Tingnan ang lahat ng mga set ng pag-aaral

Combo with "Econ chapter 10" and 18 others

Pataasin ang iyong marka sa homework at exams ngayon gamit ang Quizwiz!

The market system's answer to the fundamental question "How will the goods and services be produced?" is essentially:

"At least-cost production."

The market system's answer to the fundamental question "What will be produced?" is essentially:

"Goods and services that are profitable."

in the second statement

"In the corn market, demand often exceeds supply and supply sometimes exceeds demand." "The price of corn rises and falls in response to changes in supply and demand." In which of these two statements are the terms demand and supply being used correctly?

The market system's answer to the fundamental question "Who will get the goods and services?" is essentially:

"Those willing and able to pay for them."

The market system's answer to the fundamental question "how will the system accommodate change?" is essentially:

"Through the guiding function of prices and the incentive function of profits"

The market system's answer to the fundamental question "How will the system promote progress?" is essentially:

"Through the profit potential that encourages development of new technology."

The French term "laissez-faire" means:

"let it be."

Refer to the above diagram. A shortage of 160 units would be encountered if price was:

$.50

(Consider This) According to the Consider This box on patents and innovation, the cost for U.S. and European drug companies to research, patent, and safety-test a new drug is about:

$1 billion

Arthur sells $100 worth of cotton to Bob. Bob turns the cotton into cloth, which he sells to Camille for $300. Camille uses the cloth to make prom dresses that she sells to Donita for $700. Donita sells the dresses for $1,200 to kids attending the prom. The total contribution to GDP of this series of transactions is:

$1,100

$1,200

$1,200.

Refer to the above diagram. The equilibrium price and quantity in this market will be:

$1.00 and 200.

Assume there are no prospective investment projects (I) that will yield an expected rate of return (r) of 25 percent or more, but that there are $5 billion of investment opportunities with an expected rate of return between 20 and 25 percent, an additional $5 billion between 15 and 20 percent, and so on. If the real interest rate is 15 percent in this economy, the aggregate amount of investment will be:

$10.

Answer the question on the basis of the following data. All figures are in billions of dollars. The gross domestic product for the above economy is:

$101.

Answer the question on the basis of the following data. All figures are in billions of dollars: Refer to the data. GDP is:

$121.

Current Value of GDP

$18 Trillion

Suppose that GDP was $200 billion in year 1 and that all other components of expenditures remained the same in year 2 except that business inventories fell by $10 billion. GDP in year 2 is:

$190 billion.

Use the following table for a hypothetical single-product economy. Picture Refer to the data. Real GDP in year 4 is:

$200

Setup Corporation buys $100,000 of sand, rock, and cement to produce ready-mix concrete. It sells 10,000 cubic yards of concrete at $30 a cubic yard. The value added by Setup Corporation is:

$200,000

Setup Corporation buys $100,000 of sand, rock, and cement to produce ready-mix concrete. It sells 10,000 cubic yards of concrete at $30 a cubic yard. The value added by Setup Corporation is:

$200,000.

Suppose that GDP was $200 billion in year 1 and that all other components of expenditures remained the same in year 2 except that business inventories increased by $10 billion. GDP in year 2 is:

$210 billion.

Answer the next question(s) on the basis of the following data. All figures are in billions of dollars. Personal taxes $40 Social Security Contributions 15 Taxes on Production and Imports 20 Corporate Income Taxes 40 Transfer Payments 22 US Exports 24 Undistributed Corporate Profits 35 Government Purchases 90 Gross Private Domestic Investment 75 US Imports 22 Personal Consumption Expenditures 250 Consumption of Fixed Capital 25 Net Foreign Factor 10 Statistical Discrepancy 0 Refer to the above data. DI is:

$274

Answer the question on the basis of the following information for a private closed economy. Assume that for the entire business sector of the economy there is $0 worth of investment projects that will yield an expected rate of return of 25 percent or more. But there are $15 worth of investments that will yield an expected rate of return of 20−25 percent; another $15 with an expected rate of return of 15−20 percent; and similarly an additional $15 of investment projects in each successive rate of return range down to and including the 0−5 percent range. Refer to the above information. If the real interest rate is 15 percent, what amount of investment will be undertaken?

$30

Assume that a manufacturer of stereo speakers purchases $40 worth of components for each speaker. The completed speaker sells for $70. The value added by the manufacturer for each speaker is:

$30

Assume that a manufacturer of stereo speakers purchases $40 worth of components for each speaker. The completed speaker sells for $70. The value added by the manufacturer for each speaker is:

$30.

Refer to the above table. Per capita GDP was about:

$303 in year 3 in Zorn.

$314

Answer the question on the basis of the following data. All figures are in billions of dollars. Picture Refer to the data. Net domestic product is:

$380

$392

Refer to the above diagram. If this is a competitive market, price and quantity will move toward:

$40 and 150 respectively.

$402

$417

Real Per Capita GDP in the United States in 2009 was approximately:

$42,300

24. In 2009, output per person in the U.S was about

$46,000 per year

If the natural rate of unemployment was 6 percent, the current unemployment rate was 12 percent, and the nominal GDP was $4,000 billion, then according to Okun's law the economy would have sacrificed:

$480 billion in potential output

Assume the MPC is 2/3. If investment spending increases by $2 billion, the level of GDP will increase by

$6 billion.

Assume that an economy has 1500 workers, each working 2000 hours per year. If the average real output per worker-hour is $20, then total output or real GDP will be:

$60 million

Alejandro Scoobertini owns a store specializing in soccer jerseys. In 2012, he purchased $150,000 worth of jerseys from manufacturers, employed one worker for $40,000, purchased $20,000 worth of supplies from an office supply store, and sold jerseys for $280,000. Based on this information, what was the value added at Alejandro's store in 2012?

$70,000.

An increase in the price of product A will:

$8 and 60 units.

Assume that an economy has 2,000 workers, each working 4,000 hours per year. If the average real output per worker-hour is $10, then total output or real GDP will be:

$80 million

Use the following table for a hypothetical single-product economy. Picture Refer to the data. Nominal GDP in year 4 is:

$800

Annual Rate of Inflation

(this year-last year)//last year

National Income Accountants subdivide corporate profits into which categories?

- Dividends - Corporate Income Taxes - Undistributed Corporate Profits

Main sectors of the US economy

- Foreign countries - U.S. Businesses - U.S. Households - U.S. Government

Which are part of taxes on production and imports?

- General sales taxes - bus property taxes - customs duties - licence fees - excise taxes

What factors comprise of National Income?

- Taxes on production and imports - Compensation of employees - Interest - Rents - Corporate Profits - Proprietors' income

A price index

- is normalized to 100 for the base year - always include base year - measures the cost of purchasing a market basket of output across different years

1. The two topics of primary concern in macroeconomics are:

. short-run fluctuations in output and employment, and long-run economic growth.

Refer to the above diagram. The marginal propensity to consume is:

The average number of months between price changes for gasoline is

0.6

Two ways to adjust nominal GDP to reflect price changes are:

1) Multiply the current year's output by the price of the output in the base year. 2) Nominal GDP divided by the price index

Which set of items in the above list would shift an economy's production possibilities curve outward?

1, 2, 5, and 6 only

Refer to the above list. As distinct from the demand and efficiency factors of economic growth, the supply factors of economic growth are:

1, 2, 5, and 6 only.

Specialization—the division of labor—enhances productivity and efficiency by:

1. allowing workers to take advantage of existing differences in their abilities and skills. 2. avoiding the time loss involved in shifting from one production task to another. 3. allowing workers to develop skills by working on one, or a limited number, of tasks. (all the answers)

In a market economy a significant change in consumers' desire for product X will:

1.alter the profits or losses received by suppliers of product X. 2. cause a reallocation of scarce resources. 3. cause some industries to expand and others to contract.

At an annual growth rate of 7 percent, real GDP will double in about:

10 years.

Assume an economy that is producing only one product. Output and price data for a three-year period are as follows. Answer the question on the basis of these data. Picture Refer to the data. If year 2 is chosen as the base year, the price index for year 1 is:

100

Assume an economy that is producing only one product. Output and price data for a three-year period are as follows. Answer the question on the basis of these data. Refer to the data. If year 2 is chosen as the base year, the price index for year 1 is:

100.

125 percent higher than the nominal GDP for year 1.

If a nation's real GDP is growing by 5 percent per year, its real GDP will double in approximately:

14 years

If a nation's real GDP is growing by 5 percent per year, its real GDP will double in approximately:

14 years.

Abell was talking about the shortcomings of the Soviet Union, one of the issues was the bottlenecking of certain goods...what was the product that was in shortage to the point there was a black market for it?

16 penny nails

If the secular trend of labor productivity rises from 2 percent per year to 4 percent, the number of years that it will take for the standard of living to double will decline by about:

17 years.

Current U.S. Debt

18.4 Trillion

Between 1950 and 2009, U.S. real GDP per capita grew at an average annual rate of about:

2.0 percent.

From 1995-2007, labor productivity grew on average by:

2.7 percent

As of 1998, living standards in the United States were nearly ______ times higher than those in Africa.

Suppose that a new machine tool having a useful life of only one year costs $80,000. Suppose, also, that the net additional revenue resulting from buying this tool is expected to be $96,000. The expected rate of return on this tool is:

20 percent.

If the inflation rate is 10 percent and the real interest rate is 12 percent, the nominal interest rate is

22 percent.

If the growth 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:

23 years

Current CPI

238

Answer the question on the basis of the following information: Only three goods are produced in an economy in the following amounts: A = 10, B = 30, C = 5. The current year per unit prices of these three goods are A = $2, B = $3, and C = $1. (Advanced analysis) Refer to the information. If the per unit prices of the three goods were each $1 in a base year used to construct a GDP price index, then the GDP price index in the current year is:

255.55

What percentage of the U.S. adult population has a college or post-college education (as of 2009)?

29 percent

Which set of items in the above list would move an economy from a point inside its production possibilities curve to a point on its production possibilities curve?

3 and 4 only

Refer to the above list. As distinct from the supply factors and efficiency factor of economic growth, the demand factor(s) of economic growth is (are):

3 only

Between 1950 and 2009, U.S. real GDP grew at an average annual rate of about:

3.2 percent.

If the Consumer Price Index was 166.6 in one year and 172.2 in the next year, then the rate of inflation from one year to the next was:

3.4 %

The Great Depression of the 1930s resulted in a decline in real GDP of about:

30 percent

If real GDP in a particular year is $80 billion and nominal GDP is $240 billion, the GDP price index for that year is:

300

If real GDP in a particular year is $80 billion and nominal GDP is $240 billion, the GDP price index for that year is:

300.

What percentage of the U.S. adult population has a college or post-college education (as of 2012)?

31 percent.

Refer to the above table. Between years 1 and 2, real GDP per capita grew by approximately __________ percent in Alta.

Refer to the above list. As distinct from the supply factors and demand factor of economic growth, the efficiency factor(s) of economic growth is (are):

4 only

If the natural rate of unemployment is 4.5 percent and the actual unemployment rate is 6.5 percent, then Okun's law indicates that the GDP gap is:

4 percent

The full-employment unemployment rate for the United States economy is now generally considered to be:

4 to 5 percent of the labor force

Based on the annual number of hours worked per capita, labor supply in the United States exceeds that of France by about _______ percent.

Suppose nominal GDP in 2009 was $100 billion and in 2010 it was $260 billion. The general price index in 2009 was 100 and in 2010 it was 180. Between 2009 and 2010 the real GDP rose by approximately:

44 percent.

Refer to the above table. Between years 1 and 2, real GDP grew by __________ percent in Alta.

Refer to the table. Between years 1 and 2, real GDP grew by __________ percent in Alta.

Current Unemployment Rate

5.1%

A nation has a population of 260 million people. Of these, 60 million are retired, in the military, in institutions, or under 16 years old. There are 188 million who are employed and 12 million who are unemployed. What is the unemployment rate?

6 percent

Current Population

7.2 Billion

Assuming the total population is 200 million, the labor force is 100 million, and 92 million workers are employed, the unemployment rate is:

8 percent

What percentage of the U.S. adult population has at least a high school education (as of 2009)?

87 percent

What percentage of the U.S. adult population has at least a high school education (as of 2012)?

88 percent.

(Last Word) Over the past twenty-five years, China has averaged annual growth rates of nearly:

9 percent

Between 2009 and 2020, productivity growth is expected to account for about ________ percent of the growth of real GDP in the United States.

Globally, on average test scores of eighth-grade math and science students, the U.S. ranks (as of 2007):

9th and 11th, respectively.

Refer to the above diagram. Other things equal, which of the following positions relative to PP1 would be the most likely to result in a future production possibilities curve of PP3, rather than PP2

If the demand curve for product B shifts to the right as the price of product A declines, then:

A and B are complementary goods

The recurrent ups and downs in the level of economic activity extending over several years are a description of:

A business cycle

17. Which of the following is most likely to be an indication of higher unemployment?

A decrease in real GDP

price of outboard motors

A decrease in the demand for recreational fishing boats might be caused by an increase in the:

Other things equal, which of the following would decrease the rate of economic growth, as measured by changes in real GDP?

A decrease in the labor force participation rate

shift the demand curve for memory cards to the right

A decrease in the price of digital cameras will

indicates the quantity demanded at each price in a series of prices

A demand curve

Microeconomics is concerned with

A detailed examination of specific economic units that make up economic system

36. Which of the following is an example of a supply shock?

A dramatic increase in energy prices increases production costs for firms in the economy.

Which of the following is an example of a supply shock?

A dramatic increase in energy prices increases production costs for firms in the economy.

beyond some point the production costs of additional units of output will rise

A firm's supply curve is upsloping because:

increases product supply.

A government subsidy to the producers of a product:

Which of the following is a final good or service?

