Homework Questions (1-6)

Suppose your grandfather earned a salary of $12,000 in 1964. If the CPI is 31 in 1964 and 219 in 2010, then the value of your grandfather's salary in 2010 dollars is approximately A) $84,775. B) $63,830. C) $37,200. D) $26,280.

$84,775.

Suppose the working-age population of a fictional economy falls into the following categories: 90 are retired or homemakers; 60 have full-time employment; 20 have part-time employment; 20 do not have employment, but are actively looking for employment; and 10 would like employment but do not have employment and are not actively looking for employment. The official unemployment rate as calculated by the U.S. Bureau of Labor would equal: A) (20/60) × 100. B) (20/80) × 100. C) (30/80) × 100. D) (20/100) × 100.

(20/100) × 100.

A figure shows a point at (20, 100) and a second point at (40, 75). The slope of the line shown in the figure is: A) -1 1/3 B) -1 2/3 C) -1.25 D) -0.80

-1.25

The CPI in 1931 equaled 0.15. The CPI in 1932 equaled 0.14. The rate of inflation between 1931 and 1932 was ____ percent. A) -7.1 B) -6.6 C) 1.4 D) 6.6

-6.6

On January 1, 2004, Anna invested $5,000 at 5% interest for one year. The CPI on January 1, 2004 stood at 1.60. On January 1, 2005, the CPI was 1.68. The real rate of interest earned by Anna was ____ percent. A) -5 B) 0 C) 5 D) 8

0

The CPI is a measure of the: A) Real wage. B) Price of a specific good or service. C) Rate of inflation. D) Average level of prices relative to prices in the base year.

Average level of prices relative to prices in the base year.

To obtain a given real rate of return, lenders must charge a ____ nominal interest rate when the inflation rate is high. A) Real B) High C) Low D) Zero

High

A CPI that equals 1.34 in 2005 (when 2000 is the base year) means that: A) Prices in 2005 are 34 percent higher than in 2004. B) The CPI equals $1.34 in 2005. C) The inflation rate in 2005 is 134 percent. D) The average level of prices is 34 percent higher in 2005 than in the base year.

The average level of prices is 34 percent higher in 2005 than in the base year.

Assume both the demand and the supply of beef decrease. Which of the following outcomes is certain to occur? A) The equilibrium price of beef will rise. B) The equilibrium quantity of beef will rise. C) The equilibrium price of beef will fall. D) The equilibrium quantity of beef will fall.

The equilibrium quantity of beef will fall.

If you eat at a sushi restaurant that charges $20 for its all you can eat sushi special, then the marginal cost of your 10th piece of sushi is: A) $0 B) $2 C) $200 D) $2,000

$0

Year Guns Produced Price of Guns Butter Produced Price of Butter 2005 80 $5 40 $4 2011 90 $6 60 $10 Consider the following data for Tyrovia, a country that produces only two products: guns and butter. Refer to Table 3. Nominal GDP for Tyrovia in 2011 equals: A) $1,140. B) $880. C) $690. D) $560.

$1,140.

Consumption Expenditures $800 Investment Expenditures $200 Government Purchases $300 Exports $100 Imports $200 Wages $800 Refer to Table 2. Consider the data above (in billions of dollars) for an economy: Gross domestic product (in billions of dollars) for this economy equals A) $2,200. B) $1,600. C) $1,400. D) $1,200.

$1,200.

IBM employs Pam to assemble personal computers. Pam can assemble 1 computer if she works 1 hour, 4 computers in 2 hours, 8 computers in 3 hours, 10 computers in 4 hours, and 11 computers in 5 hours. Each computer consists of a motherboard that costs $200, a hard drive that costs $100, a case that costs $20, a monitor that costs $200, a keyboard at $60, and a mouse that costs $20. The cost of employing Pam is $40 per hour. What is the marginal cost of producing the computers Pam assembles during her 4th hour of work? A) $1,200 B) $1,240 C) $2,400 D) $2,440.

$1,240

Hours Open Total Revenue (Dollars) 1 $50 2 $75 3 $95 4 $110 5 $120 6 $125 Lydia runs a small nail salon in the town of New Hope. She is debating whether she should extend her hours of operation. Lydia figures that her sales revenue will depend on the number of hours the nail salon is open as shown in the table above. She would have to hire a worker for those hours at a wage rate of $10 per hour. What is Lydia's marginal cost if she decides to stay open for two hours instead of one hour? A) $10 B) $20 C) $25 D) $40

$10

Production Prices Year 1 Year 2 Year 3 Year 1 Year 2 Year 3 Good X 60 80 100 $1.00 $1.00 $1.40 Good Y 100 110 130 $0.80 $0.90 $1.00 Refer to the table. Assume that this economy produces only two goods Good X and Good Y. The value for this economy's nominal GDP in year 1: A) Is $140 B) Is $160 C) Is $180 D) Is $200

