Macro Midterm

(Figure: Good X) From the figure, the maximum price that consumers are willing to pay for _____ units of Good X is _____ per unit.

36; $4

Imagine an economy with production function Y = F(K) = and 400 units of capital. If the fraction of output invested in new capital is = 0.2, how much new capital will be created in the next period?

4

The Arab Oil Embargo of 1973, the Iranian Revolution of 1979, and the Gulf War of 1991 all affected oil prices by:

reducing the supply of oil.

Relative to Japan, Argentina was _____ in 1950 and _____ in 2000.

rich; poor

A dependable legal system and competitive, open markets help to

shape incentives that induce economic growth.

In the diagram, the current demand curve for chicken legs is represented by D1. If the price of chicken thighs, a substitute for chicken legs, decreases, the demand curve for chicken legs will:

shift to D3.

Refer to the figure. Producer surplus at a price of $40 is:

$100.

Refer to the figure. What is the maximum price per book that buyers are willing to pay for 2,500 books

$45

(Figure: Equilibrium) Refer to the figure. The equilibrium quantity (in units) is:

16.

According to the rule of 70, a country with an annual growth rate of 10% will double its GDP per capita in

7 years.

A production possibilities frontier shows

all combinations of goods that a country can produce given its productivity and supply of inputs.

Gross domestic product (GDP) is the market value of:

all finished goods and services produced within a country in a year.

Catching-up growth is growth due to:

capital accumulation.

Recent growth in China has been driven primarily by:

capital accumulation.

A high-school graduate deciding to go to college makes that decision by

comparing the additional income earned per year after graduating from college with the additional cost of going to college.

As more units of capital are added in the Solow model, the marginal product of capital:

decreases.

Diminishing returns to tractors indicates that:

having more tractors leads to more output, but at a decreasing rate.

From 1950 to 1970 Japan's growth rate was:

high and positive.

The most common measure of the size of an economy is:

its GDP.

Cutting-edge growth is growth due to:

new ideas

(Figure: PPF Mexico & United States) Use the above figure in which both Mexico and the United States each have 24 units of labor. Mexico has a comparative advantage in ______ and the United States has a comparative advantage in ______.

shirts; computers

(Figure: Price Ceiling) Refer to the figure. If a price ceiling were set at $12, there would be a:

shortage of 0 units.

Economies can grow due to:

the extent to which markets facilitate specialization through trade

The increase in output caused by the addition of one more unit of capital is called:

the marginal product of capital.

(Figure: Good X) From the figure, which statement is TRUE?

At a price of $6 per unit, consumers are willing and able to purchase 26 units of Good X

After a hurricane in Florida destroys half of the orange crop, economists predict:

an increase in orange prices and a decrease in orange sales.

National wealth refers to the value of a nation's entire stock of:

assets.

To avoid double accounting, the value of:

finished goods only is included in GDP.

After a hurricane, the prices of many items rise. How BEST might the government help poor people be able to afford to buy goods and services?

give poor people debit cards for use in purchasing essential items, while leaving prices unregulated

(Figure: Labor Market 1) If there is a price floor set at $9, how much deadweight loss is created, if any?

$30 million

(Table: Equilibrium Adjustment) Refer to the table. The equilibrium price is:

$6.

(Figure: Bananas) Refer to the figure. If the price of bananas is $2 a pound, how many pounds of bananas will suppliers supply

0

If a country's real GDP per capita in 1950 was $10,000, and it grew to $20,000 by year 2000, then the country's annual growth rate during this period would have been approximately

1.4%

Consider the following production function: Y = F(K) = . When the capital stock is 144, output is:

12

Imagine an economy with production function Y = F(K) = and 400 units of capital. If the fraction of output invested in new capital is = 0.2 and the depreciation rate is = 0.05, what is the steady-state amount of capital?

16 units

(Figure: Minimum Wage) Refer to the figure. How many workers are unemployed at a minimum wage of $8?

20

(Figure: Minimum Wage) Refer to the figure. At a minimum wage of $8, firms are willing to hire ________ workers.

25

(Figure: Price Ceiling) Refer to the figure. When a price ceiling of $10 is instituted by the government, consumers are able to buy how many units of the product?