A haircut purchased by a father for his 12 year-old son.

some firms leaving an industry

A leftward shift of a product supply curve might be caused by

commercialize human body parts and thus diminish the special nature of human life.

A major objection to creating a legal market for human organs is that such a market would:

eliminate the shortage of organs

A market for human organs (rather than the current volunteer-donor system) would be expected to

if the amount producers want to sell is equal to the amount consumers want to buy

A market is in equilibrium

increase the quantity of organs available for transplant

A market-based system of buying and selling human organs for transplant would:

the consumption of which varies directly with incomes

A normal good is one:

Which of the above diagrams illustrate(s) the effect of a decline in the price of personal computers on the market for software?

A only

Refer to the figures. Which figure(s) represent(s) a situation where prices are flexible?

A only.

government is imposing a legal price that is typically below the equilibrium price.

A price ceiling means that

government is imposing a minimum legal price that is typically above the equilibrium price

A price floor means that

where the demand and supply curves intersect

A product market is in equilibrium:

beer and marijuana are complementary goods

A recent study found that an increase in the Federal tax on beer (and thus an increase in the price of beer) would reduce the demand for marijuana. We can conclude that

28. Which of the following is the best example of investment as defined by economists?

A restaurant owner buys a freezer to store ingredients for the restaurant meals

26. Which of the following is the best example of financial investment?

A retiree purchases Google stock

Refer to the above figures. Which of the following events would most likely result in inflation?

A shift from D2 to D3 in Figure A.

consumer preferences have changed in favor of A so that they now want to buy more at each possible price

A shift to the right in the demand curve for product A can be most reasonably explained by saying that:

above equilibrium with the result that quantity supplied exceeds quantity demanded.

A surplus of a product will arise when price is

Which of the following institutional structures is most likely to promote growth?

A well-enforced system of patents and copyrights.

Refer to the above diagram. Which line(s) show(s) a positive vertical intercept?

A, D, and E.

Which of the following is a final good or service? A. a haircut B. fertilizer purchased by a farm supplier C. diesel fuel bought for a delivery truck D. Chevrolet windows purchased by a General Motors assembly plant

A. a haircut

Which of the following is the smallest dollar amount in the United States? A. disposable income B. personal income C. gross domestic product D. national income

A. disposable income

Okun's Law

Actual Rate -Nominal rate = % x 2 = GDP gap

23. Which of the following is not an adjustment made when comparing standards of living across countries?

Adjusting for different unemployment rates across countries

n recent years the economy of Japan has grown, despite the fact that the population of Japan has declined. Which of the following would best explain Japan's economic growth despite having a smaller population?

Advancements in technology that make labor more productive.

Which of the following economic regions has experienced the least growth in real GDP per capita since 1820?

Africa

Which of the following economic regions has experienced the least growth in real GDP per capita since 1820?

Africa.

The demand curve for a product might shift as the result of a change in

All of the above

Which of the following best illustrates the circular flow model in action?

All of these answers illustrate the workings of the circular flow model.

the mix of output that will maximize society's satisfaction

Allocative efficiency involves determining

producing the combination of goods most desired by society

Allocative efficiency is concerned with

the production of the product mix most wanted by society

Allocative efficiency refers to

Refer to the above table. Between years 2 and 3:

Alta's real GDP grew more rapidly than Zorn's real GDP.

Refer to the table. Between years 2 and 3:

Alta's real GDP grew more rapidly than Zorn's real GDP.

bicycles are normal goods

An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction assumes that

result in a product shortage

An effective ceiling price will

result in a surplus of wheat

An effective price floor on wheat will

result in a product surplus

An effective price floor will:

shift the supply curve to the right

An improvement in production technology will

quantity demanded to decrease

An increase in product price will cause:

supply curve for cigarettes leftward

An increase in the excise tax on cigarettes raises the price of cigarettes by shifting the:

Which of the following statements is correct?

An increase in the price of C will decrease the demand for complementary product D

Which of the following statements is correct?

An increase in the price of C will decrease the demand for complementary product D.

consumers will substitute other products for the one whose price has risen

An increase in the price of a product will reduce the amount of it purchased because

increase the demand for substitute product B

An increase in the price of product A will

price has declined and consumers therefore want to purchase more of the product

An increase in the quantity demanded means that:

A supply factor in economic growth would be:

An increase in the quantity of labor

Other things equal, which of the following would increase the rate of economic growth, as measured by changes in real GDP?

An increase in the size of the working age population.

Which is a demand factor in economic growth?

An increase in total spending in the economy

not accurately defined by any of these statements

An inferior good is

27. Which of the following is the best example of economic investment?

Apple builds a new plant to manufacture iPads

rise, the supply of bread to decrease, and the demand for potatoes to increase.

Assume a drought in the Great Plains reduces the supply of wheat. Noting that wheat is a basic ingredient in the production of bread and potatoes are a consumer substitute for bread, we would expect the price of wheat to:

decrease, quantity demanded will increase, and quantity supplied will decrease

Assume in a competitive market that price is initially above the equilibrium level. We can predict that price will

increase, quantity demanded will decrease, and quantity supplied will increase.

Assume in a competitive market that price is initially below the equilibrium level. We can predict that price will:

increase the supply of B and increase the demand for C

Assume product A is an input in the production of product B. In turn product B is a complement to product C. We can expect a decrease in the price of A to

a larger quantity of C will be demanded

Assume that the demand curve for product C is downsloping. If the price of C falls from $2.00 to $1.75

a decline in income if X is an inferior good

Assume the demand curve for product X shifts to the right. This might be caused by

An increase in demand with no change in supply will result in an increase in sales.

Assuming competitive markets with typical supply and demand curves, which of the following statements is correct?

in all likelihood alter both equilibrium price and quantity

Assuming conventional supply and demand curves, changes in the determinants of both supply and demand will

increase, quantity demanded to decrease, and quantity supplied to increase

At the current price there is a shortage of a product. We would expect price to

there are no pressures on price to either rise or fall.

At the equilibrium price

the quantity that consumers want to purchase and the amount producers choose to sell are the same

At the point where the demand and supply curves for a product intersect:

Refer to the above diagram. Assume that for the entire business sector of a private closed economy there is $0 worth of investment projects that will yield an expected rate of return of 25 percent or more. But there are $15 worth of investments that will yield an expected rate of return of 20−25 percent; another $15 with an expected rate of return of 15−20 percent; and similarly an additional $15 of investment projects in each successive rate of return range down to and including the 0−5 percent range. Which of the lines on the above diagram represents these data?

Refer to the above figures. Which figure(s) represent a situation where firms are likely to hold inventories to accommodate unexpected changes in demand?

B only.

Refer to the above figures. Which figure(s) represent a situation where prices are sticky?

B only.

Refer to the figures. Which figure(s) represent(s) a situation where prices are sticky?

B only.

amount of oranges that will be available at various prices has declined.

Because of unseasonably cold weather, the supply of oranges has substantially decreased. This statement indicates the

Which of the following statements is correct?

Between 1953 and 2009, increases in labor productivity account for more of the growth in U.S. real GDP than do increases in the quantity of labor.

ceiling prices and the resulting product shortages

Black markets are associated with

Which of the following would an economist consider to be investment?

Boeing building a new factory.

Brinley says that "Gas prices are rising because there aren't enough oil refineries." Katie argues that "Gas prices are rising because of the growing demand for gasoline from China and India." We can conclude that:

Both statements are positive.

The law of increasing opportunity costs is reflected in a production possibilities curve that is

Bowed out from the origin

The agency responsible for compiling the National Income Product Accounts for the U.S. economy is the:

Bureau of Economic Analysis

The agency responsible for compiling the National Income Product Accounts for the U.S. economy is the:

Bureau of Economic Analysis.

Who calculates inflation?

Bureau of Labor Statistics

the quantity demanded at each price in a set of prices is greater

By an "increase in demand" economists mean that:

Refer to the above diagram. As it relates to production possibilities analysis, the law of increasing opportunity cost is reflected in curve:

Assume a household would consume $100 worth of goods and services per week if its weekly income were zero and would spend an additional $80 per week for each $100 of additional income. Letting C represent consumption and Y represent income, the equation that summarizes this relationship is

C = 100 + .8Y.

Economy A: gross investment equals depreciation Economy B: depreciation exceeds gross investment Economy C: gross investment exceeds depreciation Other things equal, the above information suggests that the production capacity in economy:

C is growing more rapidly than economy B.

Refer to the above diagram. Which line(s) show(s) a positive relationship between x and y?

C. A, B, and D.

Which factor has accounted for the largest increase in the productivity of labor in the United States? A. Economies of scale B. The quantity of capital C. Technological advance D. The education and training of workers

C. Technological advance

Which of the following is the largest dollar amount in the United States? A. disposable income B. personal income C. gross domestic product D. national income

C. gross domestic product

raise their price and increase their quantity supplied

Camille's Creations and Julia's Jewels both sell beads in a competitive market. If at the market price of $5, both are running out of beads to sell (they can't keep up with the quantity demanded at that price), then we would expect both Camille's and Julia's to:

Follower Countries

Can grow much faster because they can adopt leading technologies from the richer leading countries

Of the following countries, the one that best exhibits the characteristics of a market economy is:

Canada

Which of the following statements is most accurate about the prospects for poorer ("follower") countries catching up with richer ("leader") countries?

Catching up is possible as "follower countries" tend to grow faster than "leader countries."

What is one major measure of economic growth?

Changes in real GDP

inferior goods

College students living off-campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start careers, their consumption of both goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are:

(Last Word) The U.S. government agency responsible for compiling the national income accounts is the: Census Bureau. Bureau of Labor Statistics (BLS). Commerce Department's Bureau of Economic Analysis (BEA). Government Accountability Office (GAO).

Commerce Department's Bureau of Economic Analysis (BEA).

Command systems also are known as

Communism

32. Decisions about savings and investment are:

Complicated by the fact that the future is uncertain

37. Which of the following is an example of a demand shock?

Consumers become worried about job loss and buy fewer goods and services than expected.

Which of the following is an example of a demand shock?

Consumers become worried about job loss and buy fewer goods and services than expected.

In what type of business do the owners bear no personal financial responsibility for the company's debts and obligations?

Cooperation

57. The advent of DVDs has virtually demolished the market for videocassettes. This is an example of:

Creative destruction

Example of command economies are:

Cuba and Korea

Examples of command economies are

Cuba and North Korea

Examples of command economies are:

Cuba and North Korea.

Unemployment that occurs when there is deficient demand for the goods and services of an economy is called:

Cyclical

Personal Income (PI) -Personal Taxes =Disposable Income (DI)

complementary goods

DVD players and DVDs are

school-age population, incomes, and preferences for education have changed over the twenty-year period

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:

(Consider this) At fast-food restaurants

Decisions entail comparisons of marginal costs and marginal benefits

Inflation caused by an increase in aggregate spending is referred to as:

Demand-pull inflation

The estimate of how much the capital is being used up each year is called:

Depreciation

complementary goods

Digital cameras and memory cards are

Which of the following is the smallest dollar amount in the United States?

Disposable income.

Structural Unemployment

Due to shift and changes in economy (i.e. computers invented

25. Which of the following statements is true?

Economic investment refers to the creation and expansion of business enterprises

Which of the following statements is most accurate about advanced economies?

Economies experience a positive growth trend over the long run but experience significant variability in the short run.

3. Which of the following statements is most accurate about advanced economies?

Economies experience a positive growth trend over the long run, but experience significant variability in the short run

What economic concept would be most closely associated with a situation where an aluminum plant uses extensive computerization on the production line to reduce per-unit costs of production?

Economies of scale

a schedule of various combinations of market prices and amounts demanded

Economists use the term "demand" to refer to:

Which of the following is a true statement?

Economists who support economic growth say that it is the most practical route to the higher standards of living that the vast majority of people desire.

A trough in the business cycle occurs when:

Employment and output reach their lowest levels

20. The Industrial Revolution began in:

England in the late 1700's

In a competitive industry Z is making substantial economic profit, output will:

Expand in industry Z as more resources will move to that industry

Net exports are:

Exports less imports

China's GDP per person in 2009 was less than one-tenth of U.S. GDP per person in the same year.

FALSE

Disposable income measures the before-tax income received by resource suppliers.

FALSE

Economists believe that most short-run fluctuations in output are the result of supply shocks

FALSE

In 2007, unemployment rates in the United States exceeded the rates in Germany, India, and Poland

FALSE

Modern economic growth refers to any situation where a nation's output increases

FALSE

NDP can be determined by adding taxes on production and imports to GDP.

FALSE

(Last Word) Which of the following problems has not accompanied China's rapid economic growth over the past twenty-five years?

Falling per capita income.

A ceiling price in a competitive market will result in persistent surpluses of a product

False

Although sleeping in on a work day or school day, has an opportunity cost, sleeping late on a weekend does not.

False

An economy cannot produce at a point outside of its production possibilities curve because human economic wants are insatiable.

False

An economy will always operate at some point on its production possibilities curve.

False

Central planning in the Soviet Union and pre-reform China emphasized the expansion of the production of consumer goods to raise the domestic standard of living.

False

Consider This) If a farmer purchases 10 acres of farmland from a neighboring farmer, this would be considered an economic investment.

False

Consumer sovereignty means that legislation now protects the rights of consumers to dispose of their incomes as they see fit.

False

If economic theories are solidly based on relevant facts, then appropriate economic policy becomes obvious and uncontroversial.

False

Positive statements are expressions of value judgments.

False

Prices tend to be more flexible when there are only two or three rival firms rather than a large number of sellers in the market.

False

Producing a good in the least costly way is known as allocative efficiency

False

Real GDP measures the change in the price level over time.

False

The present choice of position on the production possibilities curve will not influence the future location of the curve.

False

The purchase of Wal-Mart stock is a part of gross investment, but not of net investment.

False

(Consider This) What is the difference between financial investment and economic investment?

Financial investment refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created capital goods.