$140

Production Prices Year 1 Year 2 Year 3 Year 1 Year 2 Year 3 Good X 60 80 100 $1.00 $1.00 $1.40 Good Y 100 110 130 $0.80 $0.90 $1.00 Refer to the table. Assume that this economy produces only two goods Good X and Good Y. If year 1 is the base year, the value for this economy's real GDP in year 2 is: A) $168 B) $179 C) $202 D) $214

$168

Production Prices Year 1 Year 2 Year 3 Year 1 Year 2 Year 3 Good X 60 80 100 $1.00 $1.00 $1.40 Good Y 100 110 130 $0.80 $0.90 $1.00 Refer to the table. Assume that this economy produces only two goods Good X and Good Y. The value for this economy's nominal GDP in year 2 is: A) $168 B) $179 C) 202 D) $214

$179

IBM employs Pam to assemble personal computers. Pam can assemble 1 computer if she works 1 hour, 4 computers in 2 hours, 8 computers in 3 hours, 10 computers in 4 hours, and 11 computers in 5 hours. Each computer consists of a motherboard that costs $200, a hard drive that costs $100, a case that costs $20, a monitor that costs $200, a keyboard at $60, and a mouse that costs $20. The cost of employing Pam is $40 per hour. What is the marginal cost of producing the computers Pam assembles during her 3rd hour of work? A) $1,200 B) $1,240 C) $2,400 D) $2,440.

$2,440.

In Econoland in 2000, people with incomes between $20,000 and $30,000 must pay 12% of their income in taxes and people with incomes between $30,001 and $40,000 must pay 15%. In 2000, the CPI in Econoland equals 1.20 and increases to 1.26 in 2001. If the government of Econoland wants to keep households with a given real income from being pushed up into a higher tax bracket by inflation, the $20,000 to $30,000 bracket will be changed to: A) $15,873 to $23,810 B) $21,000 to $31,500 C) $24,000 to $37,800 D) $25,200 to $37,800

$21,000 to $31,500

Bob's Barber Shop cut 3,000 heads of hair in the year 2005 and 3,100 in the year 2006. The price of a hair cut was $7 in 2005 and $8 in 2006. If the year 2005 is the base year, what was Bob's contribution to real GDP in the year 2006? A) $21,000 B) $21,700 C) $24,000 D) $24,800

$21,700

Hours Open Total Revenue (Dollars) 1 $50 2 $75 3 $95 4 $110 5 $120 6 $125 Lydia runs a small nail salon in the town of New Hope. She is debating whether she should extend her hours of operation. Lydia figures that her sales revenue will depend on the number of hours the nail salon is open as shown in the table above. She would have to hire a worker for those hours at a wage rate of $10 per hour. What is Lydia's marginal benefit if she decides to stay open for two hours instead of one hour? A) $25 B) $50 C) $75 D) $125

$25

Production Prices Year 1 Year 2 Year 3 Year 1 Year 2 Year 3 Good X 60 80 100 $1.00 $1.00 $1.40 Good Y 100 110 130 $0.80 $0.90 $1.00 Refer to the table. Assume that this economy produces only two goods Good X and Good Y. The value for this economy's nominal GDP in year 3 is: A) $204 B) $222 C) $250 D) $270

$270

You paid $35 for a ticket (which is non-refundable) to see JAM, a local rock band, in concert on Saturday. (Assume that you would not have been willing to pay any more than $35 for this concert). Your boss called and she is looking for someone to cover a shift on Saturday at the same time as your concert. You will have to work 4 hours and she will pay you time and a half, which is $9/hr. What is the opportunity cost, if you go to work on Saturday? A) $1 B) $9 C) $35 D) $36

$35

You paid $35 for a ticket (which is non-refundable) to see JAM, a local rock band, in concert on Saturday. (Assume that you would not have been willing to pay any more than $35 for this concert). Your boss called and she is looking for someone to cover a shift on Saturday at the same time as your concert. You will have to work 4 hours and she will pay you time and a half, which is $9/hr. What is the opportunity cost of going to the concert? A) $1 B) $9 C) $35 D) $36

$36

Units of Activity Total Cost Total Benefit 1 $3 $10 2 $4 $14 3 $6 $16 4 $10 $20 5 $15 $24 6 $21 $28 7 $28 $29 The marginal benefit of the 6th unit of activity is: A) $1 B) $2 C) $4 D) $10

$4

Units of Activity Total Cost Total Benefit 1 $3 $10 2 $4 $14 3 $6 $16 4 $10 $20 5 $15 $24 6 $21 $28 7 $28 $29 The marginal cost of the 4th unit of activity is: A) $1 B) $2 C) $3 D) $4

