ECON Exam 1
karl's keychain company produces keychains that sell in its stores for $1 each. On January 1, 2015, the company had an inventory of 10,000 keychains. During 2015, the company produced 900,000 keychains. at the end of the business year on December 31, 2015, the company's inventory of keychains was 8,000. what was the value of karl's inventory investment in 2015?
-2000 dollars
Rocky Gap Furniture employs 10 workers working eight hours each to produce 100 rocking chairs. What is the productivity of these workers?
1.25 chairs per hour
GDP per capita in the countries of Neverland and Everland are 2,000 and 500, respectively. This suggests that, other things being equal, the returns from capital investment would be: 1) greater in neverland 2) greater in everland 3) the same in both countries
2) greater in everland
If personal consumption is $200, investment is $50, government purchases total $60, imports equal $30, and exports equal $50, then GDP equals
330 dollars
if the growth rate in an economy is 2%, its GDP will double in about
35 years
Company DEF produces gizmos. One particular batch cost $50,000 to produce. Because market conditions were bad at the time of sale, they were sold at a loss for $40,000. The value of the gizmos included in the GDP is:
40,000
Most of the recessions over the past half century have lasted between
6 and 18 months
On average, the United States falls into recession about every ____ years
7
You are deciding whether to stay home to do your laundry rather than work at your job and make $60. If you are willing to pay $80 to have someone else do your laundry, what would be the opportunity cost of a third option: going out drinking with your friends?
80
Which of these would be an example of a situation associated with short-run economic growth? A) Firms purchase 5,000 additional conveyor belts to use in factories. B) A country reports that employment rises by 200,000 workers, reducing the unemployment rate. C) The average education level in a country rises from 10 years to 11 years of schooling. D) A new hybrid variety of a crop is produced that has a yield 20% higher than before.
B) A country reports that employment rises by 200,000 workers, reducing the unemployment rate.
GDP equation
C+I+G+(X-M)
which country will double its real GDP per capital most quickly? Econia: Real GPA= 5,000; Growth rate of real GDP= 10% Macroland: Real GPA= 8,000; Growth rate of real GDP= 7% Nomicia: Real GPA= 12,000; Growth rate of real GDP= 4% Zaria: Real GPA= 15,000; Growth rate of real GDP= 1%
Econia: Real GPA= 5,000; Growth rate of real GDP= 10%
Martin purchases .500 shares of stock in ABC Company at a price of $10 per share. He pays his stockbroker a commission of $50 for helping with the transaction. How much does GDP change as a result of Martin's commission payment?
GDP rises by $50
GDP per capita
GDP/population
Microeconomics
The study of the decision making by individuals, businesses, and industries.
recession
a significant decline in economic activity spread across the economy, lasting more a few months, normally visible in production, employment, real income and other indicators
low hanging fruit principle
a thing or person that can be won, obtained, or persuaded with little effort:
Heather has one employee in her sweater shop who can sew 6 sweaters a day. When she hires a second person, the two employees can make 10 sweaters together. Thinking at the margin, the extra benefit received from hiring a second worker is ___ sweaters a) 4 b) 16 c) 10 d) 6
a) 4
For which of the following students would cheating be a more cost-effective option? a) John; has not come to class at all b) Ana; attended all classes c) the both have the same incentive to cheat
a) John; has not come to class at all
suppose that pandastan has a GDP of $5 billion and a population of 2 million, while Tigerstan has a GDP of $3 billion and a population of 1 million. Which country has a higher GDP per capita, and what is that value? a) Tigerstan, 3000 dollars b) Tigerstand, 3,333 dollars c) Pandastan, 2,500 dollars d) Pandastan, 4000 dollars
a) Tigerstan, 3000 dollars
According to the national spending approach, which of the following is counted in investment? a) a restaurant buys a new wood-fired oven for baking pizzas b) a college graduate buys a new car after graduating c) a student pays for tuition at a university d) a retiree buys newly issued U.S. government bonds
a) a restaurant buys a new wood-fired oven for baking pizzas
Which of the following is an example of monetary policy? a) a rise in short-term interest rates b) a new bridge being built by the government c) a reduction in the federal income tax d) an increase in Social Security payments
a) a rise in short-term interest rates
which of these is included in gross private domestic investment a) an increase in business inventories b) the purchase of a new TV by a household c) purchases of commons stock by investors d) highway construction by a government contractor
a) an increase in business inventories
Which of these occurrences is NOT a source of productivity growth? a) an increase in the level of consumption spending b) an increase in the quality of the labor force c) an increase in the capital-to-labor ratio d) an improvement in technology
a) an increase in the level of consumption spending
