Eco

Persistent shortages are an unintended, yet harmful, effect of

Price ceilings

Which statement about public goods is NOT true?

Public goods are overproduced by the market system

Owners of capital equipment receive when they sell these resources.

Wages

The real price of apples in Country Z rose from $4 per pound last year to $6 per pound this year. Which one of the following is correct?

apples are relatively more expensive this year in Country Z

International Harvester produced 50,000 tractors last year and sold 45,000 of them. The other 5,000 of them

are counted in last year's GDP as spending on inventory investment

What is the force that organizes economic activity in our economy?

banks

In the circular flow diagram, households save in:

financial markets

Assume the equilibrium price is $10 and the equilibrium quantity is 500 units. If the government passes legislation stating that charging any price over $15 is legal, while charging any price under $15 is illegal, then:

it has set a price ceiling

When a market is giving us an inefficient outcome, it is easy to determine exactly what the efficient quantity is.

False

For simplification, the circular flow diagrams that we use assume that all saving is done by

Households

If you buy a used 2015 Honda Civic in 2020, is the purchase included in 2020's GDP?

No

Southwest Airlines expanded its fleet this year by buying 7 new airplanes that were produced by Airbus in Toulouse, France. Are these airplanes included in the U.S's GDP?

No because they are imports

Real GDP in Catopia was $4 trillion last year and $7 trillion this year. Which one of the following is correct?

Output in Catopia over this time period rose

In the circular flow diagram, households are sellers in markets.

resource

If a blouse is made 40% in the U.S. and 60% in China then

since the blouse was not fully produced in the US, its value is not included in the U.S. GDP

Assume that a market is failing because the good traded in the market is a public good. One way for the government tp help move this market closer to the optimal quantity of output is to pass legislation that requires buyers and sellers to disclose things they would rather not disclose.

False

Deflation occurs when the inflation rate is greater than zero but smaller than the inflation rate in the previous period.

False

In the expenditure approach, GDP is measured by adding together the cost of all resources used in the U.S. economy in a one year

False

In the expenditure approach, GDP is measured by adding together the cost of all resources used in the U.S. economy in a one year period.

False

Public goods are subject to the principle of rival consumption.

False

Real GDP will increase if more or better output is produced and also if prices increase.

False

The business cycle is always shown by drawing a positively sloped line.

False

A price index measures the cost of a set of goods expressed as a percentage of the cost of the same set of goods during a base year.

True

A rationing device is anything used to determine who gets scarce goods and services.

True

An unintended, yet harmful, effect of minimum wage legislation is higher unemployment rates for low-skilled workers.

True

Assume that a market is failing because of adverse selection problems. One way for the government to help move this market closer to the optimal quantity of output is to pass legislation that requires buyers and sellers to disclose things they would rather not disclose.

True

Disinflation is desirable because it means that we are getting closer to price stability.

True

During the Great Recession of 2009, real GDP per capita in the U.S. fell.

True

If a country's real GDP increases, it means the country is producing more goods and services.

True

Money illusion is the situation where people mistake changes in nominal prices for changes in real prices.

True

Prices are important because they act as a rationing device.

True

Private goods are subject to the principle of rival consumption.

True

Real GDP per capita can be used to compare the standard of living in one country in different years.

True

Since it is impossible to measure the aggregate price level, the best we can do is to measure the price of a subset of goods and hope that it reflects what is happening with the aggregate price.

True

The lamp you bought last week in Arlington, TX, will be counted in the U.S. GDP for this current year.

True; it is a final good

In the circular flow diagram, financial markets move dollars from:

low-value uses to high-value uses

When the government provides a transparent and fair legal system

more trades are likely to occur

In Country X, a particular coffee maker used to sell for $30 ten years ago but now sells for $15. Which one of the following statements is correct?

we can't tell from the information given whether the coffee maker is more or less expensive than it used to be ten years ago

If your nominal income last year was $72,000 and your nominal income this year is $55,000 then

you have more purchasing power than you had last year