39. (Consider This) What is the difference between financial investment and economic investment?

Financial investment refers to the purchase of assets for financial gain; economic investment refers to the purchase of newly created capital goods.

A market system tends to restrict business risk to owners and investors. This results in which of the following benefits?

Firms are better able to attract inputs, as these inputs do not have to share the risk

A market system tends to restrict business risk to owners and investors. This results in which of the following benefits?

Firms focus attention on prudent risk management, as it is profitable to manage risk

Which of the following best explains why prices tend to be inflexible even when demand changes?

Firms may be reluctant to change prices for fear of setting off a price war or losing customers to rivals.

Suppose industry A is realizing substantial economic profit. Which of the following best describes what will happen in this competitive market?

Firms will enter the industry and output will rise

Who is the most affected by inflation

Fixed income receivers, savers, and creditors

+Personal Consumption +Gross Private Domestic Invest +Government Purchases +Net Exports =Gross Domestic Product

GDP

Real GDP refers to:

GDP data that have been adjusted for changes in the price level.

Suppose the total monetary value of all final goods and services produced in a particular country in 2010 is $500 billion and the total monetary value of final goods and services sold is $450 billion. We can conclude that:

GDP in 2010 is $500 billion.

Which of the following is used to measure directly the average standard of living across countries?

GDP per person

Which of the following is used to measure directly the average standard of living across countries?

GDP per person.

In determining real GDP, economists adjust the nominal GDP by using the:

GDP price index.

Assume that the size of the underground economy increases both absolutely and relatively over time. As a result:

GDP will tend to increasingly understate the level of output through time.

increase equilibrium price and quantity

Given a downsloping demand curve and an upsloping supply curve for a product, an increase in the price of a substitute good (from the buyer's perspective) will:

Refer to the above diagram. Which of the following is a positive statement?

Given its resources and technology, this society is incapable of simultaneously producing 3 units of tractors and 15 units of bread.

Which of the following activities is excluded from GDP, causing GDP to understate a nation's production?

Goods and services produced in the underground economy.

Final goods and services refer to:

Goods and services purchased by ultimate users, rather than for resale or further processing

The market system's answer to the fundamental question, " What will be produced?"

Goods and services that are profitiable

Which of the following is not a typical characteristic of a market system?

Government ownership of most property resources.

Which of the following is NOT a characteristic of the market system?

Government ownership of the major industries

The term laissez- faire suggest that:

Government should not interfere with the operation of the economy?

the horizontal sum of individual demand curves

Graphically, the market demand curve is

Net investment equals to:

Gross investment minus depreciation

Leader Countries

Grows by an average annual rate of 2 or 3 percent a year

Which of the following best measures improvements in the standard of living of a nation?

Growth of real GDP per capita.

3 Major Goals of Economy

Growth, Full Employment, Stable Prices

30. Which of the following is the principal source of savings in an economy?

Households

The knowledge and skills that make a productive worker are referred to by economists as:

Human Capital

(Last Word) Which of the following best illustrates the post hoc, ergo propter hoc fallacy?

I took the day off work to go to the beach and that's why it rained.

Answer the question on the basis of the following information: Suppose 30 units of product A can be produced by employing just labor and capital in the four ways shown below. Assume the prices of labor and capital are $2 and $3 respectively. Refer to the information. Which technique is economically most efficient in producing A?

IV.

demand curve for X to the right

If X is a normal good, a rise in money income will shift the

demand curve for Z to the left

If Z is an inferior good, an increase in money income will shift the

neither the equilibrium price nor equilibrium quantity will be affected.

If a legal ceiling price is set above the equilibrium price

not achieving productive efficiency.

If an economy produces its most wanted goods but uses outdated production methods, it is:

All of these are likely outcomes

If an effective ceiling price is placed on hamburgers then

may shift either to the right or left

If consumer incomes increase, the demand for product X:

it would create neither a shortage nor a surplus

If government set a maximum price of $45 in the above market

surplus of 21 units would occur

If government set a minimum price of $50 in the above market, a:

surplus will increase quantity demanded and decrease quantity supplied.

If price is above the equilibrium level, competition among sellers to reduce the resulting

a decrease in supply

If producers must obtain higher prices than before to produce a given level of output, then the following has occurred

demand for A will increase and the quantity of B demanded will increase

If products A and B are complements and the price of B decreases the

shift the demand curve of D to the right

If products C and D are close substitutes, an increase in the price of C will

increase the quantity supplied and decrease the quantity demanded of X

If the demand and supply curves for product X are stable, a government-mandated increase in the price of X will

A and B are complementary goods

If the demand curve for product B shifts to the right as the price of product A declines, then:

consumer incomes have fallen

If the demand for steak (a normal good) shifts to the left, the most likely reason is that

shift to the right

If the price of product L increases, the demand curve for close-substitute product J will

quantity must decline, but equilibrium price may rise, fall, or remain unchanged

If the supply and demand curves for a product both decrease, then equilibrium

price must rise, but equilibrium quantity may rise, fall, or remain unchanged

If the supply of a product decreases and the demand for that product simultaneously increases, then equilibrium

the price of the product will rise

If there is a shortage of product X, and the price is free to change

is above the equilibrium level

If there is a surplus of a product, its price

a decrease in the price of one will increase the demand for the other

If two goods are complements

quantity supplied exceeds quantity demanded.

If we say that a price is too high to clear the market, we mean that:

substitute goods and the higher price for oil increased the demand for natural gas

In 2007, the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are

the prices of other goods are assumed constant

In constructing a demand curve for product X

the price of the product for which the demand curve is relevant.

In moving along a demand curve which of the following is not held constant?

the price of the product for which the supply curve is relevant

In moving along a supply curve which of the following is not held constant?

the price of the product itself

In presenting the idea of a demand curve, economists presume the most important variable in determining the quantity demanded is

a change in buyer tastes

In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by

The market system's answer to the fundamental question," How will the goods and services be produced?"

In the way that minimizes the cost per unit of output

demand rises and supply rises

In which of the following instances is the effect on equilibrium price dependent on the magnitude of the shifts in supply and demand?

When the price of ice cream rose, the quantity demanded of ice cream fell, and the demand for ice cream toppings fell.

In which of the following statements are the terms "demand" and "quantity demanded" used correctly?

The shift of labor out of agriculture to industry in the United States has tended to:

Increase labor productivity

why the supply curve is upsloping

Increasing marginal cost of production explains

15. High rates of unemployment:

Indicate that society is not using a large portion of the talent and skills of its people

The slope of a line parallel to the vertical axis is

Infinite

Why are economists concerned about inflation?

Inflation lowers the standard of living for people whose income does not increase as fast as the price level.

.(Consider This) Which of the following statements about insurance and risk is true?

Insurance transfers risk from those with a low tolerance for risk to those with a higher tolerance for risk

GDP can be calculated by summing:

Investment, government purchases, consumption, and net exports

19. Rapid and sustained economic growth of nations:

Is a modern phenomenon

A peak in the business cycle:

Is a temporary maximum point

A major argument for economic growth is that it:

Leads to a higher standard of living

The economizing problem is one of deciding how to make the best use of

Limited resources to satisfy virtually unlimited wants

Which of the following is correct?

MPC + MPS = APC + APS

The consumption and saving schedules reveal that the:

MPC is greater than zero, but less than one.

If the saving schedule is a straight line, the:

MPS must be constant.

Which of the following statements is true about risk management in market systems versus command systems?

Market systems manage risk better because entrepreneurs taking risks bear the costs of poor . decisions, where in command systems government decision makers don't bear those costs.

assume many buyers and many sellers of a standardized product.

Markets, viewed from the perspective of the supply and demand model:

(Consider This) Martha's Milkshake Company buys earthquake insurance from the Stable Ground

Martha's has a lower tolerance for earthquake risk than Stable Ground.

Which of the following statements is most accurate about modern economic growth?

Modern economic growth is characterized by sustained and ongoing increases in living standards.

GDP is the:

Monetary value of all final goods and services produced within the borders of a nation in a particular year

33. Increased optimism about the future will lead to:

More current investment and more future consumption

29. Which of the following best represents the effect of an increase in investment?

Moving from point b to point d

Total real output can be determined by:

Multiplying the input of labor (measured in work-hours) by labor productivity (measured by real output per worker per hour)

Gross Domestic Product (GDP) -Consumption of Fixed Capital =Net Domestic Product (NDP)

NDP

Net Domestic Product (NDP) -Statistical Discrepancy +Net Foreign Factor Income =National Income (NI)

Transfer payments are included in:

NI - National Income

The system that measures the economy's overall performance is formally known as:

National income accounting

The full-employment rate of unemployment is also called the:

Natural rate of unemployment

Which of the following is most closely related to recessions?

Negative real growth in output.

34. Sharply rising oil prices are most likely to lead to a:

Negative supply shock

10. Which of the following countries would economists say definitively is achieving modern economic growth?

Nigeria experiences a 2.7 percent increase in real GDP per person.

Which of the following countries would economists say definitively is achieving modern economic growth?

Nigeria experiences a 2.7 percent increase in real GDP per person.

40. (Consider This) Which of the following is an example of economic investment?

Nike buys a new machine that increases shoe production.

If the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP?

Nominal GDP would rise, but real GDP would be unchanged.

If real GDP falls from one period to another, we can conclude that: deflation occurred. inflation occurred. nominal GDP fell. None of these necessarily occurred.

None of these necessarily occurred.

Of the following countries, which one exhibits the characteristic of a market economy?

North Korea

In calculating GDP, governmental transfer payments, such as social security or unemployment compensation, are:

Not counted

22. Under modern economic growth, the annual average increase in output per person is

Often not large, perhaps 2% per year

increases and demand decreases

One can say with certainty that equilibrium price will decline when supply

lower price increases the real incomes of buyers, enabling them to buy more

One reason that the quantity demanded of a good increases when its price falls is that the

National income accountants can avoid multiple counting by:

Only counting final goods

increase its price

Other things equal, an excise tax on a product will

product supply curve of X will shift to the right.

Other things equal, if the price of a key resource used to produce product X falls, the:

the development of a low-cost electric automobile

Other things equal, which of the following might shift the demand curve for gasoline to the left?

Cyclical Unemployment

Out of work because of recession (no jobs to be found)

21. Suppose that real GDP increases by 5% while the population of a country increases by 7%. Then

Output per person necessarily decreases

Increases in the supply of computer memory have exceeded increases in demand

Over time, the equilibrium price of a gigabyte of computer memory has fallen while the equilibrium quantity purchased has increased. Based on this we can conclude that:

Refer to the above graph. Using Qd for quantity demanded and P for price, which of the following equations correctly states the demand for this product?

P = 10 - .2Qd.

National Income (NI) -Taxes on Production and Imports -Social Security Contributions -Corporate Income Taxes -Undistributed Corporate Profits +Transfer Payments =Personal Income (PI)

Transfer payments are included in:

PI.

104. (Consider This) The Consider This box on patents and innovation demonstrates that:

Patent protection for U.S. companies may not be as effective when other countries do not

Specialization in production is economically beneficial primarily because it:

Permits the production of a larger output with fixed amounts of resources.

Which of the following transactions would be included in GDP?

Peter buys a newly constructed house.

Refer to the above diagram. Which of the following is a normative statement

Point C is superior to point B because it is important to enhance the future of society.

35. An increase in worker productivity will lead to a:

Positive supply shock

The GDP gap measures the amount by which:

Potential GDP exceeds actual GDP

interfere with the rationing function of prices

Price floors and ceiling prices

Which of the following statements best describes price flexibility in the economy?

Prices tend to be sticky in the short run but become more flexible over time.

Payments that transfer from one individual to another and are not connected to any production are called:

Private transfer payment

In terms of the circular flow diagram, businesses obtain revenue through the _____ market and make expenditures in the _____ market.

Product and resources

In terms of the circular flow diagram, households make expenditures in the ___?__ market and receive income through the _?___ market.

Product and resources

Under what circumstances do rates of economic growth understate the growth of economic well-being?

Product quality has improved.

the use of the least-cost method of production.

Productive efficiency refers to

Intermediate Goods

Products purchased for resale or further manufacturing

Final Goods

Products that are purchased by their end users

Copyrights and Trademarks are examples of:

Property Rights

Which of the following is a fundamental characteristic of the market system

Property rights

Which of the following is a fundamental characteristic of the market system?

Property rights

13. Suppose a small economy produces only MP3 players. In year 1, 10,000 MP3 players are produced and sold at a price of $100 each. In year 2, 12,000 MP3 players are produced and sold at a price of $80 each. Which of the following statements is true?

Real GDP increases while nominal GDP decreases

31. Savings are transferred from savers to borrowers through the following intermediaries, except:

Real estate brokers

Undistributed corporate profits is called:

Retained earnings

When talking about the Cold War, there were two countries that were competing for the air-speed record, what was the name of the plane that actually won that battle?

SR-71

A production possibilities curve illustrates

Scarcity

Frictional Unemployment

Searching or waiting to take job soon

Which industry or sector of the economy would least likely be affected by the business cycle?

