MACRO ECON FINAL EXAM
The "law of supply" functions in labor markets; that is, a higher for labor leads to a higher quantity of labor supplied. price demand supply quantity
price
The law of demand states that: price and quantity demanded are inversely related. the larger the number of buyers in a market, the lower will be product price. price and quantity demanded are directly related. consumers will buy more of a product at high prices than at low prices.
price and quantity demanded are inversely related.
In contrast to goods and services markets, are rare in labor markets, because rules that prevent people from earning income are not politically popular. minimum wages price floors price ceilings living wage laws
price ceilings
6. Inflation means that: all prices are rising, but at different rates. all prices are rising and at the same rate. prices in the aggregate are rising, although some particular prices may be falling. real incomes are rising.
prices in the aggregate are rising, although some particular prices may be falling.
Suppose that an economy's labor productivity and total worker-hours each grew by 3 percent between year 1 and year 2. We could conclude that this economy's: real GDP remained constant. capital stock increased by 3 percent. production possibilities curve shifted inward. production possibilities curve shifted outward.
production possibilities curve shifted outward.
Tom Atoe grows tomatoes for home consumption. This activity is: excluded from GDP in order to avoid double counting. excluded from GDP because an intermediate good is involved. productive but is excluded from GDP because no market transaction occurs. included in GDP because it reflects production
productive but is excluded from GDP because no market transaction occurs.
A nation's infrastructure refers to: its ability to realize economies of scale. its stock of technological knowledge. public capital goods such as highways and sanitation systems. the productivity of its labor force
public capital goods such as highways and sanitation systems.
If the supply and demand curves for a product both decrease, then equilibrium: quantity must fall and equilibrium price must rise. price must fall, but equilibrium quantity may either rise, fall, or remain unchanged. quantity must decline, but equilibrium price mav either rise, fall, or remain unchanged. quantity and equilibrium price must both decline.
quantity must decline, but equilibrium price mav either rise, fall, or remain unchanged.
If we say that a price is too high to clear the market, we mean that: quantity demanded exceeds quantity supplied. the equilibrium price is above the current price. quantity supplied exceeds quantity demanded. the price of the good is likely to rise.
quantity supplied exceeds quantity demanded.
A recession is defined as a period in which: cost-push inflation is present. nominal domestic output falls. demand-pull inflation is present. real domestic output falls.
real domestic output falls.
A nation's production possibilities curve is bowed out from the origin because: resources are not equally efficient in producing every good. the originator of the idea drew it this way and modern economists follow this convention. resources are scarce. wants are virtually unlimited.
resources are not equally efficient in producing every good.
The price elasticity of supply measures how: easily labor and capital can be substituted for one another in the production process. responsive the quantity supplied of X is to changes in the price of X. responsive the quantity supplied of Y is to changes in the price of X responsive quantity supplied is to a change in incomes.
responsive the quantity supplied of X is to changes in the price of X.
An effective price floor on wheat will: force otherwise profitable farmers out of business. result in a shortage of wheat. result in a surplus of wheat. clear the market for wheat.
result in a surplus of wheat.
Refer to the above data. The net domestic product is: A. $233 .B. $255 .C. $230 .D. $348
.B. $255
Refer to the above data. Equilibrium price will be: A. $4 .B. $3 .C. $2 .D. $1.
.C. $2
Refer to the above data. The gross domestic product is: A. $326 .B. $282 .C. $307 .D. $300
.C. $307
How much of each dollar spent by a consumer ultimately becomes income to someone else? 100 percent 67 percent It depends on how much labor was needed to produce the good the consumer buys. It depends on how much overhead there is in the distribution channel that delivers the good from the manufacturer to the consumer.
100 percent
If the Consumer Price Index rises from 300 to 333 in a particular year, the rate of inflation in that year is: 11 percent. 33 percent. 91 percent. 10 percent.
11 percent.
The price elasticity of demand for widgets is 0.80.Assuming no change in the demand curve for widgets, a 16 percent increase in sales implies a: 1 percent reduction in price. 12 percent reduction in price. 40 percent reduction in price. 20 percent reduction in price.
20 percent reduction in price.
Refer to the above diagram. Total revenue at price P, is indicated by area(s): C+ D. A + B. A + C. A.
A + B.
Which of the following statements best illustrates the concept of derived demand? As income goes up the demand for farm products will increase by a smaller relative amount. A decline in the price of margarine will reduce the demand for butter. A decline in the demand for shoes will cause the demand for leather to decline. When the price of gasoline goes up, the demand for motor oil will decline.