270 units

(Figure: Effects of Price Ceilings) Refer to the figure. At a price ceiling of $2 per unit, consumers are willing to pay a maximum of:

3.00

If real GDP per capita in a country was $14,000 in year 1 and $14,560 in year 2, then the economic growth rate for this country from year 1 to year 2 was:

4%.

Today, real GDP per capita is about _____ as large in the richest countries as in the poorest countries.

50 times

At an annual growth rate of 1.4%, approximately how long does it take for real GDP per capita to increase from $30,000 to $60,000 in a country?

50 years

(Figure: Equilibrium) Refer to the figure. The equilibrium price (in $) is:

8.

Adam Smith:

argued that it is beneficial to buy a product if the seller can sell it to us cheaper than we can make it for ourselves, regardless of the product's country of origin

A high-school graduate deciding to go to college makes that decision by:

comparing the additional income earned per year after graduating from college with the additional cost of going to college.

A nonbinding price floor leads to a(n):

equilibrium quantity.

Although trade increases productivity, it decreases society's collective knowledge because people specialize in a very limited number of things

false

Suppose you spent $10,000 in 2016 remodeling your house, which you originally built for $200,000 in 2000. As a result, GDP in 2016 would:

increase by $10,000.

A good is considered normal if demand for it ______ when income ______.

increases; increases

A farmer can grow soy or sorghum. If the price of soy increases, the opportunity cost of growing sorghum ______, shifting the supply curve of sorghum ______.

increases; up and to the left

(Figure: PPF Goods X & Y) Refer to the figure. Point Arepresents an allocation of resources that is:

inefficient.

Most of the world's population:

is poor relative to the United States.

Two thousand years ago, per capita GDP (in 2010 dollars) was:

less than $1,000.

The correlation between infant mortality and real GDP per capita is:

negative.

Beginning in the _____ century, economic growth became a clear trend in parts of the world.

nineteenth

(Figure: Government Price Controls) Refer to the figure. If the government sets the price ceiling at $31, there will be:

no effect on the market.

According to Adam Smith:

people buy goods for which they have higher opportunity costs than others

When economists speak of "long-run economic growth," they mean increasing the:

per capita real GDP of a country.

In the Solow model production function, Y = F(A, K, eL), K stands for:

physical capital.

The rule of 70 indicates that an increase in the growth rate of a variable will _____ the time needed to double living standards.

reduce

A dependable legal system and competitive, open markets help to:

shape incentives that induce economic growth.

Over the past 200 years, economic growth in the United States has been:

slow and consistent.

According to economists, when the Food and Drug Administration raises the approval requirements for new drugs:

society potentially loses a new drug approval.

An increase in demand causes a:

temporary shortage at the old equilibrium price and a higher new equilibrium price and quantity.

The value of production by a U.S. worker employed by a firm located in Canada is included in:

Canada's GDP and U.S. GNP.

Which statement best explains why growth in China has been so rapid recently?

China began with very little capital, so its marginal product of capital was very high.

(Figure: Four Production Functions) Refer to the figure. Which of these production functions exhibits diminishing returns?

D

Which of the following would NOT be included in GDP for the United States?

Matt purchasing an antique desk for his new home office

(Figure: Demand, Supply Shifts) In the figure, the initial demand curve is D1 and the initial supply curve is S1. Resource prices in this market increase; at the same time, the consumer population declines as migration causes an outflow of population to other regions. What happens to the supply curve and/or demand curve?

S1 shifts to S2 and D1 shifts to D2.

If North Korea and South Korea were both equally poor in 1950, why has South Korea developed so much faster since then?

South Korea has maintained a more market-based economic system.

Which of the following would be included in GDP for the United States?

Toyota, a Japanese car company, producing cars in the United States

A change in quantity supplied is reflected by a movement along the same supply curve while a change in supply refers to a shift in the entire supply curve.

True

A period marked by falling wages, falling national output, and rising unemployment is called a recession.

True

Everyone, from the most to the least skilled to the most and least educated, can benefit from trade.

True

Birmingham Steel sells steel to Winston Golf Club Manufacturers for $300,000. Winston sells its golf clubs to Academy Sports for $1,000,000. Academy Sports sells these golf clubs to consumers for $1,500,000. How much is added to GDP?