Services

Assume a current production possibilities are represented by the curve AB in the above diagram. Positive economic growth would best be indicated by a:

Shift in the curve from AB to CD

suggests that the supply of DVD players has increased

Since their introduction, prices of DVD players have fallen and the quantity purchased has increased. This statement

(Consider This) Since World War II:

South Korea's market economy has significantly outperformed North Korea's command economy.

the income effect

Steve went to his favorite hamburger restaurant with $3, expecting to buy a $2 hamburger and a $1 soda. When he arrived he discovered that hamburgers were on sale for $1, so Steve bought two hamburgers and a soda. Steve's response to the decrease in the price of hamburgers is best explained by

Institutional Structures that promote Economic Growth

Strong property rights, patents and copyrights, efficient financial institutions, literacy and widespread education, free trade and a competitive market

Kevin has lost his job in an automobile plant because of the use of robots for welding on the assembly line. Kevin plans to go to technical school to learn how to repair microcomputers. The type of unemployment Kevin is faced with is:

Structural

decrease the demand for complementary good Y and increase the demand for substitute product Z

Suppose an excise tax is imposed on product X. We expect this tax to

increase the demand for Z

Suppose product X is an input in the production of product Y. Product Y in turn is a substitute for product Z. An increase in the price of X can be expected to:

improved technology for producing Z

Suppose that at prices of $1, $2, $3, $4, and $5 for product Z, the corresponding quantities supplied are 3, 4, 5, 6, and 7 units, respectively. Which of the following would increase the quantities supplied of Z to, say, 6, 8, 10, 12, and 14 units at these prices?

demand for coffee beans has increased

Suppose that coffee growers sell 200 million pounds of coffee beans at $2 per pound in 2007, and sell 240 million pounds for $3 per pound in 2008. Based on this information we can conclude that the:

the supply to increase as farmers plant more corn

Suppose that corn prices rise significantly. If farmers expect the price of corn to continue rising relative to other crops, then we would expect:

suggest that the demand for Mustangs increased between 2007 and 2008.

Suppose that in 2007, Ford sold 500,000 Mustangs at an average price of $18,800 per car; in 2008, 600,000 Mustangs were sold at an average price of $19,500 per car. These statements:

in terms of a stable demand curve and increasing supply.

Suppose that in each of four successive years producers sell more of their product and at lower prices. This could be explained:

Demand for clothing has grown faster than the supply of clothing

Suppose that in the clothing market, production costs have fallen, but the equilibrium price and quantity purchased have both increased. Based on this information we can conclude that:

supply of salsa has increased

Suppose that salsa manufacturers sell 2 million bottles at $3.50 in one year, and 3 million bottles at $3 in the next year. Based on this information we can conclude that the:

reduce the demand for soda and increase the demand for tacos

Suppose that tacos and pizza are substitutes, and that soda and pizza are complements. We would expect an increase in the price of pizza to

Personal income usually exceeds disposable income.

TRUE

Shocks occur when actual events do not match expectations

TRUE

The greater the MPC, the greater the multiplier.

TRUE

The guiding function of prices tends to keep resources flowing toward their most highly valued uses

TRUE

The single most important source of productivity for economic growth for the United States has been:

Technological Advance

Risk management is command economies

Tends to be done poorly because decision makers are insulates from the risk of making a poor decision

independent goods

Tennis rackets and ballpoint pens are

Which of the following statements is correct?

The amount of real capital used per worker has increased historically in the United States.

Which of the following activities is excluded from GDP, causing GDP to understate a nation's well-being? The services of used-car dealers. The child-care services provided by stay-at-home parents. The construction of new houses. Government expenditures on military equipment.

The child-care services provided by stay-at-home parents.

price

The construction of demand and supply curves assumes that the primary variable influencing decisions to produce and purchase goods is

price and quantity demanded

The demand curve shows the relationship between

normal goods

The demand for most products varies directly with changes in consumer incomes. Such products are known as

Which of the following best describes the invisible-hand concept

The desires of resource suppliers and producers to further their own self-interest will automatically further the public interest

In national income accounts, value added refers to:

The difference in the market value and the cost of inputs purchased from other firms

10. A fundamental difference between the command system and laissez-faire capitalism is that, in command systems:

The division of output is decided by central planning rather than by individuals operating freely through markets.

A nation's gross domestic product (GDP):

The dollar value of all final output produced within the borders of the nation

marginal benefit and marginal cost are equal at that point

The equilibrium price and quantity in a market usually produces allocative efficiency because:

Inflation is a rise in:

The general level of prices over time

the downward sloping demand curve

The income and substitution effects account for

price and quantity demanded are inversely related

The law of demand states that, other things equal:

producers will offer more of a product at high prices than at low prices.

The law of supply indicates that, other things equal

production technology

The location of the product supply curve depends on the

Value Added

The market value of a firms output less the value of the inputs the firm has bought from others

Which of the following do national income accountants consider to be investment?

The purchase of a new house.

In a market economy, the distribution of output will be determined primarily by

The quantities and prices of the resources that households supply.

capacity of a competitive market to equate quantity demanded and quantity supplied

The rationing function of prices refers to the

Which of the following will not produce an outward shift of the production possibilities curve?

The reduction of unemployment

direct, inverse

The relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is ____.

The basic determinants of labor inputs (total hours of work) include:

The size of the labor force and average hours of work

refers to the amount of a product that will be purchased at some specific price

The term "quantity demanded":

law of supply

The upward slope of the supply curve reflects the

Which of the following characteristics is least unique to a market system?

The wide spread use of money

Proponents of economic growth make all of the following arguments except:

There is a direct relationship between a growing real GDP and rising pollution.

6. Why are high rates of unemployment of concern to economists?

There is lost output that could have been produced if the unemployed had been working.

Why are high rates of unemployment of concern to economists?

There is lost output that could have been produced if the unemployed had been working.

consumers want to buy less than producers offer for sale

There will be a surplus of a product when

The market system's answer to the fundamental question, " Who will get the goods and services ?"

Those willing and able to pay for them

The market system's answer to the fundamental question, "How will the system accommodate change?"

Through the guiding function of prices and the incentive function of prifits

56. The market system's answer to the fundamental question "How will the system promote progress?" is essentially:

Through the profit potential that encourages development of new technology."

creates economic gains for both buyers and sellers

Ticket scalping

event sponsors have established ticket prices at below-equilibrium levels

Ticket scalping implies that

produce a more interested audience

Ticket scalping is likely to

reselling a ticket at a price above its original purchase price

Ticket scalping refers to

The concept of net domestic investment refers to:

Total investment less the amount of investment goods used up in producing the year's output

Which of the following is correct?

Total output = worker-hours × labor productivity.

(Consider This) The term "economic investment" refers only to money spent purchasing newly created capital goods such as factories, tools, and warehouses

True

A demand shock occurs when large numbers of consumers unexpectedly reduce their purchases of goods and services

True

A nation that wants to invest in more newly created capital in the present must be willing to forgo present consumption.

True

An increase in demand accompanied by an increase in supply will increase the equilibrium quantity but the effect on equilibrium price will be indeterminate.

True

Central planning often suffers from a coordination problem and an incentive problem.

True

Consumers buy more of normal goods as their incomes rise.

True

Continued losses in an industry will cause some firms to reduce output or eventually leave the industry.

True

If nominal GDP is 150 and the GDP price index is 200, real GDP is 75.

True

Market economies use capital goods because they improve productive efficiency

True

Products and services are scarce because resources are scarce

True

The production possibilities curve shows various combinations of two products that an economy can produce when achieving full employmen

True

The production possibilities curve shows various combinations of two products that an economy can produce when achieving full employment.

True

False

True or False: . If market demand increases and market supply decreases, the change in equilibrium price is unpredictable without first knowing the exact magnitudes of the demand and supply changes.

False

True or False: A ceiling price in a competitive market will result in persistent surpluses of a product.

False

True or False: A decrease in supply of X increases the equilibrium price of X, which reduces the demand for X and automatically returns the price of X to its initial level.

True

True or False: A government subsidy per unit of output increases supply

True

True or False: A government tax per unit of output reduces supply

False

True or False: A market that achieves productive efficiency is producing the quantity of goods most desired by society

True

True or False: A market that is achieving allocative efficiency must also be achieving productive efficiency

False

True or False: A price floor in a competitive market will result in persistent shortages of a product.

True

True or False: An increase in demand accompanied by an increase in supply will increase the equilibrium quantity but the effect on equilibrium price will be indeterminate

False

True or False: An increase in quantity supplied might be caused by an increase in production costs

True

True or False: Consumers buy more of normal goods as their incomes rise

True

True or False: If demand increases and supply simultaneously decreases, equilibrium price will rise.

True

True or False: In a competitive market, every consumer willing to pay the market price can buy a product and every producer willing to sell the product at that price can sell it.

False

True or False: Producing a good in the least costly way is known as allocative efficiency

False

True or False: Surpluses drive market prices up; shortages drive them down

False

True or False: The rationing function of prices refers to the fact that government must distribute any surplus goods that may be left in a competitive market

False

True or False: Toothpaste and toothbrushes are substitute goods

In reference to the Cold War, Abell compared the two countries engaged to what?

Two bullies on a playground

Which of the following economic regions has experienced the most growth in real GDP per capita since 1820?

United States

In Class Abell was talking about some of the problems with the Command System, he went on to compare two countries...who were they?

United States, Soviet Union

Which of the following economic regions has experienced the most growth in real GDP per capita since 1820?

United States.

Which of the following institutional arrangements is most likely to promote growth?

Unrestricted trade between nations.

In economics, the pleasure, happiness, or satisfaction received from a product is called

Utility

Suppose Smith pays $100 to Jones.

We need more information to determine whether GDP has changed.

Which of the following is one of the Five Fundamental Questions?

What goods and services will be produced?

(Last Word) The fallacy of composition states that

What is true for the individual must necessarily be true for the group

Which of the following is not one of the five fundamental questions?

What price will be charged for goods and services

consumers are now willing to purchase more of this product at each possible price

When an economist says that the demand for a product has increased, this means that

the substitution effect

When the price of Nike soccer balls fell, Ronaldo purchased more Nike soccer balls and fewer Adidas soccer balls. Which of the following best explains Ronaldo's decision to buy more Nike soccer balls?

the income effect

When the price of a product falls, the purchasing power of our money income rises and thus permits consumers to purchase more of the product. This statement describes

income effect

When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the

the substitute effect

When the price of a product rises, consumers shift their purchases to other products whose prices are now relatively lower. This statement describes

increase in the supply of gasoline

When the price of oil declines significantly, the price of gasoline also declines. The latter occurs because of a(n):

All of these are consequences of rent controls

Which of the following is a consequence of rent controls established to keep housing affordable for the poor?

used clothing

Which of the following is most likely to be an inferior good? A. fur coats B. ocean cruises C. used clothing D. steak

If supply increases and demand decreases, equilibrium price will fall

Which of the following statements is correct?

A. An increase in the price of C will decrease the demand for complementary product D

Which of the following statements is correct? A. An increase in the price of C will decrease the demand for complementary product D. B. A decrease in income will decrease the demand for an inferior good. C. An increase in income will reduce the demand for a normal good. D. A decline in the price of X will increase the demand for substitute product Y.

Price ceilings cause goods to be rationed by some other means than legally determined market prices

Which of the following statements is true about price ceilings?

Realizing allocative efficiency implies that productive efficiency has been realized

Which of the following statements is true about productive and allocative efficiency?

an increase in supply.

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity?

an increase in money income if A is an inferior good

Which of the following will cause the demand curve for product A to shift to the left?

a change in the price of K

Which of the following will not cause the demand for product K to change?

the expectation by consumers that gasoline prices will be higher in the future.

Which of the following would most likely increase the demand for gasoline?

a reduction in the price of cattle feed

Which of the following would not shift the demand curve for beef?

economic systems differ according to which two main characteristics?

Who owns the factors an the methods used to used to coordinate economic activity

Economic systems differ according to which two main characteristics?

Who owns the factors of production and the methods used to coordinate economic activity.

Economic systems differ according to what two main characteristics

Who owns the factors of production, and the methods used to coordinate economic activity

Economic systems differ according to which two main characteristics?

Who owns the factors of production, and the methods used to coordinate economic activity.

decrease equilibrium price and increase equilibrium quantity

With a downsloping demand curve and an upsloping supply curve for a product, a decrease in resource prices will

increase equilibrium price and quantity if the product is a normal good

With a downsloping demand curve and an upsloping supply curve for a product, an increase in consumer income will

increase equilibrium price and decrease equilibrium quantity

With a downsloping demand curve and an upsloping supply curve for a product, placing an excise tax on this product will:

16. Inflation is troublesome to consumers because of the following effects, except:

Workers' wages may be rising faster than the overall prices

Refer to the above diagram. The equation that shows the relationship between Y and X is:

Y = 50 + 1/4X.

The slope of a line parallel to the horizontal axis is

Zero

Which is the correct way to calculate the unemployment rate?

[(unemployed)/(labor force)] x 100

In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by:

a change in buyer tastes.

Which of the following will not cause the demand for product K to change?

a change in the price of K

A price index is:

a comparison of the current price of a market basket to a fixed point of reference.

Assume the demand curve for product X shifts to the right. This might be caused by:

a decline in income if X is an inferior good.

If two goods are complements:

a decrease in the price of one will increase the demand for the other.

If consumer desire for product X increases, all of the following will occur except:

a decrease in the quantity of resources employed in industry X.

If consumer desire for product X increases, this will not happen:

a decrease in the quantity of resources employed in industry X.

Microeconomics is concerned with:

a detailed examination of specific economic units that make up the economic system.

The typical production possibilities curve is:

a downsloping line that is bowed out from the origin.

In a market system

a firm's employee and suppliers are largely shielded from risk

The value added of a firm is the market value of:

a firm's output less the value of the inputs bought from others.

Which of the following is a final good or service?

a haircut purchased by a father for his 12 year-old son

The period in the U.S. economy from 1995 to 2009 is characterized by:

a higher trend rate of productivity growth

Assume that the demand curve for product C is downsloping. If the price of C falls from $2.00 to $1.75:

a larger quantity of C will be demanded.

Assume that the demand schedule for product C is downsloping. If the price of C falls from $2.00 to $1.75:

a larger quantity of C will be demanded.

Net exports are negative when:

a nation's imports exceed its exports.

Unemployment describes the condition where:

a person cannot get a job but is willing to work and is actively seeking work.

Which of the following would not shift the demand curve for beef?

a reduction in the price of cattle feed

Economists use the term "demand" to refer to:

a schedule of various combinations of market prices and amounts demanded.