A decline in the price of margarine will reduce the demand for butter.
Which of the following institutional structures is most likely to promote growth? A well-enforced svstem of patents and copvrights. A tightly regulated market system. A system of tariffs and other trade barriers to protect domestic companies. All of these.
A well-enforced svstem of patents and copyrights.
The market system's answer to the fundamental question"What will be produced?" is essentially: A. "Goods and services that are profitable." B. "Low cost goods and services." C. "Goods and service that can be produced using large amounts of capital." D. "Goods and services that possess lasting value."
A. "Goods and services that are profitable."
Refer to the above data. The national income is: A. $265 .B. $223 .C. $208 .D. $346
A. $265
The value of the best alternative sacrificed to obtain something you want is referred to as A.explicit cost. B. opportunity cost. C. marginal cost. D. sunk cost.
B. opportunity cost.
Refer to the above diagram. This economy will experience unemployment if it produces at point: A. B. C. D.
D.
What is the difference between economic and financial investments? Financial investments are sensitive to interest rates, economic investments are not. Economic investments add to the capital stock of an economy, financial investments do not. Economic investments are expressed in real (inflation-adjusted) terms, financial investments are expressed in nominal terms. Financial investments include all purchases undertaken with the expectation of financial gain; economic investments include only purchases of new capital goods.
Financial investments include all purchases undertaken with the expectation of financial gain; economic investments include only purchases of new capital goods.
One of the basic economic defenses of economic growth rests on the conclusion that: Growth makes workers less obsolete and more secure in employment Growth reduces the cost to society of "common property" resources Growth makes the gap between unlimited wants and scarce resources less acute A growth-oriented society confers a "work and look to the future" attitude on the members of society
Growth makes the gap between unlimited wants and scarce resources less acute
Which of the following is a normative statement? The temperature is high today. The humidity is high today. It is too hot to play tennis todav. It will cool off later this evening.
It is too hot to play tennis todav.
What are the two most important factors influencing investor preferences? The desire for high rates of return and the thrill of uncertainty. The desire for high rates of return and dislike of risk and uncertainty. An equal balance between stocks and bonds, and high rates of return. Stable rates of return and balance between private and public sector financial assets.
The desire for high rates of return and the thrill of uncertainty.
Which of the following is a positive statement? The humidity is too high today. It is too hot to jog today. The temperature is 92 degrees today. Summer evenings are nice when it cools off.
The temperature is 92 degrees today.
Which of the following institutional arrangements is most likely to promote growth? Patents and copyrights that expire quickly and are loosely enforced. Strong government control over resource allocation decisions. Unrestricted trade between nations. All of these
Unrestricted trade between nations.
Which of the following is a final good or service? a haircut fertilizer purchased by a farm supplier diesel fuel bought for a delivery truck Chevrolet windows purchased by a General Motors assembly plant
a haircut
13. In the treatment of U.S. exports and imports, national income accountants: subtract exports, but add imports, in calculating GDP. subtract both exports and imports in calculating GDP. add both exports and imports in calculating GDP. add exports, but subtract imports, in calculating GDP.
add exports, but subtract imports, in calculating GDP.
Which of the following will cause a shift in the demand curve of labor?A.An increase or decrease in the productivity of labor. An increase or decrease in the demand for the product labor produces. A decline in the price of a complementary input. all of the above
all of the above
The main determinant of elasticity of supply is the: number of close substitutes for the product available to consumers. amount of time the producer has to adiust inputs in response to a price change. urgency of consumer wants for the product. number of uses for the product.
amount of time the producer has to adiust inputs in response to a price change.
Who is least likely to be hurt by unanticipated inflation? a disabled laborer who is living off accumulated savings an owner of a small business a secretary a pensioned steelworker
an owner of a small business
Inflation is undesirable because it: arbitrarily redistributes real income and wealth. invariably leads to hyperinflation. usually is accompanied by declining real GDP. reduces everyone's standard of living.
arbitrarily redistributes real income and wealth.
The value of total output and total income in the simple circular flow model are measures of the economy's level of savings. include only intermediate goods. are equal to each other are related in the sense that national income is less than national product.
are equal to each other
Economic theories: are useless because they are not based on laboratory experimentation. that are true for individual economic units are never true for the economy as a whole. are generalizations based on a careful observation of facts. are abstractions and therefore of no application to real situations.
are generalizations based on a careful observation of facts.
