MacroEconomics Chapter 1-5

In the economy of Ukzten in 2010, consumption was $1000, GDP was $1950, government purchases were $500, and investment was $700. What were Ukzten's net exports in 2010?

$-250

In the economy of Ukzten in 2010, consumption was $3000, exports were $400, GDP was $5000, imports were $600, and investment was $1100. What were Ukzten's government purchases in 2010?

$1100

A consumer has $20 that he wants to spend on two goods: pens priced at $2 each and pencils priced at $1 each. Which of the following correctly represents his budget constraint?

$20 = ($2 × Quantity of pens) + ($1 × Quantity of pencils)

Tyler and Camille both live in Oklahoma. A new-car dealer in Oklahoma bought a new car from the manufacturer for $18,000 and sold it to Tyler for $22,000. Later that year, Tyler sold the car to Camille for $17,000. By how much did these transactions contribute to U.S. GDP for the year?

$22,000

Annie, Darwin, Dorothy, Christian, and Isabella are five college students who work as part-time bartenders. If their average weekly earnings is $100, then their total weekly earnings is ________.

$500

Shifts of the Supply Curve occur when one of the following changes:

1. input prices 2. technology 3. number and scale of sellers 4. sellers' expectations about the future

Shifts of the Demand Curve occur when one of the following changes:

1. tastes and preferences 2. income and wealth 3. availability and prices of related goods 4. number and scale of buyers 5. buyers' expectations about the future

If nominal GDP is $12 trillion and real GDP is $10 trillion, then the GDP deflator is

120, and this indicates that the price level has increased by 20 percent since the base year.

A consumer has $50 to spend. He has to decide between buying two goods: magazines priced at $5 each and DVDs priced at $10 each. Which of the following combinations of the two goods will entirely exhaust his budget constraint?

2 magazines and 4 DVDs

In country X, the average yearly salary of 50-year-olds with 16 years of education is $50,275, while the average yearly salary of 50-year-olds with 12 years of education is $36,265. According to these data, 4 additional years of education are likely to be correlated with higher future wages of about ________.You should calculate the rate og growth here, ( new - old)/ old

38 percent

If in some year nominal GDP was $28 trillion and real GDP was $32 trillion, what was the GDP deflator?

87.5

Which of the following graphical representations is ideal for comparing a single variable across different groups?

A bar chart

Which of the following statements is true?

A budget constraint quantifies the trade-offs that economic agents face while making decisions.

National income accounts

A measure of the level of aggregate economic activity in a country.

Which of the following statements correctly differentiates between a model and a hypothesis?

A model is a simplified representation of reality, whereas hypotheses are a model's predictions.

Which of the following graphical representations can be used most appropriately to show the distribution of a household's income, in terms of percentages, among the various categories of expenses?

A pie chart

What is a recession?

A recession is defined as two straight quarters in which aggregate income falls

Model

A simplified description of reality

Demand schedule

A table that reports the quantity demanded at different prices, holding all else equal.

Supply schedule

A table that reports the quantity supplied at different prices

Which of the following is a key property of models?

All economic models begin with assumptions.

Which of the following arguments based on anecdotes is most likely to be incorrect?

Based on a local survey of a small town, it was argued that greater opportunities to work from home are the prime cause of obesity among the elderly workforce in the country.

Which of the following statements is true?

Correlation arises when there is causation and can also arise when there is no causation.

If more insurance companies decide to cover part of the price of voluntary laser eye surgery and more doctors decide to enter the field of laser eye surgery, what will happen in the market for laser eye surgery as a result of these two factors?

Demand and supply will both increase.

which of the following events must cause equilibrium price to rise?

Demand increase and supply decrease

Which of the following statements is true of economic reasoning?

Economic reasoning helps people make the best use of scarce resources.

Expenditure Approach

Expenditure-based accounting sums up the purchases of goods and services by different groups or categories.

Which of the following statements is true of free riding?

Free riding is reduced with social pressure.

Income Approach

Income-based accounting sums up payments (or income) received by labor and the owners of physical or financial capital.

Demand curve

Plots the quantity demanded at different prices.

Supply curve

Plots the quantity supplied at different prices.

Market supply curve

Plots the relationship between the total quantity supplied and the market price, holding all else equal.

Causation

When one thing directly affects another.

Correlation

When two things are related

Holding everything else constant, an increase in the price of MP3 players will result in

a decrease in the quantity of MP3 players demanded.

Empirical evidence refers to ________.

a set of facts established by observation and measurement

Which of the following would cause both the equilibrium price and equilibrium quantity of cotton (assume that cotton is a normal good) to increase?

an increase in consumer income

Transfer payments

are payments that flow from government to households. are not made in exchange for currently produced goods or services. alter household income, but they do not reflect the economy's production.

The law of demand implies, holding everything else constant, that

as the price of bagels increases, the quantity of bagels demanded will decrease.

For the purpose of calculating GDP, investment is spending on

capital equipment, inventories, and structures, including household purchases of new housing.

On a line chart, the income of a consumer is measured along the horizontal axis, and his consumption is measured along the vertical axis. The slope of the line is equal to ________.

change in consumption divided by change in income

Empiricism is analysis that uses ________ to test theories.

data

The term "free riders" refers to people who ________.

don't contribute but still benefit from others' actions

Perfectly competitive market

every buyer pays and every seller charges the same market price, no buyer or seller is big enough to influence that market price, and all sellers sell an identical good or service.

