Macroeconomics exam 2

Mr. Clooney inherited a sum of $30,000 in 1990. If the price index was 100 for 1990 and 188 for 2014, the value of the money he inherited in 2014 dollars is ________.

$56,400

Which of the following is NOT a way that the level of technological knowledge manifests itself in an economy?

In a larger, younger population and workforce

Which equality is not guaranteed by the circular flow diagram?

The income paid to factors of production must equal the market value of expenditure AND the market value of production must equal the market value of expenditure AND The market value of expenditure must equal the market value of income.

Which of the following examples best describes the Law of Demand?

When the price of bread doubles, John's consumption of bread halves.

Country X produces only one good. It produced 12,500 units of a good during a particular year. If the price of the good during that year was $100 and the price of the good during the base year was $95, the nominal GDP of the country is ________.

$1,250,000

Suppose that instead of Greg not mowing his lawn, he pays a lawn care business $20.00. He had to buy $5 in gas and took 1 hour of his time when he did it himself. How much of this transaction is counted in GDP?

$20

Scenario: John and Sue are married and live in the United States. John is a Canadian citizen and stays home with their two children, Micah and Madison; his caretaking is valued at $20,000 per child. He also programs video games from home in the evenings for a Japanese-based online poker site for $50,000 per year. Sue works as a high-powered lawyer for Berkshire Hathaway at their London branch for the U.S. dollar equivalent of $1,000,000 per year.Refer to the above scenario. Accounting for non-market based economic production, how much does John contribute to U.S. GDP?

$40,000

The expenditure on consumption in Berylia during a particular year was $310,000, the expenditure on investment was $180,000, the expenditure incurred by the government was $75,000, the expenditure of foreign economic agents on domestic products was $80,000, and the domestic expenditure on foreign produced goods was $103,000. What was the GDP of Berylia during that year?

$542,000

Scenario: The price of a given basket of goods in Country 1 is 10 karls. The price of the same basket of goods in Country 2 is 25 ritz and is $2 in the United States. Country 1 has an income per capita of 3,200 karls, and Country 2 has an income per capita of 5,500 ritz.Refer to the scenario above. The price of a basket of goods worth $1 in the United States is ________ in Country 1.

5 karls

One bag of flour is sold for $1.00 to a bakery, which uses the flour to bake two loaves of bread that are sold for $3.00 each to consumers. A second bag of flour is sold for $1.00 to a grocery store, which sells it to a consumer for $2.00. Taking these transactions into account, what is their contribution to GDP?

8

Which of the following factors will NOT cause a shift in the demand for a good?

A change in the market price of the good

Which of the following is likely to increase the productivity of workers in an economy?

An increase in the number of years of training that each worker receives

The development of genetically modified soybean seeds such as Roundup Ready seeds lowered tillage costs for soybean growers. How will this technological advance affect the supply of soybeans?

Increase in supply

Scenario: Farm Country and Industry Country are two neighboring countries. Both countries produce only one good: good X. Production in both countries is a function of total efficiency units of labor and physical capital stock. Refer to the scenario above. How could research and development (R&D) lead to increases in productivity?

New technology usually allows for production of the same output at lower cost.

Suppose there has been an increase in the equilibrium price and quantity in the market for chickens. Which of the following events could have caused this?

People quarantining at home have decided they want to try raising backyard chickens.

It is found that a one-unit increase in capital leads to a higher increase in the production of good X in Farm Country than in Industry Country. Why might this be the case if both countries have the same amount of total efficiency units of labor?

Physical capital stock is greater in Farm Country.

How does savings relate to investment using the national income accounting identity?

Savings = Investment + Exports - Imports

The value of production generated by a country's factors of production in foreign countries during a particular year was $51,000, and the value of production generated by foreign factors of production in the country during that year was worth $80,000. Which of the following is likely to be TRUE in this case?

The GDP of the country is higher than its GNP.

Scenario: The price of a standard basket of goods in Country A is 10 pesos. The price of the same basket of goods in country B is 25 francs and $5 in the United States. Country A has an income per capita of 60,000 pesos, and country B has an income per capita of 100,000 francs. Assume full employment in both countries.Refer to the scenario above. Why could it be the case that the standard of living is higher in country B than in country A?

The PPP-adjusted GDPs differ from the exchange-rate-adjusted GDPs.

Suppose the market for cement is such that the output of all sellers is identical in composition and quality. While there are a large number of buyers and sellers, everyone conducts transactions at a common market price. Which of the following statements is TRUE about the structure of the cement market?

The cement market is completely competitive

Which of the following will be included in the calculation of GDP using the income-based method?

The earrings retained by a corporation

In 2007, an unseasonably dry spring led to a sharp decline in the quantity harvested of black morels, a wild mushroom found throughout the upper Midwest. Due to the scant harvest, the price of black morels rose from $9 per pound to nearly $45 per pound. In 2008, slightly above-normal rainfall levels led to a large black morel harvest. Assuming that the demand for black morels did not change from 2007 to 2008, we would expect the 2008 black morel supply to ________ and the equilibrium price of black morels to ________.

increase; fall

Scenario: In 2010, Bozone had fifteen full-time (40 hours per week) employees and brewed 10 million cans of beer in 300 business days. Bozone paid each employee $15 per hour. In 2015, production increased to 20 million cans, and five new employees were hired. In 2015, a new policy allowed employees to take the day off if it is a powder day at Bridger ski resort. Refer to the scenario above. As a consequence of the new policy, productivity at Bozone ________ compared to 2010.

increased if there were no powder days

National income accounts measure the

level of aggregate economic activity in a country

Scenario: Red Country and Purple Country have identical aggregate production functions. The amount of physical capital stock available to each country is equal. Labor supply in Red Country is HR, while the labor supply in Purple Country is HP.Refer to the scenario above. Relative to Purple Country's total efficiency units of labor, the one-unit increase in the efficiency units of labor in Red Country indicates ________.

marginal contributions of total efficiency units of labor must be smaller

The main reason income per capita and income per worker vary across countries is because ________.

productivity varies across countries

Frozen Cow Ice Cream Company buys sugar and milk to produce ice cream and energy drinks. At the end of a quarter, both its inventory of sugar and its inventory of energy drinks has increased, but their inventory of milk has decreased. Investment for the quarter will include ________.

the increased inventory of sugar plus the increased inventory of energy drinks minus the decreased inventory of milk