Critics of economic growth: contend that growth and industrialization reduce pollution. argue that economic growth does not resolve socioeconomic problems such as an unequal distribution of income and wealth. point out that growth results in greater economic security for workers. say that its benefits accrue nearly exclusively to white males.
argue that economic growth does not resolve socioeconomic problems such as an unequal distribution of income and wealth.
Recurring upswings and downswings in an economy's realGDP over time are called: recessions. businesscycless. output yo-yos. total product oscillations.
business cycles.
A nation's gross domestic product (GDP): can be found by summing C + Is + G + Xn. is the dollar value of the total output produced by its citizens, regardless of where they are living. can be found by summing C + S+ G + Xn. is always some amount less than its NDP.
can be found by summing C + Is + G + Xn.
Increased present saving: comes at the expense of reduced current investment. comes at the expense of reduced current consumption. can only occur if the government increases the amount of money in circulation is only possible if the economy is experiencing positive growth in real GDP.
comes at the expense of reduced current consumption.
All of the following are examples of physical capitalEXCEPT buildings. machinery. company stocks and bonds. a hydroelectric power plant.
company stocks and bonds.
13. The idea that money has "time value" refers to the fact that: people prefer to receive a given sum of money in the future rather than in the present. money can be used to purchase the services of labor, as measured in hourly units. compound interest converts current dollars into a greater amount of future dollars. compound interest converts future dollars into a greater amount of current dollars.
compound interest converts current dollars into a greater amount of future dollars.
If the economy's real GDP doubles in 18 years, we can: not say anything about the average annual rate of growth. conclude that its average annual rate of growth is about 5.5 percent. conclude that its average annual rate of growth is about 2 percent. conclude that its average annual rate of growth is about 4 percent.
conclude that its average annual rate of growth is about 4 percent.
In national income accounting, consumption expenditures include: purchases of both new and used consumer goods. consumer durable goods and consumer nondurable goods, but not services consumer durable goods, consumer nondurable goods, and services. changes in business inventories.
consumer durable goods, consumer nondurable goods, and services.
In the United States professional football players earn much higher incomes than professional soccer players. This occurs because: most football players are good soccer players while the reverse is not true. consumers have a greater demand for football games than for soccer games. football and soccer games are highly substitutable products for most consumers. the marginal productivity of soccer players exceeds that of football players.
consumers have a greater demand for football games than for soccer games.
Rising per-unit production costs are most directly associated with: frictional unemployment. structural unemployment. demand-pull inflation. cost-push inflation.
cost-push inflation.
If X is a normal good, a rise in money income will shift the: supply curve for X to the left. supply curve for X to the right. demand curve for X to the left. demand curve for X to the right.
demand curve for X to the right.
"Too much money chasing too few goods" best describes: the GDP gap. demand-pull inflation. the inflation premium. cost-push inflation.
demand-pull inflation.
14. Owners of stock can receive _______ from their shares; sellers of stock can receive_______ from selling their shares. capital gains; dividends dividends: capital gains interest; dividends interest; capital gains
dividends: capital gains
The production of durable goods varies more than the production of nondurable goods because: durables purchases are nonpostponable. durables purchases are postponable the producers of nondurables have monopoly power. producers of durables are highly competitive.
durables purchases are postponable
Economic growth is best defined as an increase in: either real GDP or real GDP per capita. nominal GDP. total consumption expenditures. wealth in the economy.
either real GDP or real GDP per capita.
A competitive market system: encourages growth by allowing producers to make profitable investment decisions based on market signals. encourages growth by ensuring that everyone in society will receive a decent standard of living. discourages growth because firms busy competing have no time to innovate or invest. discourages growth unless government protects domestic firms from foreign competition
encourages growth by allowing producers to make profitable investment decisions based on market signals.
Non-diversifiable risk refers to potential losses from: random fluctuations in specific stocks. bad company policies portfolio management fraud. events that move all investments in the same direction, like unexpected political or economic shocks.
events that move all investments in the same direction, like unexpected political or economic shocks.
Refer to the above diagram. If price falls from $10 to $2, total revenue: rises from A + B to A + B + D + C and demand is elastic. falls from A + D to B + C and demand is inelastic. rises from C + D to B + A and demand is elastic. falls from A + B to B + C and demand is inelastic.
falls from A + B to B + C and demand is inelastic.
GDP is a stock because it measures income for the entire country. stock because it measures wealth at a distinct point in time. flow because dollar values are used flow because it measures income over a period of time.
flow because it measures income over a period of time.
