Macro Midterm

For the Fall semester, you had to pay a nonrefundable fee of $600 for your meal plan, which gives you up to 150 meals. If you eat 100 meals, your marginal cost of the 100th meal is:

a. $6. b. $4. c. $0.25. d. $0.

Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000 scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at $15,000 per year. Larry's opportunity cost of attending Elite U is:

a. $70,000 b. $50,000 c. $20,000 d. $15,000

If real GDP per person in a country equals $20,000 and 40 percent of the population is employed, then average labor productivity equals:

a. $8,000. b. $20,000. c. $40,000. d. $50,000.

Public saving in Econland equals:

a. -5 b. 5 c. 16 d. 17

How many workers will XYZ-TV Company hire if the going wage for TV production workers is $32,000?

a. 0 b. 1 c. 2 d. 3

If the nominal interest rate is 10% and the inflation rate is 3%, then the real interest rate equals:

a. 3% b. 7% c. 10% d. 13%

Dent 'n' Scratch Used Cars and Trucks employs 3 salesmen. Data for their sales last month are shown in this table:

a. 4 cars. b. 1/3 of a car. c. 3 cars. d. 1/4 of a car.

What's the minimum number of fish you would be willing to accept in exchange for a coconut?

a. 5 b. 4 c. 3 d. 2

Which of the following would increase the net export component of U.S. GDP?

a. A bottle of California wine is purchased in London. b. A car produced in Japan is purchased in California. c. A bottle of French wine is purchased in New York. d. A car produced in Michigan is purchased in Louisiana.

Where Y is GDP, C is consumption, I is investment, G is government spending, T is net taxes, and there is no international trade, private saving equals:

a. C + I + G - T. b. Y - T - C. c. Y -T - G. d. Y - C - I.

Which of the following is NOT a characteristic of governmental rent controls?

a. Equitable distribution of apartments. b. Excess demand for apartments. c. Fewer newly built apartment buildings. d. Very low vacancy rates.

Which of the following jobs is least likely to be outsourced?

a. Flipping hamburgersFlipping hamburgers b. Technical assistance over the phone for your computer c. Transcription of physicians' records d. Software design

Which of the following policies would be expected to increase private saving?

a. Replacing the income tax with a consumption tax b. Increasing the tax rate on capital gains c. Providing more generous Social Security retirement benefits d. Reducing the size of down payments needed to buy a house

Slower growth in labor demand in combination with increases in labor supply explains ____________ accompanied by __________.

a. a slowdown in real wage growth; a decline in employment b. a slowdown in real wage growth; rapid employment growth c. a slowdown in real wage growth; increasing wage inequality d. accelerated real wage growth; a decline in employment

To correct a nominal quantity for changes in the price level, one should:

a. add a price index to it. b. subtract a price index from it. c. divide it by a price index. d. multiply it by a price index.

The practice of spreading one's wealth over a variety of different financial investments in order to reduce overall risk is called:

a. allocation. b. following the risk premium. c. diversification. d. risk reservation.

Suppose that a disease that affects people who consume beef has been discovered in the United States. One likely result is:

a. an increase in buyers' reservation prices for beef. b. a decrease in demand for chicken. c. a decrease in demand for beef. d. a decrease in the quantity demanded of beef.

Efficiency is an important goal in economics because it:

a. assures a fair outcome. b. assures a normative outcome. c. assures a higher level of output. d. takes into consideration the distribution of income.

The figure below shows Becky's daily production possibilities curve for dresses and skirts.

a. attainable b. efficient c. both attainable and efficient d. neither attainable nor efficient

Supply curves are generally _______ sloping because _______________.

a. downward; more consumers will buy the good if the price falls. b. upward; of the principle of increasing opportunity costs. c. downward; it is less expensive to mass-produce goods. d. upward; of inflation.

More economic growth is not necessarily better unless the benefits of growth:

a. exceed the costs of growth. b. increase average labor productivity. c. increase real GDP per capita. d. increase human capital.

At the national level, higher saving rates lead to ______ and higher standards of living.

a. greater current consumption b. slower growth c. greater investment d. crowding out

Other things equal, the combination of a ______ saving rate and a ______ real interest rate will result in the largest accumulation of wealth over time.

a. high; high b. high; low c. high; zero d. low; high

The major economic cost of growth is:

a. higher interest rates. b. consumption sacrificed for capital formation. c. higher inflation rates. d. investment in stocks and bonds.

A decrease in the price of pizza will cause a(n):

a. increase in demand. b. increase in quantity demanded. c. decrease in quantity demanded. d. decrease in the number of consumers.

Economic growth can result from a(n):

a. increase in the amount of productive resources. b. increase in number of the minimum wage jobs. c. increase in the amount of consumer goods produced. d. decrease in the number of workers available.

An increase in the price of the output produced by labor will:

a. increase the supply of labor. b. decrease the supply of labor. c. increase the demand for labor. d. decrease the demand for labor

You own shares in a well-managed and diversified company. If a booming economy decreases investors' concerns about market risk, then the price of your shares will _____, holding other factors constant.

a. increase. b. decrease. c. not change. d. either increase or decrease.

A year's tuition at a state university cost $250 in 1972 when the CPI equaled 0.418. The cost of a year's tuition at the same state university cost $3,000 in 2005 when the CPI equaled 1.68. The real cost of tuition between 1972 and 2005:

a. increased. b. decreased. c. remained constant. d. may have either increased or decreased.

For a given nominal interest rate, an unexpectedly low inflation rate ______ the real interest rate.

a. increases b. decreases c. has no impact on d. may either increase or decrease

An increase in the size of the working-age population:

a. increases labor demand. b. decreases labor demand. c. increases labor supply. d. decreases labor supply.