$4

If the marginal costs of 1, 2, and 3 hours of talking on the phone are $50, $75, and $105, then the total costs are: A) $50, $150, $315 B) $50, $41.67, $115 C) $50, $125, $230 D) $50, $175, $405

$50, $125, $230

In 2011, Kendall Ford, an automobile dealership, spent $20,000 on a new car lift for its repair shop, $2,000 on a new copy machine for its sales division, and $600,000 on Ford Motor company stock. Unsold cars and trucks were valued at $400,000 on January 1, 2011 and unsold cars and trucks were valued at $900,000 on December 31, 2011. What is Kendall Ford's total investment spending in 2011? A) $22,000 B) $322,000 C) $522,000 D) $1,022,000

$522,000

Year Guns Produced Price of Guns Butter Produced Price of Butter 2005 80 $5 40 $4 2011 90 $6 60 $10 Consider the following data for Tyrovia, a country that produces only two products: guns and butter. Refer to Table 3. Real GDP for Tyrovia for 2011 using 2005 as the base year equals: A) $1,140. B) $880. C) $690. D) $560.

$690.

Suppose that the total production of an economy consists of 10 oranges and 5 candy bars, each orange sells for $0.20, and each candy bar sells for $1.00. What is the market value of production in this economy? A) .$1.20 B) $2.00 C) $5.00 D) $7.00

$7.00

Product Quantity Price Sweatshirts 50 $35.00 Dental Exams 40 $75.00 Coffee Drinks 1,000 $4.00 Coffee Beans 2,000 $0.50 Refer to Table 1. Suppose that a simple economy produces only four goods and services: sweatshirts, dental examinations, coffee drinks, and coffee beans. Assume all of the coffee beans are used in the production of the coffee drinks. Using the information in the above table, nominal GDP for this simple economy equals A) 3,090 units. B) $7,250. C) $8,750. D) $9,750.

$8,750.

Based on the following information, that the participation rate in the U.S. is 80%, the number of employed workers is 720,000 people, and the working age population is 1,000,000, what is the unemployment rate in the U.S.? A) 7.2% B) 8.0% C) 10.0% D) 28.0%

10.0%

Suppose the supply of a good is given by the equation, P = 150 + (QS/5) and the demand for the good is given by the equation, P = 1350 - QD. What is the equilibrium quantity? A) 500 B) 800 C) 1000 D) 1200

1000

# of Workers TVs Produced Marginal Product Value of MP 0 0 - - 1 35 35 $35,000 2 68 33 $33,000 3 99 31 $31,000 4 128 29 $29,000 5 155 27 $27,000 Refer to the table, which provides information about production at the XYZ-TV Company. How many workers will the XYZ-TV Company hire if the going wage for TV production workers is $32,000? A) 1 B) 2 C) 3 D) 4

2

The Coffee Nook, a small café near campus, sells cappuccinos for $2.50 and Russian tea cakes for $1.00 each. What is the opportunity cost of buying a cappuccino? A) 2 1/2 Russian tea cakes. B) 2/5 of a Russian tea cake. C) $2.50 D) $1.00

2 1/2 Russian tea cakes.

The Coffee Nook, a small café near campus, sells cappuccinos for $2.50 and Russian tea cakes for $1.00 each. What is the opportunity cost of buying a Russian tea cake? A) 2 1/2 Russian tea cakes. B) 2/5 of a Russian tea cake. C) 2 1/2 cappuccinos. D) 2/5 of a cappuccino

2/5 of a cappuccino

The demand for labor in a certain industry is ND = 300 - w, where ND is the number of workers employers want to hire and w is the real wage measured in dollars per day. The supply of labor in the same industry is NS = 200 + w, where NS is the number of people willing to work. If the minimum wage is set at $60 per day, how many workers will be unemployed? A) 10 B) 20 C) 30 D) 40

20

# of Workers TVs Produced Marginal Product Value of MP 0 0 - - 1 35 35 $35,000 2 68 33 $33,000 3 99 31 $31,000 4 128 29 $29,000 5 155 27 $27,000 Refer to the table, which provides information about production at the XYZ-TV Company. How many workers will the XYZ-TV Company hire if the going wage for TV production workers is $30,000? A) 1 B) 2 C) 3 D) 4

3

Imagine that you borrow $1,000 for one year and at the end of the year you repay the $1,000 plus $100 of interest. If the inflation rate was 7%, what was the real interest rate you paid? Select one: A) 17 percent B) 10 percent C) 7 percent D) 3 percent

3 percent

X Variable Y Variable 100 50 200 125 300 200 If these data were graphed, the slope of the line would be: A) 1/2 B) 4/3 C) 2/3 D) 3/4

3/4

Suppose the supply of a good is given by the equation, P = 150 + (QS/5) and the demand for the good is given by the equation, P = 1350 - QD. What is the equilibrium price? A) 250 B) 350 C) 450 D) 550

