Econ 2020 Midterm 1 Practice Quiz

The following table contains data for country Krugeveaux for the year 2019.---> What was country Krugeveaux's GDP in 2019? Household purchases of durable goods-$1,574 Household purchases of nondurable goods- $1,717 Household purchases of services- $385 Household purchases of new housing- $704 Purchases of capital equipment- $310 Inventory changes- $363 Purchases of new structures- $611 Depreciation- $117 Salaries of government workers- $1,422 Government expenditures on public works- $569 Transfer payments- $777 Foreign purchases of domestically produced goods- $88 Domestic purchases of foreign goods- $140 $1,991 $7,603 $3,676 $1,988

$7,603

If in some year nominal GDP was $20 billion and the GDP deflator was 80, what was real GDP? a. $25.0 billion b. $400.0 billion c. $100.0 billion d. $60.0 billion

a. $25.0 billion

With trade, the price of tricycles in this country is (refer to practice test for graph) a. $33, with 200 tricycles produced in this country and another 320 tricycles imported. b. $57, with 360 tricycles produced in this country and another 160 tricycles imported. c. $57, with 200 tricycles produced in this country and another 160 tricycles imported. d. $33, with 360 tricycles produced in this country and another 160 tricycles imported.

a. $33, with 200 tricycles produced in this country and another 320 tricycles imported.

According to the circular-flow diagram, if Christopher is the owner of a landscaping business and he just received $50 for mowing Mrs. Pendleton's lawn,... a. Christopher acts as a firm who interacted in the markets for goods and services with Mrs. Pendleton. b. Christopher acts as a firm who interacted in the markets for factors of production with Mrs. Pendleton. c. the $50 represents wages, rent, and profit to Christopher's firm. d. the $50 represents a cost of production for Christopher's firm.

a. Christopher acts as a firm who interacted in the markets for goods and services with Mrs. Pendleton.

Which of the following demonstrates human capital and physical capital in that order? a. For a restaurant: the chefs' knowledge about preparing food and the equipment in the kitchen b. For a gas station: the pumps and the cash register c. For a medical office: the building and the doctors' knowledge of medicine d. For a brick layer: her bricks and her tools

a. For a restaurant: the chefs' knowledge about preparing food and the equipment in the kitchen

The fact that the line slopes downward reflects the fact that (refer to practice test for graph) a. Peru faces a trade-off between producing peanuts and producing cashews. b. Peru should specialize in producing cashews. c. Peru will produce more peanuts and fewer cashews as time goes by. d. for Peru, it is more costly to produce peanuts than it is to produce cashews.

a. Peru faces a trade-off between producing peanuts and producing cashews.

(refer to practice test for graphs) A shift of the economy's production possibilities frontier from Graph (a) to Graph (b) could be caused by... a. an improvement in tractor production technology. b. unemployment. c. an improvement in both tractor and truck production technology. d. an improvement in truck production technology.

a. an improvement in tractor production technology.

When the consumer price index falls, the typical family... a. can spend fewer dollars to maintain the same standard of living. b. finds that its standard of living is not affected. c. can offset the effects of rising prices by saving more. d. has to spend more dollars to maintain the same standard of living.

a. can spend fewer dollars to maintain the same standard of living.

The curve becomes flatter as the amount of capital per worker increases because of... (refer to practice test for graph) a. diminishing returns to capital. b. diminishing returns to labor. c. increasing returns to labor. d. increasing returns to capital.

a. diminishing returns to capital.

Alana decides to spend 2 hours working overtime rather than going shopping with her friends. She earns $11 per hour for overtime work. Her opportunity cost of working is... a. the enjoyment she would have received had she gone shopping. b. the $22 minus the enjoyment she would have received from going shopping. c. nothing, since she would have received less than $22 worth of enjoyment from going shopping. d. the $22 she earns working.

a. the enjoyment she would have received had she gone shopping.

Assume that Cuba and Denmark can switch between producing coolers and producing radios at a constant rate. (refer to practice test for table) Output Produced in One Day Coolers- cuba- 12 coolers- denmark- 24 Radios- Cuba- 6 radios- Denmark- 3 Assume that Cuba and Denmark each has 8 days available for production. Originally, each country divided its time equally between the production of coolers and radios. Now, each country spends all its time producing the good in which it has a comparative advantage. As a result, the total output of radios increased by a. 96. b. 12. c. 3. d. 9.

b. 12.

Last year real GDP per person in the imaginary nation of Olympus was $4,260. The year before it was $4,100. By about what percentage did real GDP per person grow during the period? a. 1 percent b. 4 percent c. 0.04 percent d. 16 percent

b. 4 percent

When trade in coffee is allowed, consumer surplus in Uganda (refer to practice test for graph) a. decreases by the area F + H. b. decreases by the area B + F. c. increases by the area A + D. d. increases by the area B + F.

b. decreases by the area B + F.

