Midterm 1

(Table: Peanut Butter and Jelly) Use Table: Peanut Butter and Jelly. Suppose a market basket consists of 20 jars of peanut butter and 10 jars of jelly. If 2012 is the base year, what is the rate of inflation between 2012 and 2013? a. 44.5% b. 22.5% c. 4.5% d. 11.25%

d. 11.25%

Which of the following statements is NOT true: a. If the nominal GDP growth rate is greater than real GDP growth rate then prices declined b. The goal of GDP is to measure aggregate output c. Nominal GDP always equals real GDP in the base year. d. Trade deficits are associated with capital inflow

A. If the nominal GDP growth rate is greater than real GDP growth rate then prices declined

(Figure: The Demand and Supply of Wheat) Use Figure: The Demand and Supply of Wheat. If there is an increase in demand of 4,000 bushels per period at each price, the equilibrium price and quantity will be and bushels per period, respectively. a. $8; 8,000 b. $5; 5,000 c. $6; 6,000 d. $7; 7,000

a. $8; 8,000

Which example is a LIKELY response to inflation? a. People tend to make more transactions. b. People choose to carry higher money balances. c. People tend to hold on to fewer interest-bearing assets. d. People tend to make fewer transactions.

a. People tend to make more transactions.

Last month, Brent lost his job at the auto parts factory because the factory relocated to Asia. Brent has been looking for similar jobs in his town but has found no openings. Brent is BEST classified as: a. structurally unemployed. b. a discouraged worker. c. out of the labor force. d. frictionally unemployed.

a. structurally unemployed.

(Table: Pizza Economy II) Use Table: Pizza Economy II. GDP in this economy is: a. $74,000. b. $16,000. c. $5,000. d. $29,000.

b. $16,000.

Suppose GDP in 2019 is $1000, consumer spending is $600, government purchases are $200, investment spending is $400, and exports are $200. What is the value of imports? a. -$400 b. $400 c. $200 d. $0

b. $400

My Aunt Annette bought her house for $7,000 in 1947 (CPI in 1947 = 22.3). What is this sale price in 2018 dollars (CPI in 2018 = 250.5)? a. $7,000 b. $78,632 c. $623 d. $7,228

b. $78,632

A beneficial technological change is developed in the production of cranberries. At the same time, scientists discover that cranberries have significant health benefits. This will result in: a. a decrease in the equilibrium price and an uncertain effect on the equilibrium quantity of cranberries. b. an increase in the equilibrium quantity and an uncertain effect on the equilibrium price of cranberries. c. an increase in both the equilibrium price and quantity in the cranberry market. d. a decrease in both the equilibrium price and quantity in the cranberry market.

b. an increase in the equilibrium quantity and an uncertain effect on the equilibrium price of cranberries.

The total income of housholds after taxes and government transfers is called: a. investment. b. disposable income. c. private savings. d. aggregate spending.

b. disposable income.

Anna recently moved to Honolulu with her husband Joe, who has a new job as an economics professor at UH. Anna is an experienced surgeon who is interviewing with several hospitals in Honlulu. Anna is: a. counted as employed since she is likely to receive a job offer soon. b. frictionally unemployed. c. cyclically unemployed. d. structurally unemployed.

b. frictionally unemployed.

The labor force is the total: a. number of people employed. b. number of people who are employed or unemployed. c. number of people in the population of working age. d. population.

b. number of people who are employed or unemployed.

In the circular-flow model, households: a. buy resources in the factor markets. b. receive transfer payments from the government. c. issue stocks and bonds to raise capital. d. sell products in the market for goods and services.

b. receive transfer payments from the government.

Wage inequality is more troubling when it reflects a. different priorities in life b. unequal opportunities c. unequal outcomes d. the difficulty of the job

b. unequal opportunities

(Figure: The Labor Market) Use Figure: The Labor Market. The size of the labor force at the equilibrium wage rate is: a. 110,000. b. 200,000. c. 100,000. d. 80,000.

c. 100,000.

A survey reveals that on the Hawaiian island of Niihau 40 people have jobs, 10 people are not working but are looking for jobs, and 30 people are neither working nor looking for work. The unemployment rate on the island is_____ %. a. 50 b. 25 c. 20 d. 12.5

c. 20

(Figure: The Labor Market) Use Figure: The Labor Market. What is the unemployment rate with a minimum wage of $16, assuming all workers without a job are searching? a. 20% b. 10% c. 27% d. Impossible to determine

c. 27%

In the market for fish tacos, the factor that does NOT shift the supply curve to the left is: a. an increase in the price of fish. b. an increase in the wages of taco shop workers. c. a decrease in the price of tacos. d. fewer taco shops.

c. a decrease in the price of tacos.

The demand curve for monthly subscriptions to HBO has shifted to the right. What could have caused it? a. an increase in the price of HBO subscriptions b. a fall in the price of HBO subscriptions c. an increase in the incomes of buyers d. an increase in the supply of HBO subscriptions

c. an increase in the incomes of buyers

Skill Biased Technical Change (SBTC) leads to wage inequality by: a. increasing the supply for less-skilled workers and decreasing the supply for skilled workers b. decreasing the supply for less-skilled workers and increasing the supply for skilled workers c. decreasing the demand for less-skilled workers and increasing the demand for skilled workers d. increasing the demand for less-skilled workers and decreasing the demand for skilled workers

c. decreasing the demand for less-skilled workers and increasing the demand for skilled workers

Real GDP tends to understate our economic well-being because it: a. includes the value of services produced in the home. b. includes expenditures on crime prevention equipment. c. excludes the value of leisure. d. includes health care costs related to the consumption of cigarettes.

c. excludes the value of leisure.