The labor supply curve for a particular occupation is upsloping because: higher wages will be needed to attract workers from other occupations. lower wages will be needed to increase employment. higher wages will enable some workers to afford more leisure. the labor demand curve is downsloping.
higher wages will be needed to attract workers from other occupations.
The production possibilities curve illustrates the basic principle that: the production of more of any one good will in time require smaller and smaller sacrifices of other goods. an economy will automatically obtain full employment of its resources. if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced. an economy's capacity to produce increases in proportion to its population size.
if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced.
The U.S. Federal government is unlikely to default on its bond payments because: if necessarv, it can print the money needed to make payments on time. its bond payments are insured. the U.S. Federal budget usually runs a surplus, providing ample funds for repaying debt. of all of these.
if necessarv, it can print the money needed to make payments on time.
An unexpected increase in total spending will cause an increase in GDP: if prices are sticky. if prices are fully flexible. regardless of whether prices are sticky or fully flexible. only if prices are stuck in the long term
if prices are sticky.
The achievement of full employment through time will: diminish labor productivity. reduce the level of investment as a percentage of GDP. increase the realized rate of economic growth. have no impact on the rate of economic growth.
increase the realized rate of economic growth.
Refer to the above diagram. The decline in price from P, to P2 will: increase total revenue by D. increase total revenue by B + D. decrease total revenue by A. increase total revenue by D - A.
increase total revenue by D - A.
The real wage will rise if the nominal wage: falls more rapidly than the general price level. increases at the same rate as labor productivity. increases more rapidly than the general price level. falls more rapidly than the general price level
increases more rapidly than the general price level.
If a product is in surplus supply, its price: is below the equilibrium level. is above the equilibrium level. will rise in the near future. is in equilibrium.
is above the equilibrium level.
Refer to the above diagram. Other things equal, this economy will achieve the most rapid rate of growth if: the ratio of capital to consumer goods is minimized. it chooses point C. it chooses point B. it chooses point A.
it chooses point A.
Other things equal, if a full-employment economy reallocated a substantial quantity of its resources to capital goods, we would expect: present consumption to rise. future consumption to fall. a lower rate of growth of real GDP. labor productivity to rise.
labor productivity to rise.
The four factors of production are: land, labor, capital, and money land, labor, capital, and entrepreneurial ability labor, capital, technology, and entrepreneurial ability labor, capital, entrepreneurial ability, and money
land, labor, capital, and entrepreneurial ability
Growth is advantageous to a nation because it: promotes faster population growth. lessens the burden of scarcity. eliminates the economizing problem. slows the growth of wants.
lessens the burden of scarcity.
The problems of aggregate inflation and unemploymentare: maior topics of macroeconomics. not relevant to the U.S. economy. major topics of microeconomics peculiar to command economies.
maior topics of macroeconomics.
The GDP is the: monetary value of all final goods and services produced within a nation in a particular year. national income minus all nonincome charges against output. monetary value of all economic resources used in producing a year's output. monetary value of all goods and services, final and intermediate, produced in a specific year.
monetary value of all final goods and services produced within a nation in a particular year.
Money is not an economic resource because: money, as such, is not productive. idle money balances do not earn interest income. it is not scarce. money is not a free gift of nature.
money, as such, is not productive.
11. In calculating GDP, governmental transfer payments, such as social security or unemployment compensation, are: not counted. counted as investment spending. counted as government spending. counted as consumption spending.
not counted.
Wage determination in labor markets is important because: wages are a major determinant of money incomes. wages allocate scarce resources among alternative uses. wages, along with labor productivity, are important to firms in minimizing their costs. of all of these reasons.
of all of these reasons.
5. National income accountants can avoid multiple counting by: including transfers in their calculations. counting both intermediate and final goods. only counting final goods. only counting intermediate goods.
only counting final goods.
13. Suppose there are constant returns to scale. Now suppose that over time a country doubles its workers, its natural resources, its physical capital, and its human capital, but its technology is unchanged. Which of the following would double? both output and productivity output, but not productivity productivity, but not output neither productivity nor output
output, but not productivity
The basic formula for the price elasticity of demand coefficient is: absolute decline in quantity demanded absolute increase in price. percentage change in quantity demanded/percentage change in price. absolute decline in price/absolute increase in quantity demanded. percentage change in price/percentage change in quantity demanded.
percentage change in quantity demanded/percentage change in price
The scarcity problem: persists only because countries have failed to achieve continuous full employment. persists because economic wants exceed available productive resources. has been solved in all industrialized nations. has been eliminated in affluent societies such as the United States and Canada
persists because economic wants exceed available productive resources.