Refer to the above table. Suppose that demand is represented by columns (3) and (2) and supply is represented by columns (3) and (5). If the price were artificially set at $6, a:

a shortage of 40 units would occur

Which of the following will shift the production possibilities curve to the right?

a technological advance that allows farmers to produce more output from given inputs

Answer the question on the basis of the following national income data. All figures are in billions of dollars. Picture Refer to the data. Personal consumption expenditures:

a) cannot be calculated.

If depreciation (consumption of fixed capital) exceeds gross domestic investment, we can conclude that:

a) net investment is negative.

In calculating GDP, governmental transfer payments, such as Social Security or unemployment compensation, are:

a) not counted

Value added can be determined by:

a) subtracting the purchase of intermediate products from the value of the sales of final products.

An economy is enlarging its stock of capital goods:

a) when gross investment exceeds replacement investment

38. Shocks to the economy occur when: .

actual economic events do not match what people expected.

Shocks to the economy occur when

actual economic events do not match what people expected.

In the treatment of U.S. exports and imports, national income accountants:

add exports, but subtract imports, in calculating GDP.

Which of the following is not a supply factor in economic growth?

aggregate expenditures of households, businesses, and government

Suppose an economist says that "Other things equal, the lower the price of bananas, the greater the amount of bananas purchased." This statement indicates that:

all factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant.

Specialization--the division of labor--enhances productivity and efficiency by:

all of the above means

The failure of Soviet central planning was reflected in:

all of the above.

Specialization-the division of labor-enhances productivity and efficiency by:

all of the means identified in the other answers.

Investment spending in the United States tends to be unstable because

all of these contribute to the instability.

The budget line shows:

all possible combinations of two goods that can be purchased, given money income and the prices of the goods.

The 45-degree line on a graph relating consumption and income shows:

all the points at which consumption and income are equal.

Two major virtues of the market system are that it:

allocates resources efficiently and allows economic freedom.

42. (Last Word) Computerized inventory tracking has been credited with reducing the number and severity of recessions because these tracking systems:

allow firms to react more quickly and subtly to negative demand shocks, and avoid the large output reductions that frequently result in higher unemployment.

Specialization—the division of labor—enhances productivity and efficiency by:

allowing workers to take advantage of existing differences in their abilities and skills; avoiding the time loss involved in shifting from one production task to another; allowing workers to develop skills by working on one, or a limited number, of tasks.

Answer the question on the basis of the following information: Suppose 30 units of product A can be produced by employing just labor and capital in the four ways shown below. Assume the prices of labor and capital are $2 and $3 respectively. Refer to the above information. If the price of product A is $0.50, the firm will realize:

an economic profit of $2.

Which of the following is associated with macroeconomics?

an empirical investigation of the general price level and unemployment rates since 1990

All of the following are economic implications of the recent rise in the average rate of productivity growth except:

an end to the business cycle.

Which one of the following will cause a movement up along an economy's saving schedule?

an increase in disposable income

Which of the following will cause the demand curve for product A to shift to the left?

an increase in money income if A is an inferior good.

All of the following could immediately or eventually lead to an inward shift of a nation's production possibilities curve, except:

an increase in the average skill level of all occupational groups.

The investment demand curve will shift to the left as a result of:

an increase in the excess production capacity available in industry.

8. Inflation is defined as:

an increase in the overall level of prices.

Inflation is defined as:

an increase in the overall level of prices.

Which of the following would not be expected to increase labor productivity?

an increase in the size of the labor force

A market is:

an institution that brings together buyers and sellers

Economic growth can be portrayed as:

an outward shift of the production possibilities curve

Economic growth can be portrayed as:

an outward shift of the production possibilities curve.

If for some reason households become increasingly thrifty, we could show this by:

an upward shift of the saving schedule.

National income accountants define investment to include:

any increase in business inventories.

Economic Scarcity

applies to all economies

Economic profits and losses:

are essential to the reallocation of resources from less desired goods to more desired goods.

Economic profits and losses:

are essential to the reallocation of resources from less desired to more desired goods

Economic profits and losses:

are essential to the reallocation of resources from less desired to more desired goods.

Economists:

are somewhat arbitrary in assigning independent and dependent variables to the horizontal and vertical axes.

In a market system, employees and suppliers;

are usually shielded from risk, but at the cost not sharing in the profit of the firm

Critics of economic growth:

argue that economic growth does not resolve socioeconomic problems such as an unequal distribution of income and wealth.

Markets, viewed from the perspective of the supply and demand model:

assume many buyers and many sellers of a standardized product.

The invisible-hand concept suggests that:

assuming competition, private and public interest will coincide.

The invisible hand concept suggests that

assuming competition, private and public interests will coincide.

The invisible hand concept suggests that:

assuming competition, private and public interests will coincide.

In national income accounting, the consumption category of expenditures includes purchases of:

automobiles for personal use but not houses.

In national income accounting, consumption expenditures include purchases of:

automobiles for personal use, but not houses.

Answer the question on the basis of the following data. All figures are in billions of dollars. Picture Refer to the data. NI is:

b) $402.

Assume an economy that makes only one product and that year 3 is the base year. Output and price data for a five-year period are as follows. Answer the question on the basis of these data. Picture Refer to the data. If year 3 is chosen as the base year, the price index for year 1 is:

b) 60

The largest component of national income is:

b) Compensation of employees

Which of the following do national income accountants consider to be investment?

b) The purchase of a new house.

Refer to the diagram. The base year used in determining the price indices for this economy:

b) is 2000.

Suppose Elroy's budget line is as shown on the above diagram. If his tastes change in favor of Coke and against popcorn, the budget line will:

be unaffected.

(Last Word) The "after this, therefore because of this" fallacy states that:

because event A precedes event B, A is necessarily the cause of B.

(Last Word) According to economist Donald Bordeaux, the world's tens of billions of individual resources get arranged productively:

because private property encourages people to consider the alternative uses of their resources and select those that provide the most rewards

A firm's supply curve is upsloping because:

beyond some point the production costs of additional units of output will rise.

An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction is based on the assumption that:

bicycles are normal goods

An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction assumes that:

bicycles are normal goods.

Refer to the above diagram. Which line(s) show(s) a negative vertical intercept?

both B and C.

Refer to the above diagram. The movement down the production possibilities curve from point A to point E suggests that the production of

both bicycles and computers are subject to increasing opportunity costs.

When consumption and saving are graphed relative to real GDP, an increase in personal taxes will shift:

both the consumption and saving schedules downward.

The law of increasing opportunity costs is reflected in a production possibilities curve that is:

bowed out from the origin.

In situations of sticky prices and negative demand shocks we would expect firms to

build up inventories before reducing production

In the simple circular flow model

business are sellers of final products

In the simple circular flow model:

businesses are sellers of final products.

The investment demand curve will shift to the right as the result of:

businesses becoming more optimistic about future business conditions.

"Consumer sovereignty" means that:

buyers determine what will be produced based on their "dollar votes" for the goods and services offered by sellers.

Refer to the above production possibilities curve. At the onset of the Second World War the Soviet Union was already at full employment. Its economic adjustment from peacetime to wartime can best be described by the movement from point:

c to point b.

Setup Corporation buys $100,000 of sand, rock, and cement to produce ready-mix concrete. It sells 10,000 cubic yards of concrete at $30 a cubic yard. The value added by Setup Corporation is:

c) $200,000.

Which of the following is a final good or service?

c) A haircut purchased by a father for his 12 year-old son.

(Last Word) The U.S. government agency responsible for compiling the national income accounts is the:

c) Commerce Department's Bureau of Economic Analysis (BEA).

In an economy experiencing a persistently falling price level:

c) changes in nominal GDP understate changes in real GDP.

(Consider This) When making a capital stock and reservoir analogy, the: level of water in the reservoir is net investment. level of water in the reservoir is depreciation. inflow from the river is gross investment. outflow below the dam is the stock of capital.

c) inflow from the river is gross investment.

Given the annual rate of economic growth, the "rule of 70" allows one to:

calculate the number of years required for real GDP to double.

A nation's gross domestic product (GDP):

can be found by summing C + Ig + G + Xn

The most efficient combination of resources in producing any output is the combination that:

can be obtained for the smallest money outlay

Real GDP per capita:

can grow either more slowly or more rapidly than real GDP.

If an economy is operating inside its production possibilities curve for consumer goods and capital goods, it:

can produce more of both consumer goods and capital goods by using resources that are currently idle.

Assume that in 2002 the nominal GDP was $350 billion and in 2003 it was $375 billion. On the basis of this information we:

cannot make a meaningful comparison of the economy's performance in 2002 relative to 2003.

Assume that in 2002 the nominal GDP was $350 billion and in 2003 it was $375 billion. On the basis of this information, we:

cannot make a meaningful comparison of the economy's performance in 2002 relative to 2003.

(Last Word) If variables X and Y are positively correlated, this means that:

causation may or may not exist between X and Y.

Refer to the above diagram. Technological advance in producing both capital goods and consumer goods is shown by the shift of the production possibilities curve from AB to:

Which of the following is a distinguishing feature of a command system

central planning

Which of the following is a distinguishing feature of a command system?

central planning

In an economy experiencing a persistently falling price level:

changes in nominal GDP understate changes in real GDP.

Increased present saving:

comes at the expense of reduced current consumption.

Command systems are also known as:

communism.

The largest component of national income is: compensation of employees. rents. interest. corporate profits.

compensation of employees.

The regulatory mechanism of the market system is:

competition

The regulatory mechanism of the market system is:

competition.

Firms are motivated to minimize production cost because:

competitive pressure in the market will drive out higher cost production

DVD players and DVDs are:

complementary goods.

If the economy's real GDP doubles in 18 years, we can:

conclude that its average annual rate of growth is about 4 percent

(Last Word) A study found that the incidence of skin cancer increases along with the amount of time people work under fluorescent light, leading some people to conclude that fluorescent lighting is a cause of skin cancer. But further analysis found that people who work in offices, where fluorescent light is common, suffer more sunburn on their vacations than other workers. The sunburns, not the fluorescent light, were the cause of the higher incidence of skin cancer. The original conclusion illustrates:

confusion of correlation and causation.

If Carol's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, her marginal propensity to:

consume is three-fifths.

The basic difference between consumer goods and capital goods is that

consumer goods satisfy wants directly while capital goods satisfy wants indirectly.

If the demand for steak (a normal good) shifts to the left, the most likely reason is that:

consumer incomes have fallen

A shift to the right in the demand curve for product A can be most reasonably explained by saying that:

consumer preferences have changed in favor of A so that they now want to buy more at each possible price.

(Consider This) In 1975, McDonald's introduced its Egg McMuffin breakfast sandwich, which remains popular and profitable today. This longevity illustrates the idea of:

consumer sovereignty

.(Consider This) In 2000, McDonald's introduced its McSalad Shaker, which failed to catch on with the public and was subsequently dropped from the menu. This failure illustrates the idea of: A. consumer sovereignty.

consumer sovereignty

In 1975 McDonald's introduced its Egg McMuffin breakfast sandwich, which remains popular and profitable today. This longevity illustrates the idea of:

consumer sovereignty

In 1996 McDonald's introduced its Arch Deluxe hamburger, which failed to catch on with the public and was subsequently dropped from the menu. This failure illustrates the idea of:

consumer sovereignty

The dollar vote of consumers ultimately determine the composition of output and the allocation of resources in a market economy. The statement best describes the concept or

consumer sovereignty

The dollar votes of consumers ultimately determine the composition of output and the allocation of resources in a market economy. This statement best describes the concept of:

consumer sovereignty

The dollar votes of consumers ultimately determine the composition of output and the allocation of resources in a market economy. This statement best describes the concept of:

consumer sovereignty.

When an economist says that the demand for a product has increased, this means that:

consumers are now willing to purchase more of this product at each possible price.

An increase in the price of a product will reduce the amount of it purchased because:

consumers will substitute other products for the one whose price has risen.

The consumption schedule directly relates:

consumption to the level of disposable income.

GDP can be calculated by summing:

consumption, investment, government purchases, and net exports.

The largest component of total expenditures in the United States is:

consumption.

If competitive industry Y is incurring substantial losses, output will:

contract as resources move away from industry Y.

"Because the outputs of many industries are the inputs to other industries, the failure of any single industry to fulfill the output qualities specified in the central plan caused a chain-reaction of adverse repercussions on production." This quotation best identifies the:

coordination problem under Central planning.

"Under central planning, some group has to decide how to get the necessary inputs produced in the right amounts and delivered to the right places at the right time. This is a nearly impossible task without markets and profits." This quotation best identifies the:

coordination problem under central planning

Because the outputs of many industries are the inputs to other industries, the failure of any single industry to fulfill the output quantities specified in the central plan caused a chain reaction of adverse repercussions on production." This quotation best identifies the: A. incentive problem under central planning.

coordination problem under central planning

"Because the outputs of many industries are the inputs to other industries, the failure of any single industry to fulfill the output quantities specified in the central plan caused a chain-reaction of adverse repercussions on production." This quotation best identifies the:

coordination problem under central planning.

70. "Under central planning, some group has to decide how to get the necessary inputs produced in the right amounts and delivered to the right places at the right time. This is a nearly impossible task without markets and profits." This quotation best identifies the:

coordination problem under central planning.

The advent of DVDs threatens to eventually demolish the market for videocassettes. This is an example of:

creative destruction

The advent of DVDs has virtually demolished the market for videocassettes. This is an example of:

creative destruction.

Savings are generated whenever:

current income exceeds current spending.

(Consider This) The economic perspective used in customer decision making at fast-food restaurants is reflected in

customers selecting the shortest line.

In determining real GDP, economists adjust the nominal GDP by using the:

d) GDP price index.

What is the difference between national income and personal income?

d) National income represents income earned by American-owned resources, while personal income measures received income, whether earned or unearned.