the opportunity costs of attending college do NOT include a) food expenditures b) the costs of textbooks or eBooks c) the forgone wages that could be earned working d) required student activity fees
a) food expenditures
which situation indicates that total output in a country has grown the most when the starting output is the same in all situations? a) output per worker grows by 10% which the labor force grows by 10% b) output per worker grows by 4% while the labor force grows by 12% c) output per worker grows by 11% while the labor force remains constant d) output per worker remains constant while the labor force groups by 11%
a) output per worker grows by 10% which the labor force grows by 10%
karls keychain company produces keychains that sell in its stores for $1 each. on january 1, 2015, the company had inventory of 8,000 keychains. during 2015, the company sold 900,000 keychains. at the end of the business year on december 31, 2015, the company's inventory of keychains was 9,000. What was the value of Karls total production and inventory investment in 2015? a) production= 901,000; inventory investment= 1,000 b) production= 899,000; inventory investment= 1,000 c) production= 891,000; inventory investment= 17,000
a) production= 901,000; inventory investment= 1,000
On-the-job training can lead to an increase in the a) quality of the labor force b) population c) financial capital ratio d) capital-to labor ratio
a) quality of the labor force
A person will decide to take the day off work if the a) the marginal cost is less than the marginal benefit b) the person can make up the missed work the next day c) the person has additional sick days to spare d) marginal cost exceeds the marginal benefit
a) the marginal cost is less than the marginal benefit
which of these would NOT be included in the GDP accounts? a) the value of time spent learning how to prepare your personal income tax return b) value of winning form gambling that you report on your tax return c) value of time spent by a mechanic changing the battery of a customer's car d) payment to a certified nursing assistant for caring for an aged relative in her home
a) the value of time spent learning how to prepare your personal income tax return
the corner bakery has doughnuts, cookies, or cake pops. Your opportunity cost of buying the cake pop would be: a) your enjoyment of doughnuts or cookies b) your enjoyment of the cookies c) your enjoyment of the doughnuts d) your enjoyment of the doughnuts and cookies
a) your enjoyment of doughnuts or cookies
The student center on campus has burritos, bagels, or burgers for lunch, and they all cost the same. You decide to have a burger today, but if they were out of burgers, you would have bought a bagel. Your opportunity cost is: a) the enjoyment of the bagel b) the enjoyment of the bagel and burrito c) your enjoyment of the burrito d) your enjoyment of the bagel or the burrito
a) your enjoyment of the bagel
which country has the most productive workers? a: workers= 100, capital stock= 4,000 b: workers=50, capital stock= 500 c: workers=200, capital stock= 1,000 d: workers=150, capital stock= 150
a: workers= 100, capital stock= 4,000
you won a free ticket to see an Eric Clapton concert (which has no resale value). Bob Dylan is performing on the same night and is your most attractive alternative. Tickets to see Dylan cost $40, but you are willing to pay up to $50 to see him. Assume there are no other costs to see either performer. Based on this information, what is the opportunity cost of seeing Eric Clapton? a) 0 b) $10 c) $40 d) $50
b) $10
If a student were not studying economics, he could be doing one of the following: playing frisbee (which he values at $20), going out with his friends (which he values at $40), or going to the movies (which he values at $10). The OC of studying economics is therefore a) $40 b) $70 c) $50 d) $60
b) $70
If personal consumption is $100, investment is $25, government purchases total $25, imports equal $20, and exports equal $10, then GDP equals: a) 160 b) 140 c) 180 d) 150
b) 140
Calculate the GDP of Dinoland using the expenditures approach given the following data: personal consumption expenditures = $10 billion; gross private domestic investment = $5 billion; government spending = $3 billion; exports = $2 billion, imports = $1 billion. a) 21 billion b) 19 billion c) 18 billion d) 17 billion
b) 19 billion
Admission prices to Dollywood are $50 for a one-day ticket, $80 for a two-day ticket, and $100 for an annual pass. Based on these prices, the marginal cost of visiting Dollywood the second day is ____, the third day is ______, and the fourth day is _____. a) 30, 10, 10 b) 30, 20, 0 c) 40, 33.33, 25 d) 80, 100, 100
b) 30, 20, 0
This summer, a U.S. citizen has a paid internship at the South Korean carmaker Kia Motors at its offices located in Canada. The intern's work contributes to the GDP of which nation(s)? a) United States b) Canada c) South Korea d) Canada, South Korea, and the United States
b) Canada
An airline finds that its morning flights are half-empty, but the mid-afternoon flights are full. Which would be the MOST plausible statement for an economist to make?a) Nothing can be done because travelers are inflexible with their schedules. b) Cut the prices of early morning flights and raise the prices of afternoon flights. c) Nothing can be done to rectify the situation because of consumer sovereignty. d) Fewer flights should be scheduled in the afternoon to force travelers to take morning flights.
