equals; marginal

(Figure: Graph) Refer to the graph to answer the question. A decrease in the price of an item will cause the movement from

point Q to point P.

The law of supply refers to

positive relationship between price and quantity supplied

Technological progress is advanced through:

research and development

Carolyn Bates is a junior in college studying economics. She has created a new software application that applies the four principles of economic decision making to any potential decision that a user faces. She is considering leaving school after this academic year to pursue further development of her app. Carolyn should ignore all of the following costs when calculating the opportunity costs of leaving college EXCEPT the

skills she may gain from her final year of economics course.

Peanut butter and peanut oil are complements-in-production. When the price of peanut butter rises, the

supply of peanut oil will rise.

The marginal benefit of consuming an item is

the additional benefit from buying one more unit of that item

Paint and paintbrushes are complements. If the price of paint rises, we can expect:

the demand for paintbrushes to decrease

Which of the following explains the shape of the aggregate production function?

the law of diminishing returns