The aggregate price level is the: a. average price of shares on the stock market. b. average price of commodities. c. overall level of prices. d. same as the average price of gasoline.

c. overall level of prices.

(Figure: The Demand and Supply of Wheat) Use Figure: The Demand and Supply of Wheat. If a price of $10 temporarily exists in this market, a of bushels per period will result. a. shortage; 10,000 b. surplus; 4,000 c. surplus; 8,000 d. shortage; 8,000

c. surplus; 8,000

Growing wage inequality since 1980 refers to the fact that: a. wages in 2018 are much higher than wages in 1980 after accounting for inflation b. the difference between U.S. and Chinese wages has grown c. the gap in wages between skilled and less-skilled workers has increased d. all of the above

c. the gap in wages between skilled and less-skilled workers has increased

Shoe-leather costs are the costs of: a. living adjustments as inflation increases. b. the raw material used in production. c. the increased number of transactions as inflation increases. d. having to change prices as inflation increases.

c. the increased number of transactions as inflation increases.

(Table: Peanut Butter and Jelly) Use Table: Peanut Butter and Jelly. Suppose a market basket consists of 20 jars of peanut butter and 10 jars of jelly. If 2012 is the base year, what is the value of the price index in 2013? a. $44.50 b. 90 c. 100 d. 111.25

d. 111.25

The consumer price index in 1979 was 72.6. In 1980, it was 82.4. What was the rate of inflation from 1979 to 1980? a. 17.6% b. 9.8% c. 11.89% d. 13.5%

d. 13.5%

Suppose there is higher than expected inflation and that wages kept pace with this increase in the price level. Who benefits? a. Lenders b. Producers C. Consumers D. Borrowers

d. Borrowers

Which statement illustrates the law of demand? a. Oil companies drill for new sources because prices are higher. b. An increase in tuition encourages more students to enroll in college because the quality of education has risen. c. Fewer people play golf because incomes are lower. d. Consumers buy more personal computers because prices have fallen.

d. Consumers buy more personal computers because prices have fallen.

What is part of U.S. GDP but not U.S. GNP? a. Ford produces a Mustang in Detroit b. Ford produces a Mustang in Mexico City c. Toyota produces a Camry in Tokyo d. Toyota produces a Camry in Kentucky

d. Toyota produces a Camry in Kentucky

Which factor would shift the demand curve for new textbooks to the right? a. a decrease in the price of paper b. a fall in the price of new textbooks c. a fall in the price of used textbooks d. an increase in college enrollment

d. an increase in college enrollment

Deflation is a(n): a. increase in the average level of prices. b. decrease in the purchasing power of a unit of money. c. appreciation of the nation's currency. d. decrease in the average level of prices.

d. decrease in the average level of prices.

Intermediate goods are NOT counted in GDP because: a. these goods are produced in the underground economy. b. these goods involve financial transactions. c. these goods are not produced for the market. d. doing so would result in double counting.

d. doing so would result in double counting.

(Table: Peanut Butter and Jelly Economy) Use Table: Peanut Butter and Jelly Economy. From 2010 to 2011 real GDP_______ by________ %. a. increased; 43.75 b. decreased; 50 c. decreased; 12.5 d. increased; 12.5

d. increased; 12.5

(Table: Peanut Butter and Jelly Economy) Use Table: Peanut Butter and Jelly Economy. Between 2010 and 2011, nominal GDP_____ by_______%. a. increased; 16.67 b. increased; 12.5 c. decreased; 12.5 d. increased; 31.25

d. increased; 31.25

The rate of unemployment is found by dividing the: a. number of people looking for work by the population. b. unemployed and discouraged workers by the labor force. c. labor force by the number of people looking for work. d. number of people not working but looking for work by the sum of the number of people not working but looking for work and the number of people employed.

d. number of people not working but looking for work by the sum of the number of people not working but looking for work and the number of people employed.

Investment spending is spending on: a. bonds. b. shares of stock. c. productive physical capital, bonds, and shares of stock. d. productive physical capital.

d. productive physical capital.

In a market basket of goods: a. the quantities may change and the prices are held constant. b. both the prices and the quantities are held constant. c. both the prices and the quantities may change. d. the quantities stay constant and the prices may change.

d. the quantities stay constant and the prices may change.

Aggregate output is: a. the total quantity of intermediate goods produced by an economy. b. equal to consumer spending on goods and services. c. the value of new construction, changes in inventories, and the purchase of physical capital by businesses. d. the total quantity of final goods and services produced by an economy.

d. the total quantity of final goods and services produced by an economy.

According to the research of Raj Chetty, moving from the bottom of the income distribution as a kid to the top of the income distribution as an adult is a. equally likely in Canada and the U.S. b. Chetty's research is about geographic mobility and not intergenerational mobility c. most likely to happen if you grow up in the U.S. (i.e the "American Dream") d. twice as likely to happen if you grow up in Canada instead of the U.S.

d. twice as likely to happen if you grow up in Canada instead of the U.S.