Which of the following is not economic investment?

d) The purchase of 100 shares AT&T by a retired business executive

When an economy's production capacity is expanding:

d) gross domestic investment exceeds depreciation.

Gross domestic product (GDP) measures and reports output: in percentage terms. in quantities of physical units (for example, pounds, gallons, and bushels). as an index number. in dollar amounts and percentage growth.

d) in dollar amounts and percentage growth

(Consider This) When making a capital stock and reservoir analogy, the: level of water in the reservoir is net investment. inflow from the river is the stock of capital. outflow below the dam is gross investment. level of water in the reservoir is the stock of capital.

d) level of water in the reservoir is the stock of capital

Answer the question on the basis of the following five data sets wherein it is assumed that the variable shown on the left is the independent variable and the one on the right is the dependent variable. Assume in graphing these data that the independent variable is shown on the horizontal axis and the dependent variable on the vertical axis

data sets 1 and 3 only

data sets 1 and 3 only.

data sets 2 and 4 only.

In the following question(s) you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X, (2) the equilibrium price (P) of X and (3) the equilibrium quantity (Q) of X. Refer to the above. An increase in the price of a product that is a complement to X will:

decrease D, decrease P, and decrease Q.

decrease S, increase P, and decrease Q.

With a downsloping demand curve and an upsloping supply curve for a product, a decrease in resource prices will:

decrease equilibrium price and increase equilibrium quantity.

Refer to the above table. In relation to column (3), a change from column (5) to column (4) would indicate a(n):

decrease in supply.

Suppose an excise tax is imposed on product X. We expect this tax to:

decrease the demand for complementary good Y and increase the demand for substitute product Z.

If X is a normal good, a rise in money income will shift the:

demand curve for X to the right.

If Z is an inferior good, an increase in money income will shift the:

demand curve for Z to the left.

If products A and B are complements and the price of B decreases the:

demand for A will increase and the quantity of B demanded will increase.

The overall behavior of the economy

differs over time as prices become increasingly flexible in the months and years following a shock.

The relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is ____.

direct, inverse

In a typical year, which of the following measures of aggregate output and income is likely to be the smallest?

disposable income

The amount of after-tax income received by households is measured by:

disposable income.

The number of years required for real GDP to double can be found by:

dividing 70 by the annual growth rate.

Real GDP per capita is found by:

dividing real GDP by population.

In a competitive economy prices:

do all of the above

In a market economy a significant change in consumers' desire for product X will:

do all of the above

The marginal benefit curve is:

downsloping because successive units of a specific product yield less and less extra benefit.

The optimal point on a production possibilities curve is achieved where:

each good is produced at a level where marginal benefits equal marginal costs.

101. (Consider This) The main point of the Consider This box about hypothetical countries Slogo, Sumgo, and Speedo is that over several decades differing:

economic growth rates create large differences in real GDP per capita

Consider This) According to the Consider This box about hypothetical countries Slogo, Sumgo, and Speedo, small differences in __________ make for large differences in _________ over several decades, assuming the same growth of population for each country.

economic growth rates; real GDP per capita

If a competitive industry is neither expanding nor contracting, we would expect:

economic profits to be zero

If a competitive industry is neither expanding nor contracting, we would expect:

economic profits to be zero.

Which of the following is NOT an economic cost?

economic profits.

Economy A: gross investment equals depreciation Economy B: depreciation exceeds gross investment Economy C: gross investment exceeds depreciation Refer to the information. Positive net investment is occurring in:

economy C only.

Economy A: gross investment equals depreciation Economy B: depreciation exceeds gross investment Economy C: gross investment exceeds depreciation Refer to the above information. Positive net investment is occurring in:

economy C only.

The market system

effectively harnesses the incentives of workers and entrepreneurs.

The market system:

effectively harnesses the incentives of workers and entrepreneurs.

Economic growth is best defined as an increase in:

either real GDP or real GDP per capita.

Property rights are important because they

encourage cooperation by improving the chances of mutually agreeable transactions.

Well-defined property rights:

encourage owners to maintain or improve their property

A competitive market system:

encourages growth by allowing producers to make profitable investment decisions based on market signals.

Free trade:

encourages growth by promoting the rapid spread of new inventions and innovations

The competitive market system

encourages innovation because successful innovators are rewarded with economic profit

The competitive market system:

encourages innovation because successful innovators are rewarded with economic profits

The competitive market system:

encourages innovation because successful innovators are rewarded with economic profits.

Private property:

encourages owners to maintain or improve their property so as to preserve or enhance value.

Barter

entails the exchange of goods for goods.

Innovation lagged in the centrally planned economies because:

enterprises resisted innovation in fear that their production targets would be raised.

Refer to the above diagram. At disposable income level D, consumption is:

equal to D minus CD.

Transfer payments are:

excluded when calculating GDP because they do not reflect current production.

If competitive industry Z is making substantial economic profit, output will:

expand in industry Z as more resources will move to that industry.

If competitive industry Z is making substantial economic profit, output will:

expand in industry Z, as more resources will move to that industry.

Net exports are:

exports less imports.

Net exports are: that portion of consumption and investment goods sent to other countries. exports plus imports. exports less imports. imports less exports.

exports less imports.

(Consider This) If Ford Motor Company purchases factory equipment previously used by General Motors, this would be considered an economic investment

false

Economists refer to purchases of stocks and bonds as "investment."

false

The "coincidence of wants" problem associated with barter refers to the fact that:

for exchange to occur each seller must have a product that some buyer wants.

The coincidence-of-wants problem associated with barter refers to the fact that:

for exchange to occur each seller must have a product that some buyer wants.

The "coincidence of wants" problem associated with barter refers to the fact that:

for exchange to occur, each seller must have a product that some buyer wants.

(Last Word) The fallacy of composition is essentially the error of:

generalizing from the particular to the general.

The pursuit of self-interest:

gives direction to the market system

Final goods and services refer to:

goods and services purchased by ultimate users, rather than for resale or further processing.

Government purchases include government spending on:

government consumption goods and public capital goods.

The term laissez-faire suggests that:

government should not interfere with the operation of the economy

The term "laissez-faire" suggests that:

government should not interfere with the operation of the economy.

Between 1995 and 2009, the U.S. productivity rate:

grew substantially compared to prior years, leading some economists to predict a long-lasting resurgence of productivity growth.

If net foreign factor income is zero and there are no statistical discrepancies, the sum of national income and the consumption of fixed capital equals:

gross domestic product.

the nominal value of all goods and services produced in the domestic economy corrected for inflation or deflation.

gross domestic product.

Which of the following best measures improvements in the standard of living of a nation?

growth of real GDP per capita

(Last Word) Many economists believe that the widespread use of computerized inventory control systems

has reduced severity in the business cycle

7. Higher rates of unemployment are linked with:

higher crime rates as the unemployed seek to replace lost income.

Higher rates of unemployment are linked with:

higher crime rates as the unemployed seek to replace lost income.

The simple circular flow model shows that:

households are on the selling side of the resource market and on the buying side of the product market.

In the resource market:

households sell resources to businesses.

In the circular flow model

households sell resources to firms

The resource market

households sells resources to business

Answer the question on the basis of the following information. Assume that if the interest rate that businesses must pay to borrow funds were 20 percent, it would be unprofitable for businesses to invest in new machinery and equipment, so investment would be zero. But if the interest rate were 16 percent, businesses would find it profitable to invest $10 billion. If the interest rate were 12 percent, $20 billion would be invested. Assume that total investment continues to increase by $10 billion for each successive 4 percentage point decline in the interest rate. Refer to the above information. Which of the following correctly expresses the indicated relationship as an equation?

i = 20 - .4I.

Consumer sovereignty refers to the

idea that the decisions of producers and resource suppliers with respect to the kinds and amounts of good produced must be appropriate to consumer demands.

"Consumer sovereignty" refers to the:

idea that the decisions of producers must ultimately conform to consumer demands.

Risk is a problem

in both market system and command systems

Gross domestic product (GDP) measures and reports output:

in dollar amounts and percentage growth.

Gross domestic product (GDP) measures and reports output:

in dollar amounts.

Shortages and unmet demand provide opportunities for individuals and firms to profit under capitalism, but they present no such opportunities under central planning. This reality represents central planning's:

incentive problem

Suppose that an individual sees a tremendous opportunity to produce and sell a new product but dismisses the idea because there is no way to exploit this opportunity for personal gain. This situation best identifies the:

incentive problem under communist central planning.

When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the:

income effect.

increase D, increase P, and increase Q

increase D, increase P, and increase Q.

In the following question(s) you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X, (2) the equilibrium price (P) of X and (3) the equilibrium quantity (Q) of X. Refer to the above. An improvement in the technology used to produce X will:

increase S, decrease P, and increase Q

If the MPC is .70 and investment increases by $3 billion, the equilibrium GDP will:

increase by $10 billion.

With a downsloping demand curve and an upsloping supply curve for a product, an increase in consumer income will:

increase equilibrium price and quantity if the product is a normal good.

Refer to the above table. In relation to column (3), a change from column (2) to column (1) would indicate a(n):

increase in demand

Refer to the above diagram. The most likely cause of a shift from AB to CD would be a(n):

increase in productivity.

Refer to the figure above. Assuming this market is representative of the economy as a whole, a positive demand shock will

increase output, but leave prices unchanged.

For an economy to increase investment, it must:

increase saving.

Suppose product X is an input in the production of product Y. Product Y in turn is a substitute for product Z. An increase in the price of X can be expected to:

increase the demand for Z.

An increase in the price of product A will:

increase the demand for substitute product B.

An increase in consumer desire for strawberries is most likely to:

increase the number of strawberry pickers needed by farmers

An increase in consumer desire for strawberries is most likely to:

increase the number of strawberry pickers needed by farmers.

If the demand and supply curves for product X are stable, a government-mandated increase in the price of X will:

increase the quantity supplied and decrease the quantity demanded of X.

The achievement of full employment through time will:

increase the realized rate of economic growth

Assume product A is an input in the production of product B. In turn product B is a complement to product C. We can expect a decrease in the price of A to:

increase the supply of B and increase the demand for C.

Refer to the figure above. Assuming this market is representative of the economy as a whole, a negative demand shock will most likely:

increase unemployment.

Suppose nominal GDP was $360 billion in 1990 and $450 billion in 2000. The appropriate price index (1985 = 100) was 120 in 1990 and 125 in 2000. Between 1990 and 2000 real GDP:

increased by $60 billion.

If in some year gross investment was $120 billion and net investment was $65 billion, then in that year the country's capital stock:

increased by $65 billion.

(Consider This) Over the past several decades, the percentage of women in the paid U.S. workforce has:

increased due to higher wages, expanded job accessibility, changing preferences and attitudes, and other factors.

Economists who believe that the recent rise in the average rate of productivity growth may be long-lasting claim that the above-normal economic growth in the United States between 1995 and 2009 was caused by:

increased entrepreneurial activity, application of information technology, and global competition.

Harry's Pepperoni Pizza Parlor produced 10,000 large pepperoni pizzas last year that sold for $10 each. This year Harry's again produced 10,000 large pepperoni pizzas (identical to last year's pizzas) but sold them for $12 each. Based on this information we can conclude that Harry's production of large pepperoni pizzas this year:

increased nominal GDP by $20,000 but left real GDP unchanged.

5. Harry's Pepperoni Pizza Parlor produced 10,000 large pepperoni pizzas last year that sold for $10 each. This year Harry's again produced 10,000 large pepperoni pizzas (identical to last year's pizzas), but sold them for $12 each. Based on this information we can conclude that Harry's production of large

increased nominal GDP by $20,000, but left real GDP unchanged.

Harry's Pepperoni Pizza Parlor produced 10,000 large pepperoni pizzas last year that sold for $10 each. This year Harry's again produced 10,000 large pepperoni pizzas (identical to last year's pizzas), but sold them for $12 each. Based on this information we can conclude that Harry's production of large pepperoni pizzas:

increased nominal GDP from last year, but real GDP was unaffected.

The historical reallocation of labor from agriculture to manufacturing in the United States has:

increased the average productivity of labor.

(Last Word) Growth of real per capita income and China has largely resulted from:

increased use of technology and improved technology.

The slope of the typical production possibilities curve:

increases as one moves southeast along the curve.

More than half the growth of real GDP in the United States is caused by:

increases in the productivity of labor.

Network effects are:

increases in the value of a product to each user, including existing users, as the total number of users rises.

A government subsidy to the producers of a product:

increases product supply.

The saving schedule is such that as aggregate income increases by a certain amount saving:

increases, but by a smaller amount.

Broadly defined, competition involves:

independently acting buyers and sellers and freedom to enter or leave markets

Competition means that:

independently acting buyers and sellers and freedom to enter or leave markets

Broadly defined, competition involves:

independently acting buyers and sellers and freedom to enter or leave markets.

A demand curve:

indicates the quantity demanded at each price in a series of prices.

The invisible hand promotes society's interests because:

individuals pursuing their self-interest will try to produce goods and services that people in society want and are willing to purchase.

inferior goods.

Suppose a nation's 2010 nominal GDP was $972 billion and the general price index was 90. To make the 2010 GDP comparable with the base year GDP, the 2010 GDP must be:

inflated to $1,080 billion

Suppose a nation's 2010 nominal GDP was $972 billion and the general price index was 90. To make the 2010 GDP comparable with the base year GDP, the 2010 GDP must be:

inflated to $1,080 billion.

Suppose a nation's 2010 nominal GDP was $972 billion and the general price index was 90. To make the 2010 GDP comparable with the base year GDP, the 2010 GDP must be:

inflated to $1080 billion

Suppose a nation's 2010 nominal GDP was $972 billion and the general price index was 90. To make the 2010 GDP comparable with the base year GDP, the 2010 GDP must be:

inflated to $1080 billion.

(Consider This) When making a capital stock and reservoir analogy, the:

inflow from the river is gross investment.

