Macro Final Exam

social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity

Economics may best be defined as the:

resources are not completely adaptable

Economists believe that production possibilities frontiers are often bowed because

It is often impractical to perform experiments in economics

Economists face an obstacle that many other scientists do not face. What is that obstacle?

to provide a new and useful way of thinking about the world

Economists use some familiar terms in specialized ways

the productivity of the resource increases

Employers will hire more units of a resource if:

conclude that its average annual rate of growth is about 4 percent

If the economy's real GDP doubles in 18 years, we can:

quantity supplied exceeds quantity demanded

If we say that a price is too high to clear the market, we mean that

not counted

In calculating GDP, governmental transfer payments, such as social security or unemployment compensation, are:

price ceilings

In contrast to goods and services markets, _____________ are rare in labor markets, because rules that prevent people from earning income are not politically popular.

consumer durable goods, consumer nondurable goods, and services

In national income accounting, consumption expenditures include:

consumers have a greater demand for football games than for soccer games.

In the United States professional football players earn much higher incomes than professional soccer players. This occurs because:

"Those willing and able to pay for them."

The market system's answer to the fundamental question "Who will get the goods and services?" is essentially:

A + B

Refer to the above diagram. Total revenue at price P1 is indicated by area(s):

land, labor, and capital

Refer to the above diagram. Which of the following items flows from households to firms through the resource markets?

inelastic

Refer to the above table. Over the $6-$4 price range, supply is:

the inability of society to satisfy all human wants because of limited resources.

Scarcity refers to

"Goods and services that are profitable."

The market system's answer to the fundamental question "What will be produced?" is essentially:

$2

.Refer to the above data. Equilibrium price will be:

goods and services

8. Refer to the above diagram. Flow (3) represents:

encourages growth by allowing producers to make profitable investment decisions based on market signals

A competitive market system:

some firms leaving an industry

A leftward shift of a product supply curve might be caused by

is an institution that brings together buyers and sellers

A market

can be found by summing C + Ig + G + Xn

A nation's gross domestic product (GDP)

a decrease in the price of a product that is complementary to C

A rightward shift in the demand curve for product C might be caused by:

company stocks and bonds

All of the following are examples of physical capital EXCEPT A. buildings. B. machinery. C. company stocks and bonds. D. a hydroelectric power plant.

positive and therefore X is a normal good

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:

independently acting buyers and sellers and freedom to enter or leave markets

Broadly defined, competition involves:

complementary goods

Digital cameras and memory cards are:

specific to a particular investment

Diversifiable risk refers to risk:

either real GDP or real GDP per capita

Economic growth is best defined as an increase in

applies to all economics

Economic scarcity:

D

Refer to the above diagram. This economy will experience unemployment if it produces at point:

pleasure and satisfaction

For economists, the word "utility" means

flow because it measures income over a period of time

GDP is a

All of the above are correct

GDP is not a perfect measure of well-being; for example, A. GDP excludes the value of volunteer work. B. GDP does not address the distribution of income. C. GDP does not address environmental quality. D. All of the above are correct.

lessens the burden of scarcity

Growth is advantageous to a nation because it

100 percent

How much of each dollar spent by a consumer ultimately becomes income to someone else?

demand curve for X to the right

If X is a normal good, a rise in money income will shift the:

the GDP would be overstated

If intermediate goods and services were included in GDP

society has only a limited amount of productive resources

In the production of goods and services, trade-offs exist because

add exports, but subtract imports, in calculating GDP

In the treatment of U.S. exports and imports, national income accountants

the short-run supply curve for pork is less elastic than the long-run supply curve for pork

It takes a considerable amount of time to increase the production of pork. This implies that

events that move all investments in the same direction, like unexpected political or economic shocks

Non-diversifiable risk refers to potential losses from:

. increases and demand decreases

One can say with certainty that equilibrium price will decline when supply:

Increases in the supply of computer memory have exceeded increases in demand.

Over time, the equilibrium price of a gigabyte of computer memory has fallen while the equilibrium quantity purchased has increased. Based on this we can conclude that:

dividends; capital gains

Owners of stock can receive ___________ from their shares; sellers of stock can receive ___________ from selling their shares.

they always have more than one use for their time and money

People always face trade-offs because

the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water

People are willing to pay more for a diamond than for a bottle of water because

a shortage of 100 units

Refer to the above diagram. A price of $20 in this market will result in:

wage, rent, interest, and profit income.

Refer to the above diagram. Flow (1) represents:

falls from A + B to B + C and demand is inelastic

Refer to the above diagram. If price falls from $10 to $2, total revenue:

it chooses point A

Refer to the above diagram. Other things equal, this economy will achieve the most rapid rate of growth if:

increase total revenue by D - A.

