ECON2010 - Wei Liu MIDTERM

Refer to the accompanying figure. If this restaurant makes 75 salads in one hour, then what's the maximum number of pizzas it can make in the same hour? A. 20 B. 10 C. 30 D. 0

C. 30

Kenan's Barber Shop cut 3,000 heads of hair in 2019 and 3,100 in 202. The price of a haircut was $7 in 2019 and $8 in 2020. If 2019 is the base year, what was Kenan's contribution to nominal GDP in the year 2019? A. $21,000 B. $24,800 C. $21,700 D. $24,000

A. $21,000

Suppose the total expenditures for a typical household in 2018 equaled $2,000 per month, while the cost of purchasing exactly the same items in 2020 was $2,250. If 2018 is the base year, the CPI for 2020 equals A. 1.13 B. 1.00 C. 1.19 D. 0.89

A. 1.13

You are the Minister of Trade for a small island country with the above annual PPC: You are negotiating a trade agreement with a neighboring island with the above annual PPC: Both islands specialize exclusively in the product for which they have a comparative advantage. You have agreed to give 350 coconuts to the other island in exchange for 1,300 fish. After the trade, your island has a total of _________ coconuts and ________ fish. A. 150;1,300 B. 500;1,300 C. 500;1500 D. 150;2,800

A. 150;1,300

An "unemployment spell" is a period during which A. An individual is continuously unemployed. B. The unemployment rate exceeds 15%. C. The unemployment rate is less than 10%. D. An unemployed individual leaves the labor force and then returns.

A. An individual is continuously unemployed.

You have noticed that your next-door neighbor, Arya, always works in the garden, and her husband Suresh, always walks the dog. You conclude that if Suresh and Arya are efficient, then it must be the case that A. Arya does not have a comparative advantage in walking the dog. B. Suresh's opportunity cost for gardening is not constant. C. Suresh's opportunity cost of walking the dog is not lower than Arya's. D. Suresh does not have an absolute advantage in gardening.

A. Arya does not have a comparative advantage in walking the dog.

Inflation makes it difficult to distinguish relative price changes from changes in the general level of prices. Consequently, inflation ______ the efficiency of the market system. A. Decreases B. May either increase or decrease C. Does not change D. Increases

A. Decreases

Refer to the accompanying figure. If this restaurant goes from producing 20 to 25 pizzas per hour, then which of the following statements is true? A. It has to give up fewer than 12.5 salads. B. It has to give up exactly 12.5 salads. C. It has to give up exactly 25 salads. D. It has to give up more than 12.5 salads.

A. It has to give up fewer than 12.5 salads.

Refer to the accompanying figure. Suppose that the government require that resources be used efficiently. Which of the following would the government definitely not allow? A. Production at point D. B. Specialization in warhead production. C. Specialization in medical care production. D. Production at any point other than C.

A. Production at point D.

The downward slope of the Production Possibilities Curve illustrates the A. Scarcity Principle B. Cost-Benefit Principle C. Principle of Comparative Advantage D. Incentive Principle

A. Scarcity Principle

The value of output was $100 billion in Northland and $200 billion in Southland. The population of Northland was 50 million and the population of Southland was 30 million. There were 30 million employed workers in Northland and 20 million employed workers in Southland. Average labor productivity was higher in ______ and the standard of living was ______. A. Southland; higher in Southland B. Northland; higher in Northland C. Southland; the same in both countries D. Northland; the same in both countries

A. Southland; higher in Southland

GDP is a measure of an economy's: A. Total output B. Domestic productivity C. Level of unemployment D. Domestic price level

A. Total output

Macroeconomists are concerned with each of the following issues except A. Why do the prices of computers increase more slowly than the price of gasoline? B. Why does inflation vary across countries? C. What are the costs of inflation? D. Why does inflation vary over time?