Economists who believe that the recent rise in the average rate of productivity growth will be long lasting say that:

innovations in computers and communications, together with global capitalism, are greatly boosting U.S. productivity and the economy's potential economic growth rate.

________ consist of the money paid by private businesses to the suppliers of loans used to purchase capital.

interest

Economic historians date the start of the Industrial Revolution around the year 1776, when James Watt:

invented and built a more powerful and efficient steam engine

Economic historians date the start of the Industrial Revolution around the year 1776, when James Watt:

invented and built a more powerful and efficient steam engine.

In 2007, Trailblazer Bicycle Company produced a mountain bike that was delivered to a retail outlet in November of 2007. The bicycle was sold to E.Z. Ryder in March of 2008. This bicycle is counted as:

investment in 2007 and as negative investment in 2008.

If the real interest rate in the economy is i and the expected rate of return on additional investment is r, then other things equal:

investment will take place until i and r are equal.

If the number of worker-hours in an economy is 100 and its labor productivity is $5 of output per worker-hour, the economy's real GDP:

is $500.

Assume the price of product Y (the quantity of which is on the vertical axis) is $15 and the price of product X (the quantity of which is on the horizontal axis) is $3. Also assume that money income is $60. The absolute value of the slope of the resulting budget line

is 1/5

ssume the price of product Y (the quantity of which is on the vertical axis) is $15 and the price of product X (the quantity of which is on the horizontal axis) is $3. Also assume that money income is $60. The absolute value of the slope of the resulting budget line:

is 1/5

The production possibilities curve

is a frontier between all combinations of two goods that can be produced and those combinations that cannot be produced.

An economic system

is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem

If there is a surplus of a product, its price:

is above the equilibrium level.

Market

is an institution that brings together buyers and sellers.

(Consider This) North Korea's command economy:

is one of the few remaining command economies.

A nation's gross domestic product (GDP):

is the dollar value of all final output produced within the borders of the nation during a specific period of time and can be found by summing C + Ig + G + Xn.

A nation's gross domestic product (GDP):

is the dollar value of all final output produced within the borders of the nation during a specific period of time.

Any combination of goods lying outside of the budget line

is unattainable, given the consumer's income

Refer to the above diagram. Other things equal, this economy will achieve the most rapid rate of growth if:

it chooses point A.

Skeptics of the recent rise in the average rate of productivity growth say that:

it is too soon to judge whether the high productivity advances between 1995 and 2009 are long-lasting or transitory.

The use of money contributes to economic efficiency because:

it promotes specialization by overcoming the problems with barter.

The percentage of the working-age population in the labor force (= employed + officially unemployed) is called the:

labor force participation rate.

Suppose total output (real GDP) is $10,000 and worker-hours are 20,000. We can conclude that:

labor productivity must be $0.5.

Other things equal, if a full-employment economy reallocated a substantial quantity of its resources to capital goods, we would expect:

labor productivity to rise.

The numerical value of the multiplier will be smaller the:

larger the slope of the saving schedule.

The upward slope of the supply curve reflects the:

law of supply.

Growth is advantageous to a nation because it:

lessens the burden of scarcity.

The French term laissez-faire means

let it be

The French term laissez-faire means?

let it be

(Last Word) A caller to a radio talk show states that protesters against globalization are a collection of "anarchist punks, naïve college students, and trade union radicals." This is an example of:

loaded terminology.

The problems of aggregate inflation and unemployment are:

major topics of macroeconomics.

Which of the following is not a main function of the entrepreneur?

make routine pricing decisions.

The two general types of economic systems that exist today are:

market systems and command systems

If consumer incomes increase, the demand for product X:

may shift either to the right or left.

The fundamental invention underpinning the 1995-2012 rise in the average rate of productivity growth is the:

microchip.

The fundamental invention underpinning the recent rise in the average rate of productivity growth is the:

microchip.

Which of the following is a distinguishing feature of laissez-faire capitalism?

minimal government intervention

The most efficient combination of resources in producing a given output is the combination that:

minimize the cost per unit of output.

14. Economists and policy makers are committed to encouraging a large and growing real GDP because

more output means greater consumption opportunities

In annual percentage terms, investment spending in the United States is:

more variable than real GDP.

Refer to the above diagram. The concept of opportunity cost is best represented by the:

move from B on PP1 to C on PP1.

Refer to the above diagram. Realized economic growth is best represented by a:

move from X on AB to Y on CD.

Assume an economy is incurring unemployment. The effect of resolving this problem will be to:

move the level of actual output on to the economy's production possibilities curve.

Countries that have experienced modern economic growth have also tended to:

move toward more democratic forms of government.

The system that measures the economy's overall performance is formally known as:

national income accounting.

The total amount of income earned by U.S. resource suppliers in a year, plus taxes on production and imports, is measured by:

national income.

Suppose that an individual sees a tremendous opportunity to produce and sell a new product, but dismisses the idea because there is no way to exploit this opportunity for personal gain. This situation best identifies the:

ncentive problem under communist central planning.

If two variables are inversely related, then as the value of one variable:

ncreases, the value of the other decreases

An outward shift of a nation's production possibilities curve:

neither ensures a nation of an increase in real GDP nor of an increase in real GDP per capita.

If a legal ceiling price is set above the equilibrium price:

neither the equilibrium price nor equilibrium quantity will be affected

The smallest component of aggregate spending in the United States is:

net exports.

If depreciation (consumption of fixed capital) exceeds gross domestic investment, we can conclude that:

net investment is negative.

Increases in the value of a product to each user, including existing users, as the total number of users rises are called:

network effects

Michigan: Has surplus of Autos and wants lettuce. Texas: Has surplus of Autos and wants apples. Washington: Has surplus of apples and wants autos. On the basis of the information, it can be said that:

no coincidence of wants exists between any two states.

If real GDP rises and the GDP price index has increased:

nominal GDP must have increased.

Real GDP is preferred to nominal GDP as a measure of economic performance because:

nominal GDP uses current prices and thus may over- or understate true changes in output.

f the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP?

nominal GDP would rise, but real GDP would be unchanged.

Environmental pollution is accounted for in:

none of these.

41. (Consider This) Suppose that Toyota buys a factory previous owned by Chrysler Motors. Economists would:

not consider this to be an economic investment because no new capital is created through the purchase.

In calculating GDP, governmental transfer payments, such as Social Security or unemployment compensation, are:

not counted.

In calculating GDP, governmental transfer payments, such as social security or unemployment compensation, are:

not counted.

The invisible hand refers to the:

notion that, under competition, decisions motivated by self-interest promote the social interest.

By summing the dollar value of all market transactions in the economy, we would: determine the market value of all resources used in the production process. obtain a sum substantially larger than the GDP. determine value added for the economy. measure GDP.

obtain a sum substantially larger than the GDP.

Supply shocks:

occur when sellers face unexpected changes in the availability and/or prices of key inputs.

Proponents of economic growth say that pollution:

occurs, not because of growth, but because common resources are treated as free goods.

The ZZZ Corporation issued $25 million in new common stock in 2008. It used $18 million of the proceeds to replace obsolete equipment in its factory and $7 million to repay bank loans. As a result, investment:

of $18 million has occurred.

National income accountants can avoid multiple counting by:

only counting final goods.

The term "recession" describes a situation where:

output and living standards decline

2. The term "recession" describes a situation where:

output and living standards decline.

The term "recession" describes a situation where:

output and living standards decline.

Strong property rights are important for modern economic growth because:

people are more likely to invest if they don't fear that others can take their returns on investment without compensation

Strong property rights are important for modern economic growth because:

people are more likely to invest if they don't fear that others can take their returns on investment without compensation.

Specialization in production is economically beneficial primarily because it:

permits the production of a larger output with fixed amounts of resources.

The amount of income that households receive, weather earned or unearned, is called ______ income

personal

The coordination problem in the centrally planned economies refers to the idea that:

planners had to direct required inputs to each enterprise

Given the consumption schedule, it is possible to graph the relevant saving schedule by:

plotting the vertical differences between the consumption schedule and the 45-degree line.

Economics is concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity." This statement is:

positive and correct.

Last Word) "The government deregulated the electricity industry in California and a shortage of electricity soon occurred. It is clear that the deregulation caused the shortage." This statement needs careful analysis because it may reflect the

post hoc, ergo propter hoc fallacy

(Last Word) "The government deregulated the electricity industry in California and a shortage of electricity soon occurred. It is clear that the deregulation caused the shortage." This statement needs careful analysis because it may reflect the:

post hoc, ergo propter hoc fallacy.

The construction of demand and supply curves assumes that the primary variable influencing decisions to produce and purchase goods is

price

Refer to the above diagram. A government-set price ceiling is best illustrated by:

price A

The law of demand states that, other things equal:

price and quantity demanded are inversely related.

The law of demand states that:

price and quantity demanded are inversely related.

The demand curve shows the relationship between

price and quantity demanded.

The demand curve shows the relationship between:

price and quantity demanded.

In the above market, economists would call a government-set maximum price of $40 a

price ceiling

If the supply of a product decreases and the demand for that product simultaneously increases, then equilibrium

price must rise, but equilibrium quantity may rise, fall, or remain unchanged.

CPI

price of most recent market basket //divided by// price estimate of market basket 1982-1984

The figure above depicts a situation where:

prices are sticky, but output is flexible.

The figure depicts a situation where:

prices are sticky, but output is flexible.

(Last Word) According to economist Donald Bordeaux:

private property eliminates the possibility that resource arrangements will be random.

(Last Word) According to economist Donald Boudreaux:

private property eliminates the possibility that resource arrangements will be random.

The law of supply indicates that, other things equal:

producers will offer more of a product at high prices than at low prices.

If products were in short or surplus supply in the Soviet Union:

producers would not react because no price or profit signals occurred.

if products were in short or surplus supply in the Soviet Union:

producers would not react because no price or profit signals occurred.

Allocative efficiency is concerned with:

producing the combination of goods most desired by society.

The two basic markets shown by the simple circular flow model are:

product and resource.

The two basic markets shown by the simple circular flow model are:

product and resources

The fact that the major indicator of enterprise success in the Soviet Union and pre-reform China was the quantity of output implied that:

product quality was neglected.

In terms of circular flow diagram, businesses obtain revenue through the____market and make expenditures in the____market.

product; resource

Suppose that an economy's labor productivity and total worker-hours each grew by 3 percent between year 1 and year 2. We could conclude that this economy's:

production possibilities curve shifted outward

Suppose that an economy's labor productivity and total worker-hours each grew by 4 percent between year 1 and year 2. We could conclude that this economy's:

production possibilities curve shifted outward

Enterprise managers and workers in the Soviet Union often resisted innovations in production methods because:

production targets were often increased when innovation occurred.

Which of the following is assumed in constructing a typical production possibilities curve?

production technology is fixed.

Tom Atoe grows fruits and vegetables for home consumption. This activity is:

productive but is excluded from GDP because no market transaction occurs.

Banks and other financial institutions:

promote economic growth by helping to direct household saving to businesses that want to invest.

Copyrights and trademarks are examples of:

property rights

A nation's infrastructure refers to:

public capital goods such as highways and sanitation systems.

In national income accounting, government purchases include:

purchases by Federal, state, and local governments.

In national income accounting, government purchases include:

purchases by federal, state, and local governments.

Economists contend that most economic decisions are:

purposeful

The growth of GDP may understate changes in the economy's economic well-being over time if the:

quality of products and services improves.

If the supply and demand curves for a product both decrease, then equilibrium:

quantity must decline, but equilibrium price may rise, fall, or remain unchanged.

If we say that a price is too high to clear the market, we mean that:

quantity supplied exceeds quantity demanded.

If the real interest rate in the economy is i and the expected rate of return on additional investment is r, then other things equal:

r will fall as more investment is undertaken.

Refer to the figure above. Assuming this market is representative of the economy as a whole, a positive demand shock will:

raise the price level, but leave output unchanged.

Before the period of modern economic growth:

rates of population growth virtually matched rates of output growth.

Alex sees that his neighbors' lawns all need mowing. He offers to provide the service in exchange for a wage of $20 per hour. Some neighbors accept Alex's offer and others refuse. Economists would describe Alex's behavior as

rational self-interest, because he attempting to increase his own income by identifying and satisfying someone else's wants.

Suppose that an economy's labor productivity fell by 3 percent and its total worker-hours remained constant between year 1 and year 2. We could conclude that this economy's:

real GDP declined.

12. Suppose that an economy's output does not change from one year to the next, but the price level doubles. What happens to real GDP?

real GDP doesn't change

If nominal GDP rises:

real GDP may either rise or fall.

For a nation's real GDP per capita to rise during a year:

real GDP must increase more rapidly than population.

9. The three statistics that are the main focus for those measuring macroeconomic health are:

real GDP, inflation, and unemployment.

The three statistics that are the main focus for those measuring macroeconomic health are:

real GDP, inflation, and unemployment.

Modern economic growth refers to countries that have experienced an increase in:

real output per person.

Labor productivity is measured by:

real output per worker hour.

From society's point of view the economic function of profits and losses is to:

reallocate resources from less desired to more desired uses.

From society's point of view, the economic function of profits and losses is to:

reallocate resources from less desired to more desired uses.

Suppose that Techno TV produces LCD televisions. At a price of $2,000 per television, Techno determines that its optimal output is 3000 television sets per week. If prices are sticky and fears of a recession reduce demand for LCD televisions, we would expect Techno to:

reduce output in the short run

Demand shocks:

refer to unexpected changes in the desires of households and businesses to buy goods and services.

The term "quantity demanded":

refers to the amount of a product that will be purchased at some specific price.

Prices for airline tickets change on average about once per month. This would suggest that airline ticket prices are

relatively flexible.

Prices for airline tickets change on average about once per month. This would suggest that airline ticket prices are:

relatively flexible.