350

Units of Activity Total Cost Total Benefit 1 $3 $10 2 $4 $14 3 $6 $16 4 $10 $20 5 $15 $24 6 $21 $28 7 $28 $29 According to the cost-benefit principle, the level of activity that provides the largest net benefit is: A) 1 B) 4 C) 5 D) 7

4

Hours Open Total Revenue (Dollars) 1 $50 2 $75 3 $95 4 $110 5 $120 6 $125 Lydia runs a small nail salon in the town of New Hope. She is debating whether she should extend her hours of operation. Lydia figures that her sales revenue will depend on the number of hours the nail salon is open as shown in the table above. She would have to hire a worker for those hours at a wage rate of $10 per hour. Using marginal analysis, determine how many hours should Lydia extend her nail solon's hours of operations? A) 2 hours. B) 3 hours. C) 4 hours. D) 5 hours. E) 6 hours.

5 hours.

An investor purchasing an inflation protected bond with a fixed annual real return of 1.75 percent will earn a nominal annual return of _____ percent if the actual inflation rate turns out to be 3.25 percent. A) 1.50% B) 1.75% C) 3.25% D) 5.00%

5.00%

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 in the working-age population in this economy? A) 200 million B) 300 million C) 400 million D) 500 million

500 million

In a country with 200 million people aged 16 years and older, 120 million in the labor force, and 114 million employed, what is the participation rate? A) 5 percent B) 57 percent C) 75 percent D) 60 percent

60 percent

In an economy of 100 people in the labor force, if 10 people are unemployed for 4 weeks during the year, and 30 people are unemployed for 8 weeks during the year, and the rest are employed continuously throughout the year, then the average duration of unemployment in this economy is: A) 4 weeks. B) 7 weeks. C) 8 weeks. D) 20 percent.

7 weeks.

If the market interest rate is 10% and the inflation rate is 3%, then the real interest rate equals: A) 3% B) 7% C) 10% D) 13%

7%

Samantha is lending Jack $1,000 for one year. The CPI is 1.60 at the time the loan is made. They expect it to be 1.68 in one year. If Samantha and Jack agree that Samantha should earn a 3% real return for the year, the nominal interest rate on this loan should be _____ percent. A) .0 B) 3 C) 5 D) 8

8

Which of the following goods is directly counted in GDP? A) The lettuce that Subway purchases for its sandwiches B) The bread that Subway purchases for its sandwiches C) A 12-inch Subway sandwich purchased by a student D) The plastic bags that Subway purchases to wrap its sandwiches

A 12-inch Subway sandwich purchased by a student

One observes that the equilibrium price of rice falls and the equilibrium quantity falls. Which of the following best fits the observed data? A) An increase in demand with supply constant. B) An increase in demand coupled with a decrease in supply. C) An increase in demand coupled with an increase in supply. D) A decrease in demand with supply constant.

A decrease in demand with supply constant.

Who of the following would be classified as out of the labor force? A) Brenda Smith, an 18 year old college student employed part-time at a fast food restaurant. B) Mario Faubert, a NHL hockey player at home sick with the flu. C) Jack Little, a 21 year old new college graduate actively looking for his first job. D) Amanda Pie, a full-time homemaker.

Amanda Pie, a full-time homemaker.

What will happen to the equilibrium price and quantity of beef if the price of chickenfeed increases? A) Both will increase. B) Both will fall. C) Equilibrium price will increase and quantity will fall. D) Equilibrium price will fall and quantity will increase.

Both will increase.

What will happen to the equilibrium price and quantity of fish if fish oils are found to help prevent heart disease? A) Both will increase. B) Both will fall. C) Equilibrium price will increase and quantity will fall. D) Equilibrium price will fall and quantity will increase.

Both will increase.

Which of the following would be a consequence of substitution bias in the CPI? A) Social Security payments would not adequately compensate retired workers for inflation. B) Businesses would over-compensate employees for inflation when giving the cost of living rises. C) The inflation rate based on the CPI would under-estimate the true level of inflation. D) Judges would award child support payments that would not adequately keep up with the true cost of inflation.

Businesses would over-compensate employees for inflation when giving the cost of living rises.

The marginal cost of an activity is the: A) Change in the cost of the activity that results form an extra unit of the activity. B) Same as the total cost of the activity. C) Ratio of total cost to the level of the activity. D) Change in the level of the activity divided by the change in the cost of the activity.

Change in the cost of the activity that results form an extra unit of the activity.

A slope is measured as the: A) Value of the variable measured on the y-axis divided by the value of the variable measured on the x-axis. B) Value of the variable measured on the x-axis divided by the value of the variable measured on the y-axis. C) Change in the value of a variable on the y-axis divided by the change in the value of the variable on the x-axis. D) Value of the variable measured on the y-ais minus the value of the variable measured on the x-axis.