A. Why do the prices of computers increase more slowly than the price of gasoline?

Refer to the accompanying table. Based on their comparative advantages, Elena should specialize in ______, and Corey should specialize in ______. Name:Made per hour/Delivered per hour Corey:12/6 Elena:10/15 A. delivering pizza; making pizza B. neither making pizza nor delivering pizza; both making pizza and delivering pizza C. both making pizza and delivering pizza; neither making pizza nor delivering pizza D. making pizza; delivering pizza

A. delivering pizza; making pizza

Output per worker must be ______ output per person. A. greater than or equal to B. no more than half the size of C. equal to D. less than or equal to

A. greater than or equal to

Unexpectedly high inflation ______ borrowers and ______ lenders. A. helps; hurts B. hurts; hurts C. hurts; helps D. helps; helps

A. helps; hurts

A nation's standard of living, as measured by real GDP per person, increases A. if either average labor productivity and/or the share of the population employed increase B. only if both average labor productivity and the share of the population employed increase C. only if the share of population employed increase D. only if average labor productivity increases

A. if either average labor productivity and/or the share of the population employed increase

In Econland population and average labor productivity are constant. If a larger proportion of the population becomes employed workers, then total output will ______ and output per person will ______. A. increase; increase B. decrease; remain constant C. decrease; decrease D. remain constant; remain constant

A. increase; increase

If living standards in a country, as measured by output per person, increase, then total output must have: A. increased more rapidly than population increased. B. increased at the same rate that the population increased. C. decreased more rapidly than population decreased. D. increased more slowly than population increased.

A. increased more rapidly than population increased.

In Econland, population increased from 1 million to 1.1 million, the number of employed workers increased from 500,000 to 600,000, but average labor productivity decreased from $22,000 per worker per year to $19,000 per worker per year. Total output in Econland ______ and the average standard of living ______. A. increased; increased B. decreased; increased C. increased; decreased D. decreased; decreased

A. increased; increased

A college graduate in 1972 found a job paying $7,200. The CPI was 0.418 in 1972. A college graduate in 2016 found a job paying $35,000. The CPI was 2.40 in 2016. The 1972 graduate's job paid ______ in nominal terms and ______ in real terms than the 2016 graduate's job. A. less; more B. less; less C. more; more D. more; less

A. less; more

"Social Security should be privatized to get the government out of the retirement-financing business," is an example of ______ statement about ______ policy. A. normative; structural B. positive; fiscal C. normative; monetary D. positive; structural

A. normative; structural

Product improvements make it difficult for the statisticians who construct the CPI to distinguish between ______ changes and ______ changes. A. price; quality B. quantity; quality C. income; price D. quantity; price

A. price; quality

In a two-person, two-good economy, the gains to specialization will be larger when A. there are large differences between the individuals in their opportunity costs of producing the two goods. B. one person has an absolute advantage in both goods. C. there are small differences between the individuals in their opportunity costs of producing the two goods. D. neither person has an absolute advantage

A. there are large differences between the individuals in their opportunity costs of producing the two goods.

If workers and employers agree to a three-year wage contract under the expectation of 4.3 percent inflation, and inflation turns out to be 2.3 percent, then A. workers gain and employers lose B. workers gain and employers gain C. workers lose and employers lose D. workers lose and employers gain

A. workers gain and employers lose

In Econland total output is $8 billion, population equals 500,000 people, and of these, 400,000 are employed workers. Output per person in Econland equals ______ and average labor productivity equals______. A. $20,000;$16,000 B. $16,000;$20,000 C. $20,000;$20,000 D. $16,000;$16,000

B. $16,000;$20,000

In 1979, Merna Findley purchased a 1950 painting by Mark Rothko for $73 million. She also paid a 1 percent commission to the auction house that sold the painting. What was the contributions of these transactions to GDP in the year 1979? A. $73.73 million B. $730,000 C. $0 D. $7.3 million

B. $730,000

Smith and Jones comprise a two-person economy. Their hourly rates of production are shown in the accompanying table: Name:Calc per hour/Comp per hour Smith:100/10 Jones:120/6 The opportunity cost of making a calculator for Smith is ______ and for Jones it is ______. A. 0.6 computers; 1.2 computers B. 0.10 computers; 0.05 computers C. 10 computers; 20 computers D. 1 computer; 0.5 computers

B. 0.10 computers; 0.05 computers

The CPI in year one equaled 1.45. The CPI in year two equaled 1.51. The rate of inflation between years one and two was ______ percent. A. 6.0 B. 4.1 C. 4.5 D. 4.0

B. 4.1 final - intial/initial

The introduction of an overnight delivery service that guarantees the delivery of packages anywhere in the world overnight would increase A. The unemployment rate B. Average labor productivity C. The share of population employed D. The labor force participation rate

