Honors Econ Final ATU

If total spending rises from one year to the next, then

either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or both

Economics is the study of

how society manages its scarce resources

Sheri, a U.S. citizen, works only in Germany. The value she adds to production in Germany is included

in German GDP, but is not included in U.S. GDP

If the government removes a binding price ceiling from a market, then the price received by sellers will

increase, and the quantity sold in the market will increase

The demand curve for a good is a line that relates to

price and quantity demanded

Buyers and sellers who have no influence on market price are referred to as

price takers

Adam Smith suggested that an invisible had guides market economies. In this analogy, what is the baton that the invisible hand uses to conduct the economic orchestra?

prices

The "invisible hand" directs economic activity through

prices

The amount of goods and services produced from each unit of labor input is called

productivity

Suppose the American Medical Association announces that men who shave their heads are less likely to die of heart failure. We could expect the current demand for

razors to increase

A country reported nominal GDP of $115 billion in 2010 and $125 billion in 2009. It also reported a GDP deflator of 85 in 2010 and 100 in 2009. Between 2009 and 2010,

real output and the price level both rose

When computing the opportunity cost of attending a basketball game you should include

the price you pay for the ticket and the value of your time

If net exports is a negative number for a particular year, then

the value of foreign goods purchased exceeded the value of goods sold to foreigners during the year

If in some year real GDP was $25 billion and the GDP deflator was 68, what was nominal GDP?

$36.8 billion

The inflation rate in year 2 equals

(GDP deflator year 2- GDP deflator year 1/ GDP deflator year 1) X 100

For the general population, a 10 percent increase in the price of cigarettes leads to a

4 percent reduction in the quantity demanded of cigarettes

Suppose that the government has imposed a price ceiling on sliced sandwich bread. Which of the following events could transform the price ceiling from one that is binding to one that is not binding

A decrease in the price of unsliced bread, which people consider a substitute for sliced bread

Last year country A had a nominal GDP of $600 billion, a GDP deflator of 150 and a population of 40 million. Country B had a nominal GDP of $720 billion, a GDP deflator of 120 and a population of 50 million. From these numbers which country is likely to have had the higher standard of living

Country B because it had the higher nominal GDP per person.

Which of the following is included in the investment component of GDP

John's law firm buys a new computer

Katie is planning to sell her house, and she is considering making two upgrades to the house before listing it for sale. Replacing the carpeting will cost her $2,500 and replacing the roof will cost her $9,000. Katie expects the new carpeting to increase the value of her house by $3,000 and the new roof to increase the value of her house by $7,000.

She should replace the carpeting but not replace the roof

Saddle shoes are not popular right now, so very few are being produced. If saddle shoes become popular, then how will this affect the market for saddle shoes?

The demand curve for saddle shoes will shift right, which will create a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium be at a higher price and higher quantity.

Which of the following is included in Singapore's GDP

The value of production by an American working in Singapore

A supply curve slopes upward because

an increase in price gives producers an incentive to supply a larger quantity

Which of the following might cause the demand curve for an inferior good to shift to the left

an increase in the price of the complement

If the demand for a product decrease, then we would expect equilibrium price

and equilibrium quantity to both decrease

GDP per person tells us the income and expenditure of the

average person in the economy

Real GDP is the yearly production of final goods and services valued at

constant prices

Suppose that buyers of coffee and sugar regard the two goods as complements. Then an increase in the price of coffee will cause a

decrease in the demand of sugar and a decrease in the quantity supplied of sugar

If the government removes a binding price floor from a market, then the price paid by buyers will

decrease, and the quantity sold in the market will increase

Kari downloads 7 songs per month when the price is $1.29 per song and 10 songs per month when the price is $0.99 per song. Kari's behavior demonstrates the law of

demand

An example of a price floor is

minimum wage

Suppose an economy's production consists of corn and soybeans. In 2010, 20 bushels of corn are sold at $4 per bushels and 10 bushels of soybeans are sold at $2 per bushel. In 2009, the price of corn was $2 per bushel and the price of the soybeans was $1 per bushel. Using at the base year, it follows that, for 2010,

nominal GDP is $100, real GDP is $50 and the GDP deflator is 50

The GDP deflator is the ratio of

nominal GDP to real GDP multiplied by 100

Price controls

often hurt those they are designed to help

Which of the following transactions is not included in GDP

orange juice sold by a restaurant to its diners

Candice is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that

people face trade offs

The phenomenon of scarcity stems from the fact that

resources are limited

The law of supply states that, other things being equal, when the price of a good

rises, the quantity supplied of the good rises

Economics deals primarily with the concept of

scarcity

Rent control

serves as an example of a price ceiling

The mainstream view among economists is that

society faces a tradeoff between unemployment and inflation, but only in the short run

Efficiency means that

society is getting the maximum benefits from its scarce resources

When it comes to people's tastes, economists generally believe that

tastes are based on historical and psychological forces that are beyond the realm of economics