Change in the value of a variable on the y-axis divided by the change in the value of the variable on the x-axis.

Investment, as defined by economists, would include the purchase of a: A) Corporate bond. B) Government bond. C) Share of stock in ExxonMobil. D) Computer by an accounting firm.

Computer by an accounting firm.

The purchase of a new automobile is included in: A) Consumption expenditures on services. B) Consumption expenditures on nondurable goods C) Consumption expenditures on durable goods. D) Investment expenditures.

Consumption expenditures on durable goods.

What is the largest component of spending in the United States? A) Consumption spending B) Investment spending C) Government spending D) Net investment spending

Consumption spending

To calculate GDP by the expenditure method, one must add: A) Wages, rents, interest, and profits. B) Consumption spending, investment spending, government spending and net exports. C) Consumption spending, investment spending, government spending and exports. D) Labor, natural resources, entrepreneurship, and capital.

Consumption spending, investment spending, government spending and net exports.

Holding other factors constant, if food prices decline relative to the prices of other products, then the real wages of agricultural workers will _____ and employment of agricultural workers will _____. A) Increase; increase B) Increase; decrease C) Decrease; not change D) Decrease; decrease

Decrease; decrease

As a result of a war in the country of Omega, refugees flee to the country of Alpha to seek employment. Holding other factors constant, the influx of refugees will _____ the real wage in Alpha and ____ employment in Alpha. A) Increase; increase B) Increase; decrease C) Decrease; decrease D) Decrease; increase

Decrease; increase

The typical family on the Planet Econ consumes 10 pizzas, 7 pairs of jeans, and 20 gallons of milk. In 2004, pizzas cost $10 each, jeans cost $40 per pair, and milk cost $3 per gallon. In 2005, the price of pizzas went down to $8 each, while the price of jeans and milk remained the same. Between 2004 and 2005, a typical family's cost of living: A) Increased by 4.5 percent. B) Decreased by 4.5 percent. C) Remained the same. D) Decreased by 20 percent.

Decreased by 4.5 percent.

If the CPI equaled 1.00 in 1995 and 1.65 in 2005 and a typical household's income equaled $35,000 in 1995 and $40,000 in 2005, then between 1995 and 2005, real household income A) Increased. B) Decreased. C) Was constant. D) May have increased or decreased.

Decreased.

The situation when the price of most goods and services are falling over time is called: A) Inflation. B) Disinflation. C) A boom. D) Deflation.

Deflation.

If the price of tables sold by All-Oak Table Co. decreases from $500 to $400, then the: A) Supply of labor to All-Oak Table Co. increases. B) Supply of labor to All-Oak Table Co. decreases. C) Demand for labor by All-Oak Table Co. decreases. D) Demand for labor by All-Oak Table Co. increases.

Demand for labor by All-Oak Table Co. decreases.

Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to understate the true extent of joblessness? A) Inflation B) Discouraged workers C) People employed in the underground economy D) Unemployed persons falsely report themselves to be actively looking for a job

Discouraged workers

Which of the following is an example of structural unemployment? A) Dora lost her job when the textile mill closed. She does not have skills to work in another industry and has been unemployed for over a year. B) Marsha was laid off from her job with the airline because the recession has reduced the demand for airline travel. She expects to get her job back when the economy picks up. C) Alan, a software engineer, lost his job when the internet startup he worked for went bankrupt. He interviewed with five companies in the area before taking a job with another firm in the industry. D) Jim had a job as an engineer, but quit when his wife was transferred to another state. He looked for a month before finding a new job that he liked.

Dora lost her job when the textile mill closed. She does not have skills to work in another industry and has been unemployed for over a year.

The output of Mexican citizens who work in Texas would be included in the: A) Gross domestic product of Mexico. B) Gross national product of Mexico. C) Gross national product of the United States. D) Net national product of the United States.

Gross national product of Mexico.

The 7th glass of soda that Tim consumes will produce an extra benefit of 10 cents and has an extra cost of zero (Tim is eating at the cafeteria). The cost-benefit principle indicates that Tim will: A) Realize that he has had too much soda to drink and go home. B) Drink the 7th glass and continue until the marginal benefit of drinking another glass of soda is zero. C) Volunteer to empty out the fountain. D) Not drink the 7th glass.

Drink the 7th glass and continue until the marginal benefit of drinking another glass of soda is zero.

Suppose the current issue of the New York Times reports an outbreak of mad cow disease in Nebraska, as well as the discover of a new breed of chicken that gains more weight than existing breeds that consume the same amount of food. How will these developments affect the equilibrium price and quantity of chicken sold in the US? A) Equilibrium price may increase or decrease and quantity will increase. B) Equilibrium price will increase and quantity may increase or decrease. C) Both will increase. D) Both will decrease.