b) Cut the prices of early morning flights and raise the prices of afternoon flights.
If, in the past, you have always painted your own house but now you hire a painting contractor to do the work, what effect does this have on GDP? a) GDP is unaffected by this change b) GDP rises as a result of this change c) GDP falls as a result of this change d) GDP at first rises but then falls
b) GDP rises as a result of this change
Which of the following is a macroeconomic issue? a) Alex decides to spend his summer vacation at science camp b) South Park experiences an economic boom from increased tourism c) Kira's Dress Factory decides to hire more workers d) Jamal's Ice Cream Truck shuts down during the winter due to lake of customers
b) South Park experiences an economic boom from increased tourism
Which of the following is an example of gross private domestic investment? a) the sale of an existing home. b) a change in business inventories. c) highway construction by a government contractor d) the sale of an existing home
b) a change in business inventories.
infrastructure is a) typically better when provided by private companies b) a country's public capital c) not important in a market-based economy d) unimportant for economic growth because the government provides it
b) a country's public capital
The sale of sugar will contribute to GDP when the buyer is: a) Krispy Kreme doughnuts b) a mother who is baking cookies at home c) a Mexican food restaurant d) grocery store chain
b) a mother who is baking cookies at home
Which item is NOT an example of investment in human capital? a) apprenticeship b) acquisition of obsolete skills c) policy of universal education d) on-the-job training
b) acquisition of obsolete skills
which of these increases productivity? a) a young labor force b) an increase in skills in the labor force c) a large labor force d) a poorly educated labor force
b) an increase in skills in the labor force
Which of these is an example of an economic investment? a) trading a bond certificate b) building a new sales force training facility c) purchasing share of Google stock d) putting funds in a certificate of deposit
b) building a new sales force training facility
everything else the same, if investment expenditures rise by $300 billion and imports increase by $300 billion, then GDP a) increases by 600 billion b) does not change c) increases by 300 billion d) decreases by 600 billion
b) does not change
A person will decide not to attend a concert if the marginal cost of attending the concert: a) is the same as the cost of staying home b) exceeds the marginal benefit c) is less than the cost of attending a different concert d) is less than the marginal benefit
b) exceeds the marginal benefit
the opportunity costs of attending college do NOT include a) the forgone wages that could have been earned working b) food expenditures c) required study activity frees d) the costs of textbooks or eBooks
b) food expenditures
Which strategy is an example of increasing the capital-to-labor ratio? a) sending workers to training classes b) giving a construction crew more backhoes c) increasing the number of workers harvesting crops in a field d) replacing the roof on a factory building
b) giving a construction crew more backhoes
which of these is included in personal consumption expenditures? a) highway construction b) the purchase of a new TV by a household c) the construction of residential housing d) purchases of common stock by an investor
b) the purchase of a new TV by a household
Whispering Valley Furniture hires 5 employees working eight hours each to produce 80 rocking chairs. Rocky Gap Furniture hires 10 employees working eight hours each to produce 160 rocking chairs. Which company's workers are more productive? a) the two companies are not comparable because they don't have the same number of employees b) the two companies' workers are equally productive c) whispering valley furniture workers are more productive d) rocky gap furniture workers are more productive
b) the two companies' workers are equally productive
Sujata has a stopover in Iceland and can chose one of three tours: visit the thermal springs, hike the glaciers, or view the Northern Lights. If Sujata chooses the Northern Lights, her opportunity cost would be : a) zero as long as the northern lights was her top choice b) the value of visiting the thermal springs if that was her second choice after the northern lights c) the value of visiting the thermal springs if that was her last choice among the three tours. d) the combined value of visiting the thermal springs and the glaciers.
b) the value of visiting the thermal springs if that was her second choice after the northern lights
higher GDP per capita=
better life expectancy
Macroeconomics
broader issues in the economy such as inflation, unemployment, and national output of goods and services; the study of fluctuations in the overall economy with the goal of prescribing policies that minimize the harmful effects that fluctuations can cause (recovery or recession)
If an economy's GDP will double in 15 years, then it's growth rate must be about a 15% b 10% c 4.7% d 7%
c 4.7%
If a student were not studying economics, he could be doing one of the following: sleeping in (which he values at $5), playing cards with his friends (which he values at $10), or working (he would have earned an extra $8). The opportunity cost of studying economics is therefore a) $5. b) $8. c) $10. d) $23.
c) $10.