For economists, the word "utility" means: versatility and flexibility. rationality. pleasure and satisfaction. purposefulness.
pleasure and satisfaction.
Assume that a 4 percent increase in income across the economy produces an 8 percent increase in the quantity demanded of good X. The coefficient of income elasticity of demand is: negative and therefore X is an inferior good. negative and therefore X is a normal good. positive and therefore X is an inferior good. positive and therefore X is a normal good.
positive and therefore X is a normal good.
Suppose that a person's nominal income rises from $10,000to $12,000 and the consumer price index rises from 100 to 105. The person's real income will: fall by about 20 percent. fall by about 2 percent. rise by about 15 percent. rise by about 25 percent.
rise by about 15 percent.
An improvement in production technology will: increase equilibrium price. shift the supply curve to the left. shift the supply curve to the right. shift the demand curve to the left.
shift the supply curve to the right.
Economics may best be defined as the: interaction between macro and micro considerations. social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcitv. empirical testing of value judgments through the use of logic. use of policy to refute facts and hypotheses.
social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcitv.
In the production of goods and services, trade-offs exist because not all production is efficient. society has onlv a limited amount of productive resources. buyers and sellers often must negotiate prices. human wants and needs are limited at a particular point in time.
society has only a limited amount of productive resources.
A leftward shift of a product supply curve might be caused by: an improvement in the relevant technique of production. a decline in the prices of needed inputs. an increase in consumer incomes some firms leaving an industry.
some firms leaving an industry.
Diversifiable risk refers to risk: faced by a portfolio in general. that can be reduced with appropriate fiscal and monetary policy. posed by business cycle fluctuations. specific to a particular investment.
specific to a particular investment.
The largest contributor to increases in the productivity of American labor is:A the reallocation of labor from agriculture to manufacturing. improvements in labor quality. increases in the quantity of capital. technological advance.
technological advance.
6. If intermediate goods and services were included in GDP: the GDP would then have to be deflated for changes in the price level. nominal GDP would exceed real GDP. the GDP would be overstated. the GDP would be understated.
the GDP would be overstated.
During a severe recession, we would expect output to fall the most in: the healthcare industry. the clothing industry. agriculture. the construction industry.
the construction industry.
The components of the expenditure approach to measuring GDP include all of the following EXCEPT net exports. government purchases of goods and services. expenditures for business investments. the implicit payments for unpaid household work.
the implicit payments for unpaid household work.
Scarcity refers toA the ability of society to employ all of its resources. the ability of society to consume all that it produces. the inability of society to satisfy all human wants because of limited resources. the inability of society to eliminate poverty.
the inability of society to satisfy all human wants because of limited resources.
Employers will hire more units of a resource if: the price of the resource increases the productivity of the resource increases. the price of the good being produced declines. the price of a complementary resource rises.
the productivity of the resource increases.
Which of the following is not economic investment? the purchase of a drill press by the Ajax Manufacturing Company the purchase of 100 shares of AT&T by a retired business executive construction of a suburban housing project the piling up of inventories on a grocer's shelf
the purchase of 100 shares of AT&T by a retired business executive
It takes a considerable amount of time to increase the production of pork. This implies that: 1. a change in the demand for pork will not affect its price in the short run. the short-run supply curve for pork is less elastic than the long-run supply curve for pork. an increase in the demand for pork will elicit a larger supply response in the short run than in the long run. the long-run supply curve for pork is less elastic than the short-run supply curve for pork.
the short-run supply curve for pork is less elastic than the long-run supply curve for pork.
Human capital refers to: the skills and knowledge that enable a worker to be productive. machinery used by labor in production. the accumulated financial wealth of households. physical capital owned by households rather than businesses.
the skills and knowledge that enable a worker to be productive.
People always face trade-offs because they alwavs have more than one use for their time and monev. they buy goods with money. trading takes place in a market economy. they can make themselves better off through trade.
they alwavs have more than one use for their time and monev.
The labor demand curve of a firm: will shift to the left if the price of the product the labor is producing falls. is perfectly elastic if the firm is selling its product in a purely competitive market. C reflects a direct relationship between the number of workers hired and the money wage rate D. is the same as its marginal product curve.
will shift to the left if the price of the product the labor is producing falls.