Macro midterm 1
Which of the following is counted as consumption expenditure?
A person buying a new car
The largest category of expenditures in the US, by far, is
Consumption
GDP deflator is equal to
Nominal GDP divided by real GDP multiplied by 100
Which of the following is the best example of a tariff?
a $1000-per-car fee imposed on all small cars imported
When Sophie, a French citizen, purchases a Dell computer in Paris that was produced in Texas, the purchase is
a US export and a French import
A factor of production that is produced in order to produce something else is called
capital
The economy in a particular country is booming. Real GDP is growing at a rate of 6% per year, well above the average growth rate. Under these circumstances, which of the following types of unemployment is most likely to be the lowest?
cyclical unemployment
For computing GDP, the official measure of the value of all goods produced during a period for use in the production of other goods is called
gross private domestic investment
Disposable personal income equals personal income
minus personal tax payments
If the opportunity costs of production of two goods is different between two countries, then
mutually beneficial trade is possible
The minimum wage is an example of
price floor
In the calculation of GDP, the value of a new house constructed by a firm is included in
private investment
Technological improvements will
shift the production possibility frontier outward.
What is the big innovation in the video that transformed international trade?
shipping containers
Increasing opportunity cost along a bowed out production possibilities frontier occurs because
some factors of production are not equally suited to producing both goods or services.
Which of the following is counted in GDP?
the cost of a speed boat purchased by drug smugglers
The terms of trade refers to
the ratio at which a country can trade its exports for imports from other countries
Examples of comparative advantage show how trade between two countries can make each better off. Compared to their pre-trade positions, trade makes both countries better off because in each country
total consumption of goods is greater
The gross domestic product of an economy is defined as the
total value of all final goods and services produced during a given period.
Social Security payments to U.S. citizens are considered
transfer payments and are not included in GDP.
A shift in the demand curve to the left, all other things unchanged
will cause a movement downward along the supply curve and a lower equilibrium quantity.
What is the business cycle?
It is the economy's pattern of fluctuations in economic activity: expansion followed by contraction and then by another expansion.
In a small economy, consumption spending in 2012 is $6,000, government spending is $1,200, gross investment is $1,500, exports are $2,000, and imports are $1,000. What is gross domestic product in 2012?
$9700
Using the expenditure approach, what is the formula for GDP?
GDP=C+I+G+NX
Consider the following scenario: In January, 8 million people were seeking jobs but did not succeed. In February, 2 million of these people gave up and stopped looking for work. Holding all else constant, what happened to the unemployment rate in February?
It decreased
What does the downward slope of the production possibilities curve represent?
Scarcity
What is the difference between a shortage and scarcity?
Scarcity will always exist because choices must be made, but a shortage will only exist if the price is kept below the equilibrium level
In the market for coffee, what will happen if a fungus damages the crop?
Supply will shift left, and the price will increase
For each watch that Switzerland produces, it gives up the opportunity to make 50 pounds of chocolate. Germany can produce 1 watch for every 100 pounds of chocolate it produces. Which of the following is true about the comparative advantage between the two countries?
Switzerland has the comparative advantage in watches.
What are the three fundamental questions?
What to produce? How to produce? For whom to produce?
Which of the following transactions would be included in the official calculation of GDP?
You buy a new iPod.
When Tesla, a U.S. company, purchases Italian-made Pirelli tires for its automobiles, the purchase is
a U.S. import and an Italian export.
The term "market" in economics refers to
a group of buyers and sellers of a product and the arrangement by which they come together to trade.
The difference between iron ore deposits and the steel produced from these deposits that is later used to make factory equipment illustrates the difference between
a natural resource and capital
Which of the following would cause an increase in the supply of cheese?
an increase in the number of firms that produce cheese
Which of the following will not shift the demand curve for a good?
an increase in the price of the good
Many disagreements among economists result because
economists sometimes make normative judgments
Which of the following reduces the duration of frictional unemployment?
establishing employment agencies which give out information about job vacancies
The natural rate of unemployment
includes frictional and structural unemployment.
The law of demand implies, holding everything else constant, that as the price of yogurt
increases, the quantity of yogurt demanded will decrease.
The GDP deflator is equal to
nominal GDP divided by real GDP, multiplied by 100
You have been attending college for the last four years, and are focused solely on your studies. You would be classified
not in the labor force
Formula for unemployment rate
number of unemployed/labor force x 100
The point on a business cycle where real GDP stops rising and begins falling is called a(n)
peak
Disposable personal income is defined as
personal income less personal taxes
If the quantity demanded for a product exceeds the quantity supplied, the market price will rise until
quantity demanded equals quantity supplied. The market price will then equal the equilibrium price.
Supply is best defined as the
relationship between the quantity of a good or service sellers are willing to offer for sale and various prices, all other things unchanged.
A critical function of the government in facilitating the operation of a market economy is
setting up and enforcing private property rights
According to the production possibility model, if more resources are allocated to the production of physical and human capital, then all of the following are likely to happen except
the country's total production will fall
Gross national product is defined as
the value of final goods and services produced by residents of the United States, even if the production takes place outside the United States
If Norwegian workers are more productive than Albanian workers, then trade between Norway and Albania
will take place so long as each country has a comparative advantage in a good or service that buyers in the other country want.
Countries will benefit from trade if they specialize based on
Comparative advantage
Which of the following is correct about the economic decisions consumers, firms, and the government have to make?
Each faces the problem of scarcity which necessitates tradeoffs in making economic decisions.
In recent years the cost of producing wines in the U.S. has increased largely due to rising rents for vineyards. At the same time, more and more Americans prefer wine over beer. Which of the following best explains the effect of these events in the wine market?
The supply curve has shifted to the left and the demand curve has shifted to the right. As a result, there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.
If the United States lifted the embargo on Cuban products, what would happen in the U.S. market for Cuban cigars?
The supply curve would shift to the right
Which of the following best describes an assumption economists make about human behavior?
They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time.
In which measure would we include the value of production of a Swiss-owned watch factory located in Pennsylvania?
US GDP and Swiss GNP
A negative relationship between the quantity demanded and price is called the law of
demand
The primary difference between a change in demand and a change in the quantity demanded is
A change in quantity demanded is a movement along the demand curve, and a change in demand is a shift in the demand curve.