Equilibrium price may increase or decrease and quantity will increase.

How will a new law mandating an increase in required levels of automobile insurance affect the equilibrium price and quantity in the market for new automobiles? A) Equilibrium price will fall; quantity will fall. B) Equilibrium price will fall; quantity will rise. C) Equilibrium price will rise; quantity will rise. D) Equilibrium price will rise; quantity will fall.

Equilibrium price will fall; quantity will fall.

What will happen to the equilibrium price and quantity of apples if apples are discovered to help prevent colds and a fungus kills 10% of existing apple trees? A) Equilibrium price will increase and quantity may increase or decrease. B) Equilibrium price may increase or decrease and quantity will increase. C) Both will increase. d) Both will decrease.

Equilibrium price will increase and quantity may increase or decrease.

What will happen to the equilibrium price and quantity of oranges if the wage paid to orange pickers rises? A) Equilibrium price will increase and quantity will fall. B) Both will increase. C) Both will decrease. D) Equilibrium price will fall and quantity will increase.

Equilibrium price will increase and quantity will fall.

What will happen to the equilibrium quantity and price of potatoes if population decreases and a new, higher-yielding variety of potato plant is developed? A) Equilibrium quantity will increase and price may increase or decrease. B) Both will decrease. C) Both will increase. D) Equilibrium quantity may increase or decrease and price will decrease.

Equilibrium quantity may increase or decrease and price will decrease.

The costs of unemployment are lowest (and perhaps even negative) for _______ unemployment. A) Frictional B) Cyclical C) Structural D) Cyclical and structural

Frictional

The value of what a U.S.-owned McDonald's produces in South Korea is included in the U.S. ________ and the South Korean ________. A) GDP; GDP B) GNP; GDP C) GDP; GNP D) GNP; GNP

GNP; GDP

If a borrower and lender agree to an interest rate on a loan when inflation is expected to be 4% and inflation turns out to be 6% over the life of the loan, then the borrower _____ and the lender ______. A) Gains; gains B) Gains; loses C) Is not affected; gains D) Loses; gains

Gains; loses

Increasing wage inequality results when international trade leads to _____ wages for workers in exporting industries and _____ wages for workers in import(-competing) industries. A) Higher; higher B) Higher; lower C) Lower; no change in D) Lower; higher

Higher; lower

Gross domestic product understates the total production of final goods and services because of the omission of: A) Exports. B) Inflation. C) Intermediate goods. D) Household production.

Household production.

The cost-benefit principle indicates that an action should be taken A) If the total benefits exceed the total costs. B) If the average benefits exceed the average costs. C) If the net benefit (benefit minus cost) is zero. D) If the extra benefit is greater than or equal to the extra costs.

If the extra benefit is greater than or equal to the extra costs.

A real quantity is a quantity measured: A) In physical terms. B) In terms of current dollar value. C) By the average quantity. D) Using real prices.

In physical terms.

If the slope of a straight line is -3, and if Y (the variable on the vertical axis) decreases by 6, then X (the variable on the horizonal axis) will: A) Increase by 2 B) Decrease by 2 C) Increase by 18 D) Decrease by 18.

Increase by 2

The introduction of a new technology that increases the productivity of labor will: A) Increase the supply of labor. B) Decrease the supply of labor. C) Increase the demand for labor. D) Decrease the demand for labor

Increase the demand for labor.

How will an increase in the birth rate affect the equilibrium price of land? The equilibrium price of land will ______ because the ____ for land shifts to the ______. A) Increase; supply; left. B) Decrease; demand; left. C) Increase; demand; right. D) Decrease; supply; right.

Increase; demand; right.

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; increased B) Increased; decreased C) Increased; did not change D) Decreased; increased

Increased; increased

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

Increases

According to the principle of diminishing returns to labor, if the amount of capital and other inputs are held constant, employing additional workers A) Increases output at an increasing rate. B) Increases output at a constant rate. C) Increases output at a decreasing rate. D) Decreases output at an increasing rate

Increases output at a decreasing rate.

If the quantity of goods and services produced in the economy decreases, A) It may be possible for real GDP to increase. B) Real GDP would certainly increase. C) It may be possible for nominal GDP to increase. D) Nominal GDP would certainly increase.

It may be possible for nominal GDP to increase.

Which of the following would be directly counted in GDP in 2012? A) Kitchen cabinets purchased from Home Depot in 2012 to be installed in a house built in 1997 B) Kitchen cabinets built in 1887, extracted from the 1887 home, and installed in a brand new country-style home C) Kitchen cabinets built in 1887, extracted from the 1887 home, and installed in a farm house built in 1950. D) None of the above

Kitchen cabinets purchased from Home Depot in 2012 to be installed in a house built in 1997.

Indicate how you think the following would shift demand in the indicated market: Buyers in the market for CDs learn of an increase in the price of CDs. A) Shift demand to the left. B) Shift demand to the right. C) Leave demand unchanged.