$1,500,000

In the Solow model production function, Y = F(A, K, eL), A stands for:

ideas

A decrease in the opportunity cost of steel production will:

make suppliers more likely to produce steel, thus shifting the supply curve down and to the right

GDP is calculated by:

multiplying the quantity of all goods and services by their prices and adding together the results.

A policymaker wants to reduce inflation. In order to make an intelligent decision about how to do so, the policymaker

needs to know the causes of inflation, for example, the government's printing of too much money.

A policymaker wants to reduce inflation. In order to make an intelligent decision about how to do so, the policymaker:

needs to know the causes of inflation, for example, the government's printing of too much money.

A binding price floor leads to a(n):

surplus.

Real GDP per capita is calculated as the total real GDP divided by the:

total population.

(Table: Small-Town GDP) Refer to the table. Which of the four towns has the highest standard of living?

town B

(Table: Small-Town GDP) Refer to the table. Which of the four towns has the lowest standard of living?

town C

An increase in supply causes a temporary surplus at the old equilibrium price.

true

Everyone, from the most to the least skilled to the most and least educated, can benefit from trade

true

High inflation in Zimbabwe in 2009 was a result of the Zimbabwean government's printing too much money.

true

An increase in quantity demanded is a movement along a fixed demand curve caused by a shift in the supply curve.

unskilled workers

If U.S. per capita GDP is $50,000 and grows at 5% per year, what will U.S. per capita GDP be in 70 years?

$1.6 million

(Table: Prices and Quantities in a 4-Good Economy) Refer to the table. Suppose an economy produces only the four goods listed. What is the GDP in this country?

$7,700

(Figure: Chocolate) What is the equilibrium price per pound in the diagram?

$8

(Figure: The Distribution of World Income) Refer to the figure. Based on the data in the figure, about how many times wealthier is the richest country when compared to the poorest countries in the world?

100

At an average growth rate of 4%, approximately how long would it take for an economy to double its GDP?

17.5 years

Suppose a country's annual growth rate of real GDP per capita is approximately 2%. By which year would the country double its real GDP per capita from $10,000 in 1950 to $20,000?

1985

In 2010, U.S. GDP per capita grew by approximately:

2.2%.

Refer to the figure. The market price of the product is $20 per unit. Calculate the dollar amount of consumer surplus being earned in this market.

60,000

According to the rule of 70, a country with an annual growth rate of 10% will double its GDP per capita in:

7 years.

(Figure: Bananas) Refer to the figure. If the price of bananas is $10 a pound, which number is closest to the number of pounds that suppliers will supply?

80,000

Which statement is TRUE regarding the figure?

At a price of $6 per unit, consumers are willing and able to buy 10 units.

Which statement is NOT a reason for high growth rates in Germany and Japan following World War II?

Both countries had higher growth rates than the United States before World War II.

America was so poor in past centuries that even George Washington caught malaria.

True

A decrease in supply raises the price of a good, but it also decreases the quantity demanded, which lowers the price of a good. The net effect on price is ambiguous.

False

A minimum wage mostly creates unemployment among older workers.

False

Refer to the figure. A country needs 4 units of labor to produce one car and 3 units of labor to produce one boat, and the country has 120 units of labor. Which of the figures represents this country's PPF?

Figure B

(Figure: Countries A and B) Refer to the figure. According to the diagram about countries A and B, which of the following statement(s) is correct?I. Country A has a comparative advantage in Good Y.II. Country B has an absolute advantage in both goods.III. Country B has a comparative advantage in Good X.

I, II, and III

Anita can bake 10 cakes in a day, but has no time left to make cookies. If she bakes only cookies, she can make 200 cookies in a day. John makes equally delicious cakes and cookies but can only make 7 cakes or 100 cookies in a day. Based on this information, which of the following statements is TRUE?

John has the comparative advantage in the production of cakes.

(Figure: Demand, Supply Shifts) In the figure, the initial demand curve is D1 and the initial supply curve is S1. If technological innovations lower the costs of production, what will happen?

S1 will shift to S3 and equilibrium price will decrease but equilibrium quantity will increase.

Among the most powerful institutions for supporting good incentives are:

property rights.

Fluctuations in graduate school enrollment correlate positively with fluctuations in unemployment. What is the most likely reason why?