If a nation's real GDP increases from 100 billion to 106 billion and its population jumps from 200 million to 212 million, it real GDP per capita will:

remain constant.

If a nation's real GDP increases from 100 billion to 106 billion and its population jumps from 200 million to 212 million, its real GDP per capita will:

remain constant.

When economists refer to "investment," they are describing a situation where:

resources are devoted to increasing future output.

An effective price floor will

result in a product surplus.

Specialization in production is important primarily because it:

results in greater total output.

The percentage of U.S. adults with a high school education or above has:

risen from 41 percent in 1960 to 87 percent in 2009.

Answer the question on the basis of the following information: Picture The economy above has experienced a:

rising real GDP.

Any combination of goods lying outside of the budget line:

s unattainable, given the consumer's income.

If an economy wants to increase its current level of investment, it must:

sacrifice current consumption.

At the point where the consumption schedule intersects the 45-degree line

saving is zero.

The saving schedule is drawn on the assumption that as income increases:

saving will increase absolutely and as a percentage of income.

Kara's Kittens typically produces and sells at its optimal (lowest per-unit cost) level of 30 scratching posts per week. Kara's also maintains an inventory of 20 scratching posts. If prices are sticky and there is a positive demand shock this week resulting in demand for 40 scratching posts, we would expect Kara's to:

sell the additional scratching posts out of its inventory and rebuild the inventory later when a negative demand shock occurs.

Households and businesses are:

sellers in the resource and product markets respectively.

According to the concept of the "invisible hand," if Susie opens and operates a profitable childcare center, then:

she has served society's interests by providing a desired good or service.

Refer to the above graph. An increase in an economy's labor productivity would:

shift curve AB to CD.

Refer to the above graph. An increase in the economy's human capital would:

shift curve AB to CD.

Refer to the above graph. Growth of production capacity is shown by the:

shift from AB to CD.

Refer to the graph. Growth of production capacity is shown by the:

shift from AB to CD.

Refer to the above diagram. A decrease in supply is depicted by a:

shift from S2 to S1

Refer to the above diagram. Increases in the quantity and quality of human resources and capital are best represented by a:

shift in the production possibilities curve from AB to CD.

(Consider This) Refer to the above diagram. The direct economic impact of the destruction and loss of lives caused by the terrorist attacks of September 11, 2001 is illustrated by the:

shift of the production possibilities curve from CD to AB.

A decrease in the price of digital cameras will:

shift the demand curve for memory cards to the right.

If products C and D are close substitutes, an increase in the price of C will:

shift the demand curve of D to the right.

An improvement in production technology will:

shift the supply curve to the right.

If the price of product L increases, the demand curve for close-substitute product J will:

shift to the right.

Other things equal, an increase in a consumer's money income:

shifts her budget line rightward because she can now purchase more of both products.

The business cycle depicts:

short-run fluctuations in output and employment.

Economic profits in an industry suggest the industry:

should be larger to better satisfy consumers' desire for the product.

The economic function of profits and losses is to:

signal that resources should be reallocated

The economic function of profits and losses is to:

signal that resources should be reallocated.

If the equation y = 15 - 4x was plotted, the:

slope would be -4

A leftward shift of a product supply curve might be caused by:

some firms leaving an industry.

(Consider This) Capital is a:

stock, whereas gross investment and depreciation are flows.

In 2007, the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are:

substitute goods and the higher price for oil increased the demand for natural gas.

Suppose that inventories were $80 billion in 2012 and $70 billion in 2013. In 2013, national income accountants would:

subtract $10 billion from other elements of investment in calculating total investment.

Suppose that inventories were $80 billion in 2007 and $70 billion in 2008. In 2008, accountants would:

subtract $10 billion from other elements of investments in calculating total investment.

The value of U.S. imports is:

subtracted from exports when calculating GDP because imports do not constitute production in the United States.

Consumption of fixed capital (depreciation) can be determined by:

subtracting NDP from GDP.

Value added can be determined by:

subtracting the purchase of intermediate products from the value of the sales of final products.

The fact that nominal GDP has risen faster than real GDP:

suggests that the general price level has risen.

Corporate profits are found by:

summing corporate income taxes, dividends, and undistributed corporate profits.

Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. Given D0, if the supply curve moved from S0 to S1, then:

supply has decreased and equilibrium quantity has decreased

The largest contributor to increases in the productivity of American labor is:

technological advance

Which of the following is the largest contributor to the growth of labor productivity in the United States?

technological advance

The largest contributor to increases in the productivity of American labor is:

technological advance.

Empirical studies suggest that:

technological advances account for about 40 percent of U.S. productivity growth.

Economic growth rates in follower countries:

tend to exceed those in leader countries because followers can cheaply adopt the new technologies that leaders developed at relatively high costs.

Any point inside the production possibilities curve indicates:

that more output could be produced with available resources.

A typical concave (bowed out from the origin) production possibilities curve implies:

that society must choose among various attainable combinations of goods.

An upward shift of the saving schedule suggests

that the APC has decreased and the APS has increased at each GDP level.

At the point where the consumption schedule intersects the 45-degree line:

the APC is 1.00.

(Last Word) Which of the following is a source of data for the consumption component of the U.S. GDP?

the Census Bureau's Retail Trade Survey

Nominal GDP is adjusted for price changes through the use of:

the GDP price index.

Nominal GDP is adjusted for price changes through the use of: the Consumer Price Index (CPI). the Producer Price Index (PPI). the GDP price index. exchange rates.

the GDP price index.

If intermediate goods and services were included in GDP:

the GDP would be overstated.

Real GDP per capita in the United States (as of 2007) exceeds that of France primarily because:

the United States has a higher percentage of the working-age population in the labor force and because U.S. employees average about 20 percent more hours worked per year.

The consumption schedule shows:

the amounts households intend to consume at various possible levels of aggregate income.

The Industrial Revolution and modern economic growth resulted in:

the average human lifespan more than doubling.

An increase in demand means that:

the demand curve has shifted to the right.

A nation's production possibilities curve might shift to the left (inward) as a result of:

the depletion of its soil fertility due to overplanting and overgrazing.

Which of the following best describes the invisible-hand concept?

the desires of resource suppliers and producers to further their own self-interest will automatically further the public interest.

Refer to the above diagram, in which S1 and D1 represent the original supply and demand curves and S2 and D2 the new curves. In this market the indicated shift in supply may have been caused by

the development of more efficient machinery for producing this commodity.

Value added refers to:

the difference between the value of a firm's output and the value of the inputs it has purchased from others.

A fundamental difference between the command system and laissez-faire capitalism is that, in command systems:

the division of output is decided by central planning rather than by individuals operating freely through markets.

The income and substitution effects account for:

the downward sloping demand curve

The income and substitution effects account for:

the downward sloping demand curve.

Macroeconomics is mostly focused on:

the economy as a whole.

If depreciation exceeds gross investment:

the economy's stock of capital is shrinking.

Macroeconomics approaches the study of economics from the viewpoint of:

the entire economy.

Economies of scale refer to:

the fact that large producers may be able to use more efficient technologies than smaller producers

Economies of scale refer to:

the fact that large producers may be able to use more efficient technologies than smaller producers.

18. Suppose a family's income increases by 5% at the same time that inflation is 6%. Then

the family's standard of living will fall

Answer the question on the basis of the following information: Picture In the economy above:

the growth of nominal GDP understates the growth of real GDP.

Graphically, the market demand curve is:

the horizontal sum of individual demand curves.

Other things equal, which of the following would increase labor productivity the most?

the increase in the stock of real capital exceeds the increase in inputs of labor

When we draw an investment demand curve we hold constant all of the following except:

the interest rate.

GDP excludes:

the market value of unpaid work in the home

All of the following are sources of increasing returns and economies of scale except:

the multiplier effect.

Real GDP is:

the nominal value of all goods and services produced in the domestic economy corrected for inflation or deflation.

Suppose total output (real GDP) is $4,000 and labor productivity is $8. We can conclude that:

the number of worker-hours must be 500.

Suppose total output (real GDP) is $4000 and labor productivity is $8. We can conclude that:

the number of worker-hours must be 500.

Refer to the above diagram. This production possibilities curve is constructed so that:

the opportunity cost of both bread and tractors increases as more of each is produced.

The real interest rate is:

the percentage increase in purchasing power that the lender receives on a loan.

(Consider This) Rising wages for women in the United States have increased:

the percentage of married women in the workforce.

The coordination problem in the centrally planned economies refers to the idea that:

the planners had to direct inputs to each interprise

(Last Word) Which of the following has to do with the problem of distinguishing cause and effect in economic reasoning?

the post hoc, ergo propter hoc fallacy.

In comparing GDP data over a period of years, a difference between nominal and real GDP may arise because:

the price level may change over time.

In the second quarter (three-month period) of 2001, U.S. nominal GDP increased but U.S. real GDP declined. We can conclude that:

the price level rose by more than nominal GDP

In moving along a supply curve which of the following is not held constant?

the price of the product for which the supply curve is relevant

In presenting the idea of a demand curve, economists presume the most important variable in determining the quantity demanded is:

the price of the product itself.

In constructing a demand curve for product X:

the prices of other goods are assumed constant.

The fact that the slope of the production possibilities curve becomes steeper as we move down along the curve indicates that

the principle of increasing opportunity costs is relevant.

The fact that the slope of the production possibilities curve becomes steeper as we move down along the curve indicates that:

the principle of increasing opportunity costs is relevant.

In 1933, net private domestic investment was a minus $6.0 billion. This means that:

the production of 1933's GDP used up more capital goods than were produced in that year.

Which of the following do national income accountants consider to be investment?

the purchase of a new house

In a market economy the distribution of output will be determined primarily by:

the quantities and prices of the resources that households supply.

If a positive relationship exists between x and y:

the relationship will graph as an upsloping line.

Refer to the above figures. As the economy moves from the very short run to the longer run, we would expect:

the representation of the economy to move from Figure B to Figure A.

Human capital refers to:

the skills and knowledge that enable a worker to be productive.

The MPC for an economy is:

the slope of the consumption schedule or line.

When the price of a product rises, consumers shift their purchases to other products whose prices are now relatively lower. This statement describes:

the substitution effect.

Nominal GDP is:

the sum of all monetary transactions involving final goods and services that occur in the economy in a year.

Nominal GDP is: the sum of all monetary transactions that occur in the economy in a year. the sum of all monetary transactions involving final goods and services that occur in the economy in a year. the amount of production that occurs when the economy is operating at full employment. money GDP adjusted for inflation.

the sum of all monetary transactions involving final goods and services that occur in the economy in a year.

The production possibilities curve shows:

the various combinations of two goods that can be produced when society employs all of its scarce resources.

Competition means that:

there are independently-acting buyers and sellers in each market

Competition means that:

there are independently-acting buyers and sellers in each market.

The presence of market failures implies that:

there is an active role for government, even in a market system.

If the economy adds to its inventory of goods during some year:

this amount should be included in calculating that year's GDP.

If the economy adds to its inventory of goods during some year: gross investment will exceed net investment by the amount of the inventory increase. this amount should be ignored in calculating that year's GDP. this amount should be subtracted in calculating that year's GDP. this amount should be included in calculating that year's GDP.

this amount should be included in calculating that year's GDP.

In a competitive market economy firms will select the least-cost production technique because:

to do so will maximize the firms profits

In a competitive market economy, firms select the least cost production technique because:

to do so will maximize the firms profits

In a competitive market economy, firms select the least-cost production technique because:

to do so will maximize the firms' profits.

The negative slope of the production possibilities curve is a graphical way of indicating that:

to produce more of one product we must do with less of another.

The concept of net domestic investment refers to:

total investment less the amount of investment goods used up in producing the year's output.

Which of the following is correct?

total output = worker-hours labor productivity

Labor productivity is defined as:

total output/worker-hours.

For comparing changes in potential military strength and political preeminence, the most meaningful measure of economic growth would be changes in:

total real output.

The process by which capital goods are accumulated is known as investment

true

The GDP tends to:

understate economic welfare because it does not take into account increases in leisure.

The marginal cost curve is:

upsloping because of increasing marginal opportunity costs.

Kelly works at an ice cream shop and observes that the number of people buying ice cream varies greatly from day to day. For a couple of weeks she has recorded the number of people at the shop each day, as well as the daily temperature. If Kelly is using the scientific method to better understand ice cream buying habits, her next step is to:

use the observed data to form an hypothesis about ice cream buying behavior.

4. Real GDP measures the:.

value of final goods and services produced within the borders of a country, corrected for price changes.

Real GDP measures the:

value of final goods and services produced within the borders of a country, corrected for price changes.

The annual growth of U.S. labor productivity:

was greater between 1995 and 2009 than between 1973 and 1995.

Real per capita GDP:

was much more equal across nations in 1820 than it is today.

In the late 1990s the U.S. stock market boomed, causing U.S. consumption to rise. Economists refer to this outcome as the:

wealth effect.

A positive statement is concerned primarily with:

what is

Shocks to the economy occur:

when expectations are unmet.

The invisible-hand concept suggests that:

when firms maximize their profits, society's output will also be maximized.

An economy is enlarging its stock of capital goods:

when gross investment exceeds replacement investment.

Which of the following is a distinguishing feature of a market system

wide-spread ownership of capital

11. Real gross domestic product

will increase if there is an increase in the level of output

The division of labor means that:

workers specialize in various production tasks

The division of labor means that:

workers specialize in various production tasks.

The incentive problem under communist central planning refers to the idea that: A. planners had to direct required inputs to each enterprise.

workers, managers, and entrepreneurs could not personally gain by responding to shortages or . surpluses or by introducing new and improved products.

The incentive problem under communist central planning refers to the idea that:

workers, managers, and entrepreneurs could not personally gain by responding to shortages or surpluses or by introducing new and improved products.

Refer to the above table. A total output of 3 units of capital goods and 4 units of consumer goods:

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