B. Average labor productivity

The value of intermediate goods is excluded from the measurement of GDP in order to A. Index economic activity B. Avoid double counting C. Adjust for inflation D. Measures GDP in constant prices

B. Avoid double counting

For a given nominal interest rate, an unexpectedly high inflation rate ______ the real interest rate. A. Increases B. Decreases C. May either increase or decrease D. Has no impact on

B. Decreases

Holding other factors constant, if the average amount of training the typical worker in the economy receives increases, then the real wages of workers will ______ and employment of workers will ______ A. Decrease / increase B. Increase / increase C. Increase / decrease D: not change / increase

B. Increase / increase

Which of the following is consistent with a political and legal framework that discourages economic growth? A. A speedy approval process for new businesses B. The allocation of bank credit by the government rather than by markets C. Taxation and regulation that are not very burdensome D. Agricultural prices that are allowed to vary according to market conditions

B. The allocation of bank credit by the government rather than by markets

Which of the following statements is positive? A. Higher taxes are needed to support education. B. When the Federal Reserve increases the money supply, interest rates decrease. C. Large budget deficits should be avoided. D. A tax cut that benefits low-income households is acceptable.

B. When the Federal Reserve increases the money supply, interest rates decrease.

The implementation of new production methods by managers, such as the just-in-time inventory system, increases A. the share of the population employed B. average labor productivity C. the unemployment rate D. the quantity of human capital

B. average labor productivity

According to the accompanying table, Julia has the absolute advantage in making (Name:Timetomakeapie/timetomakeacake) Kate: 60 minutes / 80 minutes Julia: 50 minutes / 60 minutes A. cakes. B. both pies and cakes. C. pies. D. neither pies nor cakes.

B. both pies and cakes. Julia is faster than Kate at making pies and cakes. Therefore, she has the absolute advantage

If the price of motel rooms increases by 10 percent while the prices of other goods and services increase by 5 percent on average, the relative price of motel rooms has: A. remained constant B. increased C. decreased by 5% D. decreased by 10%

B. increased

If the total expenditures of a typical family equaled $35,000 per year in 2018 and the exact same basket of goods and services cost $40,000 in the year 2020, the family's cost of living: A. decreased by 12.5% B. increased by 14% C. decreased by 14% D. increased by 12.5%

B. increased by 14% final - initial/ initial

The price of a gallon of gasoline at the pump increased by 10% at the same time that inflation rate was 15%. The nominal price of gasoline ______, and the real price of gasoline ______. A. decreased; increased B. increased; decreased C. increased; also increased D. increased; did not change

B. increased; decreased

A government policy to build bridges and dams is an example of a policy to promote economic growth by A. improving the social and legal environment B. increasing physical capital C. increasing human capital D. improving technology

B. increasing physical capital

Involuntary part-time workers are A. considered out of the labor force B. not counted as unemployed C. short-term unemployed D. chronically unemployed

B. not counted as unemployed

Because of diminishing returns to capital, there is a limit to the increases in average labor productivity that can be gained from additional or improved A. imports B. physical capital C. entrepreneurship D. availability of land and natural resources

B. physical capital

Depression and lost self-esteem are examples of the ______ costs of unemployment, while the lost income and tax revenue are examples of the ______ costs of unemployment. A. economic; psychological B. psychological; economic C. economic; social D. social; psychological

B. psychological; economic

You are the Minister of Trade for a small island country with the above annual PPC: You are negotiating a trade agreement with a neighboring island with the above annual PPC: If the other island's delegate offers to give you 2 fish for every 1 coconut you give them, you will: A. accept their offer because you do not have the comparative advantage in fish. B. refuse their offer because the opportunity cost to you of a coconut is more than 2 fish. C. accept their offer because you do not have an absolute advantage in fish. D. refuse their offer because the opportunity cost to you of a coconut is less than 2 fish.

