ECON 1202 Midterm

Investment, as defined by economists, would not include which of the following? Ford

buys U.S. government bonds

Refer to Figure 2-1. Point A is

inefficient in that not all resources are being used.

Refer to Figure 7-1. Under autarky, the equilibrium price is

$30

Up to what rate of inflation is considered to be acceptable by the Federal Reserve?

2%

Which of the following will shift the demand curve for a good?

A decrease in the price of a complementary good

Which of the following statements is true in regarding taxing by the State of Connecticut?

All of these statements are false: - these taxes tend to reduce consumer surplus - taxes on gas, tobacco and alcohol are sometimes called sin taxes and the purpose of these taxes is to reduce the consumption of these products - taxes of gas, tobacco and alcohol are generally taxed at a nominal rate

If a minimum wage is imposed that is higher than the market's equilibrium we will likely see

Both A and B are correct. (an increase in some people's standard of living and an increase in unemployment)

Assume we are looking at the electric car market. How would a major increase in gas price affect this market?

Demand increases...a shortage develops...price increases...higher prices prevail

Assume we are looking at the market for soda. A medical study is published that says soda has many medical benefits. How would this market likely be affected?

Demand increases...a shortage develops...price increases...higher prices prevail

If mortgage interest rates dramatically decrease what would we expect to see happen in the housing market?

Demand increases...a shortage develops...price increases...higher prices prevail.

Which of the following statements about the economic decisions that consumers, firms, and the government have to make is true?

Each faces the problem of scarcity which necessitates trade-offs in making economic decisions

In Macroeconomics there are three general areas of concern. Which one of the following is more of a long run concern?

Economic growth

Which of the following statements about a simple circular flow model is false?

Households are neither buyers nor sellers in the product market

Refer to Figure 3-7. Assume that the graphs in the figure represent the demand and supply curves for almonds. Which panel best describes what happens in this market when there is an increase in the productivity of almond harvesters?

Panel (a) -- supply increases

Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for women's clothing. Which panel best describes what happens in this market when the wages of seamstresses (workers in the industry) rise?

Panel (b) -- supply decreases

Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for bicycle helmets. Which panel best describes what happens in this market if there is a substantial increase in the price of bicycles?

Panel (d) -- demand decreases

Refer to Figure 7-1. Suppose the government allows imports of leather footwear into the United States. What will be the domestic quantity supplied?

Q0

Refer to Figure 7-1. Suppose the government allows imports of leather footwear into the United States. The market price falls to $24. What area represents consumer surplus?

R + S + T + U

During a recession, we will most likely see which of the following?

Real GDP decrease, inflation decrease, and unemployment increase

During an economic expansion we will most likely see which of the following

Real GDP increase, inflation increase, and unemployment decrease

Monteary policy that is intended to stimulate and expand the economy will end up doing which of the following?

Reducing interest rates

Assume we are looking at the corn market. How would a major drought affect this market?

Supply decreases...A shortage develops... price increases...higher prices prevail

Assume we are looking at the gasoline market. How would a major increase in the price of oil affect this marktet?

Supply decreases...A shortage develops...price increases...higher prices prevail

Which of the following time periods is known as a time of protectionism and very high tarrifs?

The 1930's

During the last half of the 1970's we saw very high nominal interest rates with negative real interest rates. What could have caused this?

The existence of very high inflation

In October 2005, the U.S. Fish and Wildlife Service banned the importation of beluga caviar into the US, the most prized of caviars, from the Caspian Sea. What happened in the market for caviar in the U.S.?

The supply curve shifted to the left.

When a factory closes, why is it bad news for the local restaurants?

Unemployed factory workers have lower incomes and are less likely to dine out.

Economics is the study of the ____ people make to attain their goals, given their _____ resources

choices; scarce

The reduction in economic surplus that results from a market not being in competitive equilibrium is called the

deadweight loss

An outward shift of a nation's production possibilities frontier represents

economic growth

In the circular flow model, the value of total production for an economy ____ the value of total expenditures on final goods and services.

equals

The basis for trade is absolute advantage, not comparative advantage

false

As measured by a percentage of the entire economic output

foreign trade is just as important for the United States as it is for most other countries

When labor unions successfully bargain for wage rates that are ____ the equilibrium wage rate, they may cause ____

higher than; an increase in structural unemployment

Which one of the following categories of goods and services represent the largest category of the CPI basket?

housing

In a city with rent-controlled apartments, all of the following are true except

landlords have an incentive to rent more apartments than they would without rent

Economic growth is generally considered as a

long run concept

In order to be binding, a price ceiling

must lie below the free market equilibrium price

A full-time student who is not working is categorized as

not in the labor force

Which of the following is not a result of binding government price control?

price controls benefit poor consumers but harm producers and wealthy consumers

The purpose of the Smoot-Hawley legislation in 1930 was to

reduce imports from other countries

Most of the time, recessions cause the unemployment rate to ____ and the inflation rate to ____

rise; fall

A market that is in a shortage situation can also be described as a

sellers market

Assume we are looking at the gasoline market. How would a major increase in the supply of oil worldwide affect this market?

supply increases...a surplus develops...price decreases...lower prices prevail

Refer to figure 2-1. Point B is

technically efficient

The real rate of interest is

the nominal rate of interest minus the inflation rate

A change in all of the following variables will change the market demand for a product except a change in

the price of the product

If equilibrium is achieved in a competitive market where there is no government and tax

there is no deadweight loss

Refer to Figure 2-1. Point C is

unattainable with current resources

Many countries engage in trade protection by imposing tariffs or quotas for at least some goods. This is because

while such restrictions harm consumers, they benefit producers, who are usually a more cohesive and politically influential group