Midterm (Ch. 1-6)

C

The natural rate of unemployment: A. Means that the economy will always operate at its natural rate B. Means that the economy will always realize its potential output C. Is equal to the total of frictional and structural unemployment D. Is a fixed unemployment rate that does not change over time

B

A headline states: "Real GDP falls again as the economy slumps." This condition is most likely to produce what type of unemployment? A. Structural B. Cyclical C. Frictional D. Natural

D

A price floor means that: A. inflation is severe in this particular market. B. sellers are artificially restricting supply to raise price. C. government is imposing a maximum legal price that is typically below the equilibrium price. D. government is imposing a minimum legal price that is typically above the equilibrium price

C

A recession is a decline in: A. The full-employment unemployment rate over a year B. The natural rate of unemployment C. GDP that lasts six months or longer D. GDP that lasts one year or longer

B

A worker who loses a job at a call center because business firms switch the call center to another country is an example of: A. Frictional unemployment B. Structural unemployment C. Cyclical unemployment D. Disguised unemployment

D

After graduating from high school, Ron Willis plans to go to college. The college tuition is $15,000 a year. But, instead of going to college, Ron could take a full-time job paying $20,000. If Ron decides to go to college, what is his opportunity cost for attending for one year? A. $5,000 B. $15,000 C. $20,000 D. $35,000

A

Along a production possibilities curve, an increase in the production of one type of good can be accomplished only by: A. decreasing the production of the other type of good. B. increasing the production of the other type of good. C. holding constant the production of the other type of good. D. decreasing the price of the other type of good.

D

An example of a public transfer payment is a(n): A. Airline pass giving price discounts to senior citizens B. Monthly subsidy from home for a university student C. Gift of land from a wealthy relative D. Veteran's benefit payment

A

Assuming conventional supply and demand curves, changes in the determinants of supply and demand will: A. in all likelihood alter both equilibrium price and quantity. B. alter equilibrium quantity, but not equilibrium price. C. alter equilibrium price, but not equilibrium quantity. D. have no effect on equilibrium price or quantity.

A

Consumer sovereignty and "dollar votes" are most related to which fundamental question about a competitive market system? A. What goods and services will be produced? B. How will the goods and services be produced? C. How will the system promote progress? D. Who will get the goods and services?

C

Data from the registrar's office at Gigantic State University indicate that over the past twenty years tuition and enrollment have both increased. From this information we can conclude that: A. higher education is an exception to the law of demand. B. the supply of education provided by GSU has also increased over the twenty-year period. C. school-age population, incomes, and preferences for education have changed over the twenty-year period. D. GSU's supply curve of education is downsloping.

READ

Discuss three features or characteristics of the Market System. ANSWER Private Property, Freedom of Enterprise and Choice, Self-Interest, Competition, Markets and Prices, Technology and Capital Goods, Specialization, Use of Money, Active, but Limited, Government.

D

If the secular trend of labor productivity is 3 percent per year, the number of years that it will take for the standard of living to double will be about: A. 15 years. B. 17 years. C. 20 years. D. 23 years.

B

If there is a shortage of product X: A. fewer resources will be allocated to the production of this good. B. the price of the product will rise. C. the price of the product will decline. D. the supply curve will shift to the left and the demand curve to the right, eliminating the shortage.

C

In the circular flow model, households: A. buy products and resources. B. sell products and resources. C. buy products and sell resources. D. sell products and buy resources.