B. refuse their offer because the opportunity cost to you of a coconut is more than 2 fish.

The extra costs incurred to avoid holding cash when there is inflation are called the: A. consumer price index costs B. shoe leather costs C. external costs D. average costs of inflation

B. shoe leather costs

Assume an economy produces only hamburgers and hot dogs and the base year is 2019. Burgers: 2019 - 2,000/$2 Burgers: 2020 - 3,000/$3 Hot Dogs: 2019 - 3,000/$1 Hot Dogs: 2020 - 4,000/$1.50 Given the data in the table above, what is the value of real GDP in 2020? A. $10,500 B. $7,000 C. $10,000 D. $5,000

C. $10,000

Real GDP per person in both Alpha and Omega is equal to $2,000. Over the next 100 years, real GDP grows at a 1.5% annual rate in Alpha and at a 2.5% annual rate in Omega. After 100 years, real GDP per person in Alpha is _______ smaller than real GDP per person in Omega. A. $2,000 B. $8,864 C. $14,763 D. $5,410

C. $14,763

The CPI in year eleven equaled 1.26. The CPI in year twelve equaled 1.49. The rate of inflation between years eleven and twelve was ______ percent. A. 23.0 B. 15.4 C. 18.3 D. 2.6

C. 18.3

Refer to the accompanying table. Elena's opportunity cost of delivering a pizza is making Name: Pizzas Made per hour/Pizzas delivered per hour Corey : 12/6 Elena: 10/15 A. 3/2 of a pizza. B. 12 pizzas C. 2/3 of a pizza. D. 10 pizzas

C. 2/3 of a pizza.

Data for an economy show that the unemployment rate is 6 percent, the participation rate is 60% , and 200 million people 16 years or older are not in the labor force. How many people are in the working-age population in this economy? A. 333 million B. 800 million C. 500 million D. 1.20 billion

C. 500 million Since the participation rate is 60%, 40% are not participating. So 200 million people are not participating represent 40% --> .4x = 200,000,000 x= 200,000,000/.4 x= 500,000,000

Which of the following would increase the investment component of U.S. GDP? A. You purchase a new washing machine produced in France. B. A laundromat in Mexico purchases a new washing machine produced in the U.S. C. A laundromat in Seattle purchases a new washing machine produced in the U..S. D. You purchase a new washing machine produced in the U.S.

C. A laundromat in Seattle purchases a new washing machine produced in the U..S.

Who from among the following would be counted as unemployed? A. A person who is willing to work but has not looked for a job in two months. B. A person with a part-time job who wants and is looking for a full-time job. C. A person who is willing to work and has looked for a job in the last week. D. All of these people would be counted as unemployed.

C. A person who is willing to work and has looked for a job in the last week.

All of the following statements are correct except A. There are unemployed people even during expansions. B. A trade surplus exists when a country exports more than it imports. C. Economies grow steadily over time. D. Unemployment increases during recessions.

C. Economies grow steadily over time.

Government purchases include all of the following except: A. the purchase of new military hardware by the U.S. Army B. the construction of a new courthouse built by a county government C. Social Security benefits paid by the federal government D. the salary paid to an elementary school teacher employed by a local public school district

C. Social Security benefits paid by the federal government

If Ana devotes all her time to making fudge, she can make 3 pounds of fudge an hour, and if she devotes all her time to making toffee, she can make 2 pounds of toffee an hour. If Leo devotes all his time to making fudge, he can make 4 pounds of fudge an hour, and if he devotes all his time to making toffee, he can make 5 pounds of toffee an hour. Can they produce 2 pounds of fudge and 4.5 pounds of toffee each hour? A. Yes, this point is both attainable and efficient. B. No, this point is not attainable. C. Yes, this point is attainable, but inefficient. D. No, this point is not attainable and inefficient.

C. Yes, this point is attainable, but inefficient.

If average labor productivity decreases while population and the number of employed workers remain constant, then output per person A. increases B. may increase or decrease C. decreases D. remains constant

C. decreases

If a country is producing at point where an increase in the production of one good requires a reduction in the production of another good, then it must be producing at an: A. unattainable point B. inefficient point C. efficient point D. undesirable point

C. efficient point

A government is running a budget deficit if A. government revenue exceeds government spending. B. exports exceed imports. C. government revenue is less than government spending. D. imports exceed exports.