The key variable in determining changes in a country's standard of living is the:

a. interest rate. b. inflation rate. c. unemployment rate. d. long-run rate of economic growth.

Frictional unemployment may be economically beneficial if:

a. its psychological costs are borne only by the unemployed worker. b. losses in economic output are small. c. it leads to a better match between worker and job. d. the social costs are limited to smaller tax revenues collected.

The Cost-Benefit Principle indicates that an action should be taken if:

a. its total benefits exceed its total costs. b. its average benefits exceed its average costs. c. its net benefit (benefit minus cost) is zero. d. its extra benefit is greater than or equal to its extra cost

Real GDP is not a perfect measure of economic well-being because it excludes the value of all of the following except:

a. leisure time. b. goods and services available in the market economy. c. nonmarket economic activity. d. goods and services produced in the underground economy.

Which branch of economics is most likely to study differences in countries' growth rates?

a. microeconomics b. normative economics c. macroeconomics d. experimental economics

A college graduate in 1972 found a job paying $7,200. The CPI was 0.418 in 1972. A college graduate in 2005 found a job paying $30,000. The CPI was 1.68 in 2005. The 1972 graduate's job paid ______ in nominal terms and ______ in real terms than the 2005 graduate's job.

a. more; less b. more; more c. less; more d. less, less

In an economy without international trade, investment must equal ______ saving.

a. national b. private c. public d. life-cycle

Comparisons of economic activity over time should be made using

a. nominal GDP adjusted for unemployment. b. nominal GDP per capita. c. current-dollar GDP. d. real GDP.

If an economy produces 3 million oranges that sell for $0.25 each and 100,000 cars that sell for $25,000 each, then when the market value of total output is calculated:

a. oranges receive a greater weight than cars. b. oranges receive the same weight as cars. c. oranges receive a smaller weight than cars. d. the market value of oranges is excluded.

Suppose that the price of chicken rises sharply compared to the price of turkey. In response, consumers buy more turkey and less chicken than they did in the CPI base year. In this situation the CPI will tend to ______ inflation as a result of ______ bias.

a. overstate; substitution b. understate; substitution c. accurately measure; substitution d. overstate; quality adjustment

The Scarcity Principle states that:

a. people don't have enough money to buy what they want. b. society will eventually run out of resources. c. with limited resources, having more of one thing means having less of another. d. some countries have fewer resources than others.

The idea that tradeoffs have to be made when resources are scarce is reflected in the fact that:

a. points below the production possibilities curve are efficient. b. points below the production possibilities curve are inefficient. c. the production possibilities curve has a negative slope. d. the slope of a linear production possibilities is constant.

"Holding all other relevant factors constant, consumers will purchase more of a good as the price falls." This statement reflects the behavior underlying:

a. the demand curve. b. an increase in demand. c. the supply curve. d. a decrease in the demand curve.

Suppose there are two parallel highways between two cities with approximately equal traffic. What would you expect to happen if the state began charging tolls to drive on one of those highways?

a. More drivers would drive on the non-toll road, making the toll road less congested. b. More drivers would drive on the toll road making the non-toll road less congested. c. Traffic would remain evenly divided between the two roads as drivers continuously sought the less-congested route. d. Traffic would decrease on both roads.

High rates of saving today contribute to ______ in the future.

a. higher tax rates b. more unemployment c. a higher standard of living d. more capital gains

Countries with high real GDP tend to have ______ infant mortality rates and ______ literacy rates than countries with low real GDP.

a. higher; higher b. higher; lower c. lower; higher d. lower; lower

Globalization can increase wage inequality in the United States if international competition is primarily in industries requiring ______ workers.

a. many b. few c. highly-skilled d. low-skilled

Buyers and sellers of a particular good comprise the:

a. market for the good. b. demand for the good. c. supply for the good. d. production possibilities curve for the good.

Capital income includes:

a. profits, rent, and interest. b. wages and salaries. c. earnings of the self-employed. d. capital gains from stock sales.

Total spending on final goods and services in an economy must equal total:

a. profits. b. production value. c. revenues from all transactions. d. investment

If government spending increases by $1 million while net taxes are unchanged, then:

a. public saving increases. b. public saving decreases. c. public saving does not change. d. private saving increases.

A measure of the average price of a given class of goods or services relative to the price of the same goods and services in a base year is called a:

a. real price. b. real quantity. c. rate of inflation. d. price index.

Refer to the figure below. The opportunity cost of making an additional salad:

a. remains constant regardless of how many salads are made. b. increases as the number of salads increases. c. decreases as the number of pizzas decreases. d. decreases as the number of salads increases.

In the market for labor, the price of labor is the:

a. same as price of the product produced by the labor. b. real wage. c. marginal product of labor. d. number of hours employed per year.

Workers whose spells of unemployment are broken up by brief periods of employment or withdrawal from the labor force are referred to as ______ workers

a. short-term unemployed b. discouraged c. long-term unemployed d. chronically unemployed

GDP would be a better measure of economic well-being if it included:

a. the costs of education. b. the total value of intermediate goods. c. the market value of final goods. d. the value of leisure.

Physical capital is:

a. the factories and machinery used to produce other goods and services. b. the talents, training, and education of workers. c. the financial resources available for investment. d. the physical labor of workers.

Public saving is negative when:

a. there is a government budget surplus. b. there is a government budget deficit. c. the government's budget is balanced. d. after-tax income of households and businesses is greater than consumption expenditures.

When statisticians fail to allow for the possibility that consumers switch from products with rising prices to those whose prices are stable or falling, the CPI will tend to ______ the rate of inflation.

a. understate b. precisely measure c. be unrelated to d. overstate