READ

Indicate whether each of the following statements applies to microeconomics or macroeconomics: a. The unemployment rate in the United States was 5.0% in April 2008. b. A U.S. software firm discharged 15 workers last month and transferred the work to India. c. An unexpected freeze in central Florida reduced the citrus crop and caused the price of oranges to rise. d. U.S. output, adjusted for inflation, grew by 2.2% in 2007. e. The consumer price index rose by 2.8% in 2007. Answer: a. Macroeconomics b. Microeconomics c. Microeconomics d. Macroeconomics e. Macroeconomics

C

Inflation caused by an increase in aggregate spending is referred to as: A. Cost-push inflation B. Demand-push inflation C. Demand-pull inflation D. Hyperinflation

D

Money spent on the purchase of a new house is included in the GDP as a part of: A. The consumption of private fixed capital B. Personal consumption expenditures C. Personal saving D. Investment

D

Official unemployment rate statistics may: A. Overstate the amount of unemployment by including part-time workers in the calculations B. Understate the amount of unemployment by excluding part-time workers from the calculations C. Overstate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment D. Understate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment

A

Other things equal, the provision of a per unit subsidy for a product will: A. increase its supply. B. increase its price. C. decrease the quantity sold. D. decrease its demand.

D

The Great Depression of the 1930s resulted in a decline in real GDP of about: A. 10 percent B. 20 percent C. 30 percent D. 40 percent

B

The basic economic problem is essentially one of deciding how to make the best use of: A. limited resources to satisfy limited economic wants. B. limited resources to satisfy unlimited economic wants. C. unlimited resources to satisfy unlimited economic wants. D. unlimited resources to satisfy limited economic wants.

C

The best example of a "frictionally unemployed" worker is one who: A. Reduces productivity by causing frictions in a business B. Is laid off during a recessionary period in the economy C. Is in the process of voluntarily switching jobs D. Is discouraged and not actively seeking work

A

The branch of economics that focuses primarily on aggregates is: A. macroeconomics. B. microeconomics. C. scientific economics. D. consumer economics.

C

The following are national income account data for a hypothetical economy in billions of dollars: gross private domestic investment ($320); imports ($35); exports ($22); personal consumption expenditures ($2,460); and, government purchases ($470). What is GDP in this economy? A. $3,250 billion B. $3,263 billion C. $3,237 billion D. $3,290 billion

B

The largest component of GDP is: A. Government purchases B. Personal consumption expenditures C. Gross private domestic investment D. Net foreign factor income earned in the United States

A

The law of supply indicates that: A. producers will offer more of a product at high prices than they will at low prices. B. the product supply curve is downsloping. C. consumers will purchase less of a good at high prices than they will at low prices. D. producers will offer more of a product at low prices than they will at high prices.

C

The primary focus of the study of economics is with: A. expanding the production of goods and services. B. equalizing the distribution of consumer income and wealth. C. making the most efficient use of scarce productive resources. D. reallocating resources from consumption to production in the economy.

D

Which industry or sector of the economy would least likely be affected by the business cycle? A. Automobiles B. Consumer durables C. Capital goods D. Services

D

Which of the following is a private transfer payment? A. The sale of shares of stock in Wal-Mart B. The sale of used clothing at a thrift store C. The Social Security benefits sent to a retired worker D. A check for $100 sent by a parent to a daughter at college

READ

Which of the following would be included in a given year's GDP calculations? a. The herbs that you grow in your garden for family consumption. b. Helping your sister mow her lawn on your day off. c. The money you receive when you sell your macroeconomics textbook at the end of the course. Explain why they are or are not included in GDP. ANSWER a. Not included - does not pass through the market b. Not included - transaction does not pass through the market c. Not included - resold goods do not count towards GDP

B

Which of the following would not shift the demand curve for beef? A. a widely publicized study that indicates beef increases one's cholesterol B. a reduction in the price of cattle feed C. an effective advertising campaign by pork producers D. a change in the incomes of beef consumers

READ

hat effect will each of the following have on the supply of auto tires? a. A technological advance in the methods of producing tires. b. A decline in the number of firms in the tire industry. c. An increase in the price of rubber used in the production of tires. ANSWER a. Supply will increase because the technological advance allows the tire manufacturers to produce more tires using the same amount of inputs. b. Supply will decrease because there are fewer firms in the industry. c. Supply will decrease because the increase in the price of rubber results in an increase in production costs. Thus, each firm will need to charge a higher price at each level of output (or supply less at each price).