C. government revenue is less than government spending.

Two methods used to adjust nominal values for inflation are: A. substituting and complimenting B. aggregating and disaggregating C. indexing and deflating D. real and nominal

C. indexing and deflating

Refer to the accompanying figure. The opportunity cost of increasing medical care from 200 to 400 units is ______ the opportunity cost of increasing medical care from 400 to 600 units. A. greater than B. exactly the same as C. less than D. twice as much as

C. less than

Capital goods are A. excluded from GDP B. the end products of production C. long-lived goods used for producing other goods and services D. publicly provided

C. long-lived goods used for producing other goods and services

"The Federal Reserve should raise interest rates in order to keep inflation at an acceptably low level" is a ______ statement about _______ policy. A. positive; fiscal B. positive; monetary C. normative; monetary D. normative; fiscal

C. normative; monetary

Two types of bias that tend to cause the CPI to overstate the "true" rate of inflation are the ______ bias and the ______ bias. A. price; quantity B. quality adjustment; price adjustment C. substitution; quality adjustment D. aggregation; price

C. substitution; quality adjustment

If Country A and Country B have the same population size, then the standard of living in these two countries can still be different depending on A. their respective political systems. B. their respective inflation rates. C. the relative sizes of total outputs. D. their relative geographic size.

C. the relative sizes of total outputs.

Suppose a jar of orange marmalade that is ultimately sold to a customer at The Corner Store is produced by the following production process: (Name: revenue/Cost of purchased inputs) Citrus Growers: $0.75/$0 Florida Jam Co.: $2/$0.75 The Corner Store: $2.50/$2 What is the value added of The Corner Store? A. $1.75 B. $2.50 C. $2.00 D. $0.50

D. $0.50

Suppose a jar of orange marmalade that is ultimately sold to a customer at The Corner Store is produced by the following production process: (Name: revenue/Cost of purchased inputs) Citrus Growers: $0.80/$0 Florida Jam: $2.25/$0.80 The Corner Store: $3/$2.25 What is the value added by Florida Jam Company? A. $0.80 B. $2.25 C. $2.20 D. $1.45

D. $1.45

If Bountiful Orchard grows $125,000 worth of peaches, sells $45,000 worth of peaches to consumers and uses to rest to make jam that is sold to consumers for $100,000, Bountiful Orchard's contribution to GDP is: A. $45,000 B. $225,000 C. $125,000 D. $145,000

D. $145,000 $100,000 + $45,000 = $145,000

Suppose that the total production of an economy consists of 4 oranges and 10 candy bars, each orange sells for $0.25, and each candy bar sells for $0.50. What is the market value of production in this economy? A. $5.00 B. $0.75 C. $1.00 D. $6.00

D. $6.00

The following table provides data for an economy in a certain year: Consumption exp. - 1,000 Imports - 600 Gov purchase g&s - 700 Construction new homes - 500 Sales of existing homes - 600 Exports - 500 Gov payment to retirees - 200 Household purchases goods - 300 Beginning of year inv - 500 End of year inv - 600 Business fixed investment - 300 Given the data, how much did households spend on nondurables and services? A. 1,300 B. 300 C. 1,000 D. $700

D. $700

The population of Alpha totals one million people, 40 percent of whom are employed. Average output per worker in Alpha is $20,000. Real GDP per person in Alpha totals: A. $12,000 B. $50,000 C. $20,000 D. $8,000

D. $8,000

Data for an economy shows that the unemployment rate is 6%, the participation rate 60 percent, and 200 million people 16 years or older are not in the labor force. How many people are unemployed this economy? A. 43.2 million B. 28.8 million C. 12.0 million D. 18.0 million

D. 18.0 million Dividing the number of unemployed people by the total number in labor force then multiplying by 100

Suppose that average labor productivity in Country A is $15,000, and that Countries A and E have the same real GDP per capita. Based on the information in the table, what must be the average labor productivity in Country E? Country: population/share of pop employed A: 100/60 B: 150/55 C: 75/50 D: 250/45 E: 95/40 A. 3,250 B. 1,250 C. 10,000 D. 22,500

D. 22,500

If real GDP per person were equal to $2,000 in 1900 and grew at 1 percent annual rate, what would be the value of real GDP per person 100 years later? A. 2,100 B. 20,000 C. 4,000 D. 5,410

D. 5,410 2,000 x (1+0.01)^100

Changes in business inventories are A. Excluded from GDP. B. Classified to government purchases. C. Classified as consumption expenditures. D. Classified as investment expenditures