Say John was choosing between three alternatives: going to the beach, which he values at $80; washing his car, which he values at $60; or going out with a friend, which he values at $100. The costs of going out with a friend is: a) $20 b) $60 c) $80 d) $140
c) $80
say your parents gave you a used car valued at $8,000 as a gift for your birthday. Unfortunately, you were hoping to get a sportier model that sells for $12,000. The opportunity cost to you keeping the car that your parents gave you is: a) 20,000 b) 4,000 c) 8,000 d) 12,000 e) 0
c) 8,000 dollars
Given the form of a typical production function, which of these would have the greatest impact on the output of a country? a) N increases by 50% b) K increases by 50% c) A increases by 50% d) L increases by 50%
c) A increases by 50%
Which one of these would be included in GDP calculations? a) petroleum purchased by a refiner from the company that drilled it b) a windshield purchased by General Motors c) a hamburger purchased by a hungry restaurant patron d) nails purchased by a building contractor
c) a hamburger purchased by hungry restaurant patron
the opportunity cost of undertaking an activity is defined as the ___ activity a) monetary benefit of undertaking that b) cost forgone by not undertaking another c) benefit forgone by not undertaking the next best d) monetary cost of undertaking that
c) benefit forgone by not undertaking the next best
Which of these is NOT a source of increase in productivity? a) capital investment b) improvements in labor quality c) increases in population growth d) research and development
c) increases in population growth
human capital includes a) pension plans that enable early retirement b) labor c) the improvement of labor capabilities from training, education, and apprenticeship programs d) physical capital
c) the improvement of labor capabilities from training, education, and apprenticeship programs
Which of these services most likely would NOT be counted in GDP? a) you hire a real estate agent to sell a house you have owned for 10 years b) you pay a commission to the salesperson on the purchase of a used car c) you pay your neighbor's teenaged son to cut your grass while you are away on vacation d) you hire a painting company to paint your 10-year-old house
c) you pay your neighbor's teenaged son to cut your grass while you are away on vacation
Which activity is an example of a nonmarket transaction? a. employing a lawn service worker to trim your bushes. b. hiring a maid to clean your home. c. growing your own food in a vegetable garden d) hiring a nanny to take care of your children
c. growing your own food in a vegetable garden
Suppose you and your roommate have the following agreement when it comes to cleaning your apartment: each person washes her or his own dishes after each meal. The principle of trade you just learned tells you that it would be more efficient if: a) both of you wash your own dishes after each meal. b) neither of you wash the dishes after eating. c) each of you wash half of all the dirty dishes. d) one of you wash all the dishes while the other does a different chore.