The opportunity cost of going to graduate school is low when jobs are hard to find.

Suppose a doctor spends half of the year in the United States and the other half in Canada and works in both places. How does his production get allocated between U.S. and Canadian GDP?

The value of the services produced in the United States gets counted in U.S. GDP and the value of the services produced in Canada gets counted in Canadian GDP.

Refer to the figure. What areas represent the deadweight losses in the labor market as a result of the imposition of a minimum wage at $4?

There is no deadweight loss in this market as a result of the $4 minimum wage.

A decrease in the cost of inputs will shift the supply curve down and to the right.

True

Refer to the figure. Which factor would cause the change in the figure?

a decrease in the price of a complement good

A free market maximizes the gains from trade, the sum of consumer and producer surplus, meeting all of the following conditions EXCEPT:

all buyers who are willing to pay positive prices are able to receive goods from trade.

GNP is the market value of all finished goods and services produced:

by a country's permanent residents, wherever they are located, in a year.

(Figure: Price Ceiling of Ps) Refer to the figure. Suppose a price ceiling of Ps is imposed. The shaded area may likely represent all of the following EXCEPT:

consumer surplus.

(Figure: Computers and Books) According to the figure, both countries can increase consumption if:

country A produces only computers and buys books from country B.

The Solow growth model features _____ returns to physical capital.

diminishing

Every year, 1.8 million children in poor countries die of diarrhea. What is most effective in preventing these deaths?

economic growth

A nonbinding price ceiling leads to a(n):

equilibrium quantity.

Which is NOT a key institution for economic growth?

income equality Previous

As more units of capital are added in the Solow model, output:

increases at a decreasing rate.

(Figure: PPF Goods X & Y) Refer to the figure. Point A represents an allocation of resources that is:

inefficient.

Adam Smith advocated the benefits of:

international trade.

A price ceiling:

is a maximum price allowed by law.

Relative to the United States, Argentina was _____ in 1950 and _____ in 2000.

poor; poor

(Figure: Government Price Controls) Refer to the figure. The government enacts a price control causing a shortage of 15 units of the good. Therefore, the ________ is set at ________.

price ceiling; $10

A government subsidy to producers causes the:

supply of the product to increase.

(Table: Equilibrium Adjustment) Refer to the table. If the price in the free market is $8, then a:

surplus of 25 units would exist, and price would tend to fall.

When GDP is calculated, goods are valued using:

the current market price.

Which of the following would be included in 2017's GDP?

the real estate agent's commission on the resale of a house built in 2015

The Solow model is based on:

a production function.

In the diagram, for a market price of $4 total consumer surplus equals:

$30.

Refer to the figure. Which statement is correct?

A price floor set at W2 would cause a labor surplus best labeled by A.

How are wealth and economic growth related?

Economic growth increases wealth

A decrease in demand for a good will lead to a decrease in the price of the good, but an increase in the quantity supplied.

False

Advances in technology such as personal computers and cellular telecommunications are indicated in the supply graph by a movement along the supply curve.

False

An advantage to specialization is that it can decrease the average cost of production by concentrating on smaller-scale production.

False

Greater emphasis on self-sufficiency and trading less with foreign countries would increase incomes and living standards in the United States.

False

Fluctuations in graduate school enrollment correlate positively with fluctuations in unemployment. What is the most likely reason why

The opportunity cost of going to graduate school is low when jobs are hard to find.

A firm produces volleyballs and soccer balls. What happens to the supply of soccer balls if the market price of volleyballs increases?

The opportunity cost of producing soccer balls rises, so the supply curve of soccer balls decreases.

(Figure: Basic Supply and Demand) In the diagram, which of the following statements is TRUE?

When the price is $2, there is a tendency for the price to rise in the future.

A computer chip that you purchase to repair your home computer is an example of:

a finished good.

Adam Smith coined the term "invisible hand" to mean:

a metaphorical hand that leads individuals to promote social interest by pursuing self-interest.

Which would decrease national output?

a natural disaster that destroys some capital

Around the world, about one _____ people have incomes of less than $2 per day.

billion

What data are needed to calculate GDP?

both quantities and prices of goods and services produced

A(n) ______ causes the equilibrium price to ______ and equilibrium quantity to ______.

decrease in supply; rise; fall