D. Classified as investment expenditures

The value of output was $1,000 billion in Northland and $2,000 billion in Southland. The population of Northland was 50 million and the population of Southland was 120 million. There were 30 million employed workers in Northland and 75 million employed workers in Southland. Average labor productivity was higher in _________ and the standard of living was _______. A. Southland; the same in both countries B. Southland; higher in Southland C. Northland; the same in both countries D. Northland; higher in Northland

D. Northland; higher in Northland

From an economic perspective, the best response to increased wage inequality is to A. Make skill-biased technological change illegal B. Stop all international trade C. Block future technological change D. Provide transition aid to disadvantaged workers

D. Provide transition aid to disadvantaged workers

The government purchases component of GDP includes A. Transfer payments B. Interest payments on government debt. C. Payments made to social security recipients. D. Purchases of final goods and services.

D. Purchases of final goods and services

Real GDP per person in Northland is $30,000, while real GDP in Southland is $10,000. However, northlands real GDP per person is growing at 1% per year, and south lands real GDP per person is growing at 3% per year. If these growth rates persist indefinitely, then A. Northlands real gdp per person will decline until it equals southlands B. Southlands real gdp per person will always be exactly 2 percent less than northlands. C. Northlands real gdp per person will always be put between 1 and 2 percent less than northlands D. Southlands real gdp per person will eventually be greater than northlands

D. Southlands real gdp per person will eventually be greater than northland

The price of a gallon of gasoline at the pump increased by 10 percent at the same time that the inflation rate was 5 percent. The nominal price of gasoline _____, and the real price of gasoline _____. A. increased; decreased B. decreased; increased C. increased; did not change D. decreased; decreased

D. decreased; decreased

If total output increases from $1 trillion to $2 trillion as population increases from 100 million to 250 million, then output per person: A. increases, but by less than 100 percent. B. doubles. C. remains constant. D. decreases.

D. decreases.

Government purchases include spending by federal, state and local governments on A. capital goods, residential housing, and changes in inventories B. stocks, bonds, and other financial instruments C. consumer durables, non durables and services D. final goods and services

D. final goods and services

Suppose Karl divides his time between making birdhouses and growing artichokes. Karl's friend recently gave Karl some new woodworking tools that greatly reduced the amount of time it takes Karl to make each birdhouse, but the new tools had no impact on the amount of time it takes Karl to grow artichokes. Thus, the new tools _____ Karl's opportunity cost of growing artichokes. A. decreased B. halved C. had no effect on D. increased

D. increased

If average labor productivity increases while population and the number of employed workers remain constant, then output per person A. may increase or decrease B. decreases C. remains constant D. increases

D. increases

If total output increases from $100 billion to $200 billion as population increases from 100 million to 150 million, then output per person: A. remains constant B. decreases C. doubles D. increases, but by less than 100 percent

D. increases, but by less than 100 percent

Points that lie below the Production Possibilities Curve are inefficient because A. producing more of one good means producing less of the other. B. too many goods are being produced. C. producers farce scarcity. D. more of one good could be produced without producing less of the other.

D. more of one good could be produced without producing less of the other.

"Any tax cut to increase demand for output should favor lower-income people" is a ______ statement about ______ policy. A. positive; fiscal B. normative; monetary C. positive; monetary D. normative; fiscal

D. normative; fiscal

If Country A and Country B have the same total output, then the standard of living in these two countries can be different depending on: A. their respective political systems. B. their respective geographic size. C. their respective inflation rates. D. population size.

D. population size.

When economists use market values to aggregate output, they sum the A. quantity of items produced B. inputs of each item produced C. number of items produced D. price times the quantity of each item produced

D. price times the quantity of each item produced

Capital income includes A. capital gains from stock sales B. earnings of the self-employed C. wages and salaries D. profits, rent and interest

D. profits, rent and interest

Refer to the accompanying figure. If this economy were currently operating at point D, the in order to make more movies A. no productive resources would need to switch from making milk to movies because point D is already efficient B. no productive resources would need to switch from making milk to movies because each resource should continue to be used according to its comparative advantage. C. the first productive resources to switch to making movies should be those with the lowest opportunity cost of making milk D. the first productive resources to switch to making movies should be those with the highest opportunity cost of making milk.

D. the first productive resources to switch to making movies should be those with the highest opportunity cost of making milk.