d
Question: Which item would be included in the GDP accounts? a. personal time spent learning how to use accounting software b. personally rotating the tires on your neighbor's car C. caring for your aged grandmother at home d paying a $50 consultation fee over the phone with a psychic adviser
d paying a $50 consultation fee over the phone with a psychic adviser
Suppose that a store sells candy bars for $0.89 for one and $1.50 for two. The marginal cost of the second candy bar is: a) $0.75 b) $1.50 c) $0.89 d) $0.61
d) $0.61
Your friend gives you a widget valued at $100 as a gift. Unfortunately, you were hoping for a model that sells for $300. The OC to you keeping the widget is: a) 0 b) 300 c) 400 d) 100 e) 800
d) 100
Say someone gave you a used phone valued at $500 as a gift. Unfortunately, you were hoping for a model that sells for $800. The opportunity cost to you keeping the phone is: a) 800 b) 0 c) 300 d) 500 e) 1,300
d) 500
Which of the following scenarios would result in economic growth in the country of Everland? a) GDP and prices double b) GDP and population double, prices remain the same c) population doubles while GDP and prices remain the same d) GDP doubles while prices remain the same
d) GDP doubles while prices remain the same
If a country's population increases at a slower rate than the growth in its real GDP: a) average output per person has decreased b) the country's rate of inflation has decreased c) the standard of living in the country has decreased d) GDP per capita has increased
d) GDP per capita has increased
Which of these is NOT one of the reasons for the phenomenal growth of the U.S. economy over the past century? a) open immigration policies b) an increase in human capital c) high worker productivity d) a reduction in the capital-to-labor ratio
d) a reduction in the capital-to-labor ratio
If a consumer purchases a foreign-produced hair dryer at a department store, the value of the hair dryer is a) included in both consumer purchases and exports b) added to capital investment in equipment but then subtracted from consumer purchases c) hair dryer produced somewhere else d) added to imports but then subtracted as part of exports
d) added to imports but then subtracted as part of exports
Which of the following activities is counted as part of U.S. GDP? a) john purchases a counterfeit DVD b) joe watches a free video on YouTube c) jake takes a vacation at a Caribbean resort d) jeff stays in a hotel in Colorado while on a skiing trip
d) jeff stays in a hotel in Colorado while on a skiing trip
An increase in physical capital per worker will a) reduce the productivity of labor b) increase the standard of living only if coupled with an increase in other inputs c) lead to lower standards of living d) lead to more output per worker
d) lead to more output per worker
In the national income accounts, which of these is NOT classified as government spending? a) services provided by police officers b) services provided by U.S. senators c) purchases of military hardware d) payments to Social security recipients
d) payments to Social security recipients
Which transaction would NOT be included in the GDP calculation of a country? a) the value of an increase in unsold inventory of a company b) the price of a new office building c) salary of a solider in a country's army d) supplemental income paid by the government to a person with a disability
d) supplemental income paid by the government to a person with a disability
opportunity costs exist because: a) sellers are willing to give up their product without a price b) the opportunities to find ways to reduce costs c) buyers always have an opportunity to go to another seller d) using resources of one activity means that their use elsewhere must be given up
d) using resources of one activity means that their use elsewhere must be given up
The corner store has pizza, soup, or salad for lunch, and they all cost the same. You decide to have soup today, but if they were out of soup, you would have bought a salad. Your opportunity cost of the soup is: a) your enjoyment of the pizza and salad b) your enjoyment of the pizza c) your enjoyment of the salad d) your enjoyment of the pizza or salad
d) your enjoyment of the pizza or salad
Everything else, is the same, if investment expenditures rise by $300 billion and imports increase by $200 billion, the GDP
does not change
you are deciding whether to spend the evening at the movie theater, stay home watching a show, or doing your laundry. If you are willing to pay $50 to have someone else do your laundry, and value the movie theater at $20, what would be the opportunity cost of staying home watching the show? a) 20 b) 0 c) 70 d) 30 e) 50
e) 50 dollars
Chinas GDP per capita would have been higher if not for the deterioration in its environment T or F
false
Investment in structures, equipment, software, and net inventory is known as:
gross private domestic investment
Economics
location of resource, don't have enough resources to do what we want, studies how people allocate limited resources to unlimited needs
we ____ recessions in economy in order to _____
need; grow
economic problem
needs are unlimited, resources are limited, rare of finite
net marginal benefit principle
rational people think at the margin. rational people take action if the marginal benefit outweighs the costs
trade principle
specialization in trade makes all parties better off as long as the exchange is possible and those involved trade in a mutually beneficial manner. Countries should focus on producing what they have a comparative advantage
economics
studies how people allocate limited resources to unlimited needs
suppose you have a choice between studying one more hour for your history exam or studying one more hour for your psychology exam. Your decision on what to study should be based on: a) the additional benefits of studying for each class b) which class you like the most c) how much time you have already studied for each class d) your current average score in each class
the additional benefits of study for each class
opportunity cost principle
the opportunity cost of engaging in the activity is the value of the next best alternative you must sacrifice to engage in it
What is GDP
the total market value of all final goods and services produced in a country in a given year
Tyrone has three options on how to spend his Saturday afternoon: to out out with friends, watch a movie, or wash his car. Tyrone's opportunity cost of washing his car would be: a) the value of going out with friends b) the value of watching a movie c) the value of going out with friends AND watching a movie d) the value of going out with friends OR watching a movie
the value of going out with friends OR watching a movie
opportunity cost
the value of the next best thing
real GDP
using prices in a base year
Invisible hand principle
when markets are functioning efficiently, the actions of individuals guided by self interest and the pursuit of maximizing their own utility will lead to positive, better outcomes for society