Suppose the United States has a comparative advantage over Mexico in producing pork. The principle of comparative advantage asserts that... a. in order to consume beyond its PPF, the United States should refrain altogether from producing pork and import all of what it requires from Mexico. b. in order to consume beyond its PPF, the United States should produce more pork than what it requires and export some of it to Mexico. c. in order to consume beyond its PPF, the United States should produce a moderate quantity of pork and import the remainder of what it requires from Mexico. d. Mexico has nothing to gain from importing United States pork.

b. in order to consume beyond its PPF, the United States should produce more pork than what it requires and export some of it to Mexico.

An economy's production of two goods is efficient if... a. the economy is producing at a point on or inside the production possibilities frontier. b. it is impossible to produce more of one good without producing less of the other. c. all members of society consume equal portions of the goods. d. it is possible to produce more of one good without producing less of another good.

b. it is impossible to produce more of one good without producing less of the other.

When a country has a comparative advantage in producing a certain good, a. the country's opportunity cost of that good is high relative to other countries' opportunity costs of that same good. b. then specializing in the production of that good and trading for other goods could allow that country to consume at a point beyond its production possibilities frontier. c. the country should import that good. d. the country should produce just enough of that good for its own consumption.

b. then specializing in the production of that good and trading for other goods could allow that country to consume at a point beyond its production possibilities frontier.

Assume that Cuba and Denmark can switch between producing coolers and producing radios at a constant rate. (refer to practice test for table) Output Produced in One Day Coolers- cuba- 12 coolers- denmark- 24 Radios- Cuba- 6 radios- Denmark- 3 a. 0.5 radios, and Denmark's opportunity cost of one cooler is 8 radios. b. 2 radios, and Denmark's opportunity cost of one cooler is 0.125 radios. c. 0.5 radios, and Denmark's opportunity cost of one cooler is 0.125 radios. d. 2 radios, and Denmark's opportunity cost of one cooler is 8 radios.24

c. 0.5 radios, and Denmark's opportunity cost of one cooler is 0.125 radios.

Which of the following is included in the calculation of GDP?... a. The purchase of a used textbook from a friend who took the same class last year. b. The purchase of ink and paper supplies by a textbook company for the production of new textbooks. c. The purchase of tutoring services from a tutor who holds citizenship outside the country but resides within the country. d. The purchase of a new edition of a foreign textbook that was produced in a different nation.

c. The purchase of tutoring services from a tutor who holds citizenship outside the country but resides within the country.

In a simple circular-flow diagram, total income and total expenditure are... a. seldom equal because of the ongoing changes in an economy's unemployment rate. b. never equal because total income always exceeds total expenditure. c. always equal because every transaction has a buyer and a seller. d. equal only when the government purchases no goods or services.

c. always equal because every transaction has a buyer and a seller.

Changes in real GDP reflect... a. only changes in prices. b. both changes in prices and changes in the amounts being produced. c. only changes in the amounts being produced. d. neither changes in prices nor changes in the amounts being produced.

c. only changes in the amounts being produced.

A rational decisionmaker... a. ignores marginal changes and focuses instead on "the big picture." b. takes an action only if the combined benefits of that action and previous actions exceed the combined costs of that action and previous actions. c. takes an action only if the marginal benefit of that action exceeds the marginal cost of that action. d. ignores the likely effects of government policies when he or she makes choices.

c. takes an action only if the marginal benefit of that action exceeds the marginal cost of that action.

If the nominal interest rate is 5 percent and the real interest rate is 7 percent, then the inflation rate is... a. 12 percent. b. 0.4 percent. c. −2 percent. d. 2 percent.

c. −2 percent.

Suppose a basket of goods and services has been selected to calculate the CPI and Year 1 has been selected as the base year. In Year 1, the basket's cost was $50; in Year 2, the basket's cost was $52; and in Year 3, the basket's cost was $55. The value of the CPI in Year 3 was... a. 90.9. b. 105.0. c. 104.0. d. 110.0.

d. 110.0.

Which of the following is an example of a normative, as opposed to a positive, statement? a. Following the most recent recession, the economy is recovering at a slower than usual pace. b. A decrease in the minimum wage would decrease unemployment. c. The elimination of trade restrictions would increase an economy's standard of living. d. The social security system is a good system and it deserves to be preserved as it is.

d. The social security system is a good system and it deserves to be preserved as it is.

When trade in coffee is allowed, producer surplus in Uganda (refer to practice test for graph) a. decreases by the area A + D. b. decreases by the area H. c. increases by the area B + F. d. increases by the area B + F + H.

d. increases by the area B + F + H.