Leave demand unchanged.

A college graduate in 1972 found a job paying $7,200. The CPI was 0.418 in 1972. A college graduate in 2005 found a job paying $30,000. The CPI was 1.68 in 2005. The 1972 graduate's job paid ____ in nominal terms and ______ in real terms than the 2005 graduate's job. A) More; less B) More; more C) Less; the same D) Less, less

Less, less

If a straight line passes through the point x= 14 and y= 3 and also through the point x=4 and y= 10, the slope of this line is: A) Negative 11 divided by 6. B) Seven tenths. C) Negative seven tenths D) 6 divided by 11.

Negative seven tenths

You paid $35 for a ticket (which is non-refundable) to see JAM, a local rock band, in concert on Saturday. (Assume that you would not have been willing to pay any more than $35 for this concert). Your boss called and she is looking for someone to cover a shift on Saturday at the same time as your concert. You will have to work 4 hours and she will pay you time and a half, which is $9/hr. Should you go to the concert instead of working Saturday? A) Yes, your benefit is more than your cost. B) No, your benefit is less than your cost. C) Yes, your benefit is equal to your cost. D) No, because there are no benefits in the concert.

No, your benefit is less than your cost.

If the demand for Personal Computers (PC) shifts to the right (up) as consumers' incomes rise, PC's are: A) Inferior goods. B) Complement goods. C) Normal goods. D) Substitute goods.

Normal goods.

All of the following describe trends in the labor markets of the industrialized world EXCEPT: A) Growing wage inequality. B) A slowdown in real wage growth since the 1970s. C) High rates of unemployment in Western Europe. D) Over-16 population growth rate exceeding the growth rate of new jobs in the United States.

Over-16 population growth rate exceeding the growth rate of new jobs in the United States.

Suppose that the price of chicken rises sharply compared to the price of turkey. People buy more turkey and less chicken than they did in the CPI base year. In this situation the CPI will tend to _____ inflation as a result of _____ bias. A) Overstate; substitution B) Understate; substitution C) Accurately measure; substitution D) Overstate; quality adjustment

Overstate; substitution

A farmer buys a new tractor from John Deere to use on her cotton farm. This tractor is included in GDP as: A) Part of gross private domestic investment. B) A durable consumption good. C) A service D) A nondurable consumption good.

Part of gross private domestic investment.

Gross national product, GNP, of the United States is the market value of all final goods and services: A) Produced within the United States. B) Consumed within the United States. C) Produced by citizens of the United States anywhere in the world. D) Consumed by citizens of the United States anywhere in the world.

Produced by citizens of the United States anywhere in the world.

A shortage occurs when: A) Demand is greater than supply. B) The equilibrium price is too high. C) Quantity demanded exceeds quantity supplied. D) Quantity supplied exceeds quantity demanded.

Quantity demanded exceeds quantity supplied.

Suppose the labor force stays constant, and the working-age population stays constant, but a greater number of persons who were unemployed become employed. The labor force participation rate will: A) Increase B) Decrease C) Remain constant D) Not change in a way that can be predicted

Remain constant

Because Congress fixes the minimum wage in nominal terms, when there is inflation, the nominal minimum wage _____ and the real minimum wage _____. A) Remains constant; falls B) Remains constant; remains constant C) Remains constant; increases D) Increases; falls

Remains constant; falls

If your nominal wage rises faster than the price level, we can say your real wage has ________ and the purchasing power of your income has ________. A) Fallen; fallen B) Fallen; risen C) Risen; risen D) Risen; fallen

Risen; risen

The central concern of economics is: A) Poverty B) Scarcity C) Wealth Accumulation D) Overconsumption

Scarcity

Indicate how you think each of the following would shift demand in the indicated market: Buyers in the market for pizza read a study linking pepperoni consumption to heart disease. A) Shift demand to the left. B) Shift demand to the right. C) Leave demand unchanged.

Shift demand to the left.

Indicate how you think each of the following would shift demand in the indicated market: Buyers in the market for CDs learn of an increase in the price of downloadable MP3s. A) Shift demand to the left. B) Shift demand to the right. C) Leave demand unchanged.

Shift demand to the right.

Indicate how you think each of the following would shift demand in the indicated market: The incomes of buyers in the market for Adirondack vacations, which are a normal good, increases. A) Shift demand to the left. B) Shift demand to the right. C) Leave demand unchanged.

Shift demand to the right.

How would each of the following affect the U.S. market supply curve for corn? A tornado sweeps through Iowa. A) Shift supply to the left. B) Shift supply to the right. C) Leave supply unchanged.

Shift supply to the left.

How would each of the following affect the U.S. market supply curve for corn? The price of fertilizer rises. A) Shift supply to the left. B) Shift supply to the right. C) Leave supply unchanged.