Suppose that when the price of hamburgers decreases, the Ruiz family increases their purchases of ketchup. To the Ruiz family,

hamburgers and ketchup are complements.

An omitted variable is a variable that ________.

has been left out, and if included, would explain why the variables considered in a study are correlated

Grapes are considered intermediate goods

if the purchaser uses them to make wine to sell others but not if the purchaser eats them.

During the recession of 2007-2009, despite falling income levels, the fast-food chain Subway experienced increased sales. The increase in demand for Subway sandwiches despite the decline in income indicates that Subway sandwiches are considered

inferior goods.

Mean

is the average value of the group of numbers

Market price

is the price at which buyers and sellers conduct transactions.

Median

is the value in the middle of a group of numbers

Optimization

making the best choice possible with given information

GDP excludes most items that are produced and sold illegally and most items that are produced and consumed at home because

measuring them is so difficult.

Unemployment compensation is

not part of GDP because it is a transfer payment.

Changes in real GDP reflect

only changes in the amounts being produced.

If a firm has an incentive to increase supply now and decrease supply in the future, the firm expects that the

price of its product will be lower in the future than it is today.

Consumption consists of spending by households on goods and services, with the exception of

purchases of new houses.

an increase in the quantity supplied

results in a movement upward and to the right along a fixed supply curve

In markets, prices move toward equilibrium because of

the actions of buyers and sellers

Marginal analysis

the change in the net benefit of one option compared to another

Consumer price index

the cost of buying a basket of goods and services in the current year divided by the cost of the same basket in the base year.

Select the phrase that correctly completes the following statement. "A positive change in technology caused an increase in the supply of flat-screen televisions. As a result ________."

the price of flat-screen televisions decreased and the quantity demanded of flat-screen televisions increased

GDP deflator

the ratio of nominal GDP to real GDP. It is a measure of how prices of goods and services produced in a country have risen since the base year.

Economics is

the study of peoples choices

A decrease in the number of pizza seller in the Bloomsburg market causes

the supply of pizza to shift to the left

If net exports is a negative number for a particular year, then

the value of foreign goods purchased exceeded the value of goods sold to foreigners during the year.

Postive correlation

they both change in the same direction

Negative correlation

they change in opposite directions

Scarce resource

things that people want, where the quantity that people want often exceeds the quantity that is available.

When the objective of an experiment or a study is to understand the changes in the attributes of a variable on a month-to-month basis, a ________ is most useful.

time series graph

Total value

total benefit- total cost

To conduct a randomized experiment, researchers usually classify the participants into a ________.

treatment group and a control group

Empiricism

using data to figure out answers to interesting questions

Equilibrium

when everyone is optimizing; no one would be better off with a different choice

Which of the following statements is true?

Rational economic agents maximize more than just monetary income.

Which of the following is NOT a key principle of economics?

Substitution

Quantity demand

The amount of a good that buyers are willing to purchase at a given price.

Quantity Supplied

The amount of a good that sellers are willing to sell at a given price.

Income per capita

The average income per person

Technological advancements have led to lower prices and an increase in the sale of digital cameras. How does this affect the digital photo printing paper market?

The demand curve for digital photo printing paper shifts to the right.

In June, buyers of titanium expect that the price of titanium will fall in July. What happens in the titanium market in June, holding everything else constant?

The demand curve shifts to the left.

A model is based on an assumption that an additional year of education increases a student's future wage by 20 percent. Refer to the scenario above. Which of the following statements is true about the model?

The model describes the economic payoff of more education.

Inflation rate

The percentage change in a price index.

Competitive equilibrium

The point at which the market comes to an agreement about what the price will be (competitive equilibrium price) and how much will be exchanged (competitive equilibrium quantity) at that price.

Which of the following will hold true if the market for cameras is in equilibrium at a price of $40?

The quantity of cameras produced will equal the quantity of cameras bought in the market.

Microeconomics

The study of how individuals, firms, and governments make choices

Which of the following statements is true?

The subjects in the treatment group and the control group of an experiment are treated identically, except along a test variable single dimension.

Market demand curve

The sum of the individual demand curves of all the potential buyers. The market demand curve plots the relationship between the total quantity demanded and the market price, holding all else equal.

National Income and Product Accounts (NIPA)

The system of national income accounts used in the United States.

Nominal GDP

The total value of production using current market prices to determine the value of each unit that is produced.

Real GDP

The total value of production using market prices from a specific base year to determine the value of each unit that is produced.

Suppose that Jinelle, an engineer, has to choose between two jobs. Which of the following statements is true?

When deciding between jobs, she should consider both the wage and the non-wage attributes of each job.

Which of the following statements is true?

Normative statements depend on personal preferences and values

Excess demand

Occurs when consumers want more than suppliers provide at a given price. This situation results in a shortage.

Excess supply

Occurs when suppliers provide more than consumers want at a given price. This situation results in a surplus.

Three principles of economics

Optimization Equilibrium Empiricism

Which of the following statements is true?

An optimizing individual is also likely to exhibit rationality.

Economic agent

Any group or individual that makes choices, such as consumers, firms, parents, politicians, etc.

________ is the study of an economy as a whole.

Macroeconomics

Maria has to choose between driving and taking a train to destination A. Traveling by train will cost her $400 and will take 4 hours. Driving to destination A takes 6 hours, and the required amount of gasoline costs $250. Her opportunity cost of time is $15 per hour. Refer to the scenario above. If the opportunity cost of time increases to $80 per hour, which of the following statements is true?

Maria should choose to travel by train, as it saves her $10.