Refer to the above diagram. The decline in price from P1 to P2 will:

a higher price to the group that has the less elastic demand

Suppose that a firm has "pricing power" and can segregate its market into two distinct groups based on differences in elasticities of demand. The firm might charge:

production possibilities curve shifted outward

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:

inelastic for price declines that increase quantity demanded from 6 units to 7 units

Suppose that the above total revenue curve is derived from a particular linear demand curve. That demand curve must be:

Supply will increase and the market clearing price will fall

Suppose that there is an improvement in technology in the market for iPhones. Which of the following is true? A. Supply will increase and the market clearing price will fall. B. Supply will increase and the market clearing price will rise. C. Demand will increase and the market clearing price will rise. D. Demand will increase and the market clearing price will fall

price

The "law of supply" functions in labor markets; that is, a higher __________ for labor leads to a higher quantity of labor supplied.

monetary value of all final goods and services produced within a nation in a particular year

The GDP is the:

if necessary, it can print the money needed to make payments on time

The U.S. Federal government is unlikely to default on its bond payments because:

long run, short run, and immediate market period respectively

The above diagram concerns supply adjustments to an increase in demand (D1 to D2) in the immediate market period, the short run, and the long run. Supply curves S1, S2, and S3 apply to the:

increase the realized rate of economic growth

The achievement of full employment through time will:

percentage change in quantity demanded/percentage change in price

The basic formula for the price elasticity of demand coefficient is:

the implicit payments for unpaid household work

The components of the expenditure approach to measuring GDP include all of the following EXCEPT

microeconomics and macroeconomics

The field of economics is traditionally divided into two broad subfields,

$307

The gross domestic product is

compound interest converts current dollars into a greater amount of future dollars

The idea that money has "time value" refers to the fact that:

will shift to the left if the price of the product the labor is producing falls.

The labor demand curve of a firm:

higher wages will be needed to attract workers from other occupations

The labor supply curve for a particular occupation is upsloping because:

technological advance

The largest contributor to increases in the productivity of American labor is

price and quantity demanded are inversely related

The law of demand states that:

producers will offer more of a product at high prices than at low prices

The law of supply indicates that, other things equal:

amount of time the producer has to adjust inputs in response to a price change

The main determinant of elasticity of supply is the:

$265

The national income is

$255

The net domestic product is

there is an active role for government, even in a market system

The presence of market failures implies that

20 percent reduction in price

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:

responsive the quantity supplied of X is to changes in the price of X

The price elasticity of supply measures how:

the supply of old baseball cards is price inelastic

The price of old baseball cards rises rapidly with increases in demand because

major topics of macroeconomics

The problems of aggregate inflation and unemployment are

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 production possibilities frontier illustrates the basic principle that:

increases more rapidly than the general price level

The real wage will rise if the nominal wage:

households are on the selling side of the resource market and on the buying side of the product market

The simple circular flow model shows that:

opportunity cost

The value of the best alternative sacrificed to obtain something you want is referred to as

"one who manages a household"

The word "economy" comes from the Greek word oikonomos, which means

productive but is excluded from GDP because no market transaction occurs

Tom Atoe grows tomatoes for home consumption. This activity is:

all of these reasons

Wage determination in labor markets is important because: A. wages are a major determinant of money incomes. B. wages allocate scarce resources among alternative uses. C. wages, along with labor productivity, are important to firms in minimizing their costs. D. of all of these reasons.

The desire for high rates of return and dislike of risk and uncertainty

What are the two most important factors influencing investor preferences?

a haircut

What is a final good or service?

Financial investments include all purchases undertaken with the expectation of financial gain; economic investments include only purchases of new capital goods

What is the difference between economic and financial investments?

equality

Which of the following concepts cannot be illustrated by the production possibilities frontier?

Unrestricted trade between nations.

Which of the following institutional arrangements is most likely to promote growth? A. Patents and copyrights that expire quickly and are loosely enforced. B. Strong government control over resource allocation decisions. C. Unrestricted trade between nations. D. All of these

A well-enforced system of patents and copyrights.

Which of the following institutional structures is most likely to promote growth? A. A well-enforced system of patents and copyrights. B. A tightly regulated market system. C. A system of tariffs and other trade barriers to protect domestic companies. D. All of these.

property rights

Which of the following is a fundamental characteristic of the market system?

tracking the price of oil when a war in the Middle East interrupts the flow of crude oil

Which of the following is an example of using the scientific method with a natural experiment?

cable television

Which of the following is the least likely to be a competitive market?

A decline in the demand for shoes will cause the demand for leather to decline.

Which of the following statements best illustrates the concept of derived demand? A. As income goes up the demand for farm products will increase by a smaller relative amount. B. A decline in the price of margarine will reduce the demand or butter. C. A decline in the demand for shoes will cause the demand for leather to decline. D. When the price of gasoline goes up, the demand for motor oil will decline.

Economists are usually not able to conduct experiments, so they must rely on natural experiments offered by history.

Which of the following statements is correct? A. Economists almost always find it easy to conduct experiments in order to test their theories. B. Economics is not a true science because economists are not usually allowed to conduct experiments to test their theories. C. Economics is a social science rather than a true science because it cannot employ the scientific method. D. Economists are usually not able to conduct experiments, so they must rely on natural experiments offered by history.

all of the above

Which of the following will cause a shift in the demand curve of labor? A. An increase or decrease in the productivity of labor. B. An increase or decrease in the demand for the product labor produces. C. A decline in the price of a complementary input. D. all of the above

Goods for which the income elasticity coefficient is relatively high and positive.

Which type of goods is most adversely affected by recessions?