Shift supply to the left.

How would each of the following affect the U.S. market supply curve for corn? A new and improved crop rotation technique is discovered. A) Shift supply to the left. B) Shift supply to the right. C) Leave supply unchanged.

Shift supply to the right.

How would each of the following affect the U.S. market supply curve for corn? The government offers new tax breaks to farmers. A) Shift supply to the left. B) Shift supply to the right. C) Leave supply unchanged.

Shift supply to the right.

In recent decades, slower growth in the demand for labor accompanied by an accelerated growth in the supply of labor in the U.S. explains: A) Slower real wage growth and double-digit rates of unemployment. B) Slower real wage growth and increasing wage inequality. C) Slower real wage growth and an increase in the number of people with jobs. D) Increasing wage inequality and double-digit unemployment.

Slower real wage growth and an increase in the number of people with jobs.

In September 2011, Bank of America laid off 30,000 employees. The laid-off employees who were not able to find jobs at another bank due to a permanent decline in business in the financial industry would be considered: A) Structurally unemployed. B) Frictionally unemployed. C) Seasonally unemployed. D) Cyclically unemployed.

Structurally unemployed.

An Arizona student claims to have spotted a UFO over the desert outside of Tucson. How will his claim affect the supply (not the quantity supplied) of binoculars in Tucson stores? A) Supply of binoculars will not be affected; demand may increase. B) Supply of binoculars will not be affected; demand may decrease. C) Supply of binoculars will decrease; demand may decrease.

Supply of binoculars will not be affected; demand may increase.

Ali decides to attend the one-hour review session for microeconomics instead of working at his job. His job pays him $10 per hour. Ali's opportunity cost of attending the review session is: A) The $10 he could have earned at his job. B) The value of the session minus the $10 he could have earned at his job. C) Nothing, because the review session does not cost anything. D) Equal to the benefit he gets from the review session.

The $10 he could have earned at his job.

In general, when the demand curve shifts to the right and supply remains constant then: A) Quantity demanded will rise. B) The equilibrium price will fall. C) The equilibrium quantity will rise. D) The market cannot reestablish an equilibrium.

The equilibrium quantity will rise.

Suppose the government launches a successful advertising campaign that convinces workers with high school degrees to quit their jobs and become full time college students. This would cause: A) The unemployment rate to decrease. B) The labor force participation rate to decrease. C) The number of discouraged workers to increase. D) No change in the unemployment rate.

The labor force participation rate to decrease.

The demand for labor depends on ______ and _______. A) The supply of labor; the marginal product of labor B) The supply of labor; the price of output produced C) The rate of price inflation; the price of the output produced D) The marginal product of labor; the price of output produced

The marginal product of labor; the price of output produced

When deflation occurs, A) The real interest rate is greater than the nominal interest rate. B) The nominal interest rate is greater than the real interest rate. C) The nominal interest rate is equal to the real interest rate and inflation is negative. D) The nominal interest rate is equal to the real interest rate and inflation is positive.

The real interest rate is greater than the nominal interest rate.

The market interest rate in Alpha is 7% and the market interest rate in Beta is 10%, but the inflation rate in Alpha is 3% and inflation rate in Beta is 8%. Which of the following statements is true? A) The real interest rate is higher in Alpha, but the nominal interest rate is higher in Beta. B) The real interest rate is lower in Alpha, but the nominal interest rate is lower in Beta. C) Both the real and nominal interest rates are higher in Alpha. D) Both the real and nominal interest rates are higher in Beta.

The real interest rate is higher in Alpha, but the nominal interest rate is higher in Beta.

Suppose, in 2012, you purchased a house built in 2003. Which of the following would be included in the gross domestic product for 2012? A) The value of the house in 2012 B) The value of the house in 2003 C) The value of the house in 2012 minus depreciation D) The value of the services of the real estate agent

The value of the services of the real estate agent

A person 16 years or older who does not work, but is actively looking for work, is officially classified as: A) Employed. B) Unemployed. C) Chronically unemployed. D) Out of the labor force.

Unemployed.

In calculating gross domestic product, the Bureau of Economic Analysis uses the sum of the market value of final goods and services produced. This means that the BEA: A) Simply counts the total number of goods produced in the market place and then adds them up. B) Values goods at their market prices, multiplies them by the quantity produced, and then adds them up. C) Simply counts the total number of goods and services produced in the marketplace and then adds them up. D) Values goods and services at their market prices, multiplies them by the quantity produced, and then adds them up.

Values goods and services at their market prices, multiplies them by the quantity produced, and then adds them up.

A regulated maximum price that is above the equilibrium price A) Will lead to black markets. B) Will have no effect on the market. C) Will lead to excess supply in the market. D) Will lead to excess demand in the market.

Will have no effect on the market.