Macro Exam 1

(Figure: The Demand and Supply of Quinoa) Use Figure: The Demand and Supply of Quinoa. A price of _____ will result in a _____.

$9; surplus

(Scenario: Linear Production Possibility Frontier) Use Scenario: Linear Production Possibility Frontier. What is the maximum number of cowboy hats Smallville can produce?

40

Marius and Jennifer are going to sell cupcakes and muffins at their third annual fundraiser bake sale. In one day, Marius can make 40 cupcakes or 20 muffins, and Jennifer can make 15 cupcakes or 15 muffins. With specialization, _____ cupcakes and _____ muffins will be made in one day.

40; 15

If they spend all night writing computer programs, Laurence can write 10 programs, and Carrie Anne can write 5. If they spend all night making sunglasses, Laurence can make 6 pairs, and Carrie Anne can make 4. Given this information and supposing Laurence and Carrie Anne have constant opportunity costs, we know that _____ has an absolute advantage in _____.

Laurence; both programs and sunglasses

If they spend all night writing poems, Leticia can write 10 poems, and Isabella can write 5. If they spend all night making necklaces, Leticia can make 6, and Isabella can make 4. We know that _____ has a comparative advantage in _____.

Leticia; poems

Marius and Jennifer are going to sell cupcakes and muffins at their third annual fundraiser bake sale. In one day, Marius can make 40 cupcakes or 20 muffins, and Jennifer can make 15 cupcakes or 15 muffins. Based on this information, _____ has the comparative advantage in cupcakes, and _____ has the comparative advantage in muffins.

Marius; Jennifer

______ are used to reduce the severity of recessions.

Monetary and fiscal policy

Keynesians argue that low levels of spending:

can lead to prolonged recessions.

You decide whether to eat one more slice of cheesecake based on how hungry you feel. Which economic principle does this statement BEST represent?

"How much" is a decision at the margin.

In 2019, consumer spending was $14,000, government purchases of goods and services were $3,700, and investment spending was $3,700. If GDP in 2019 was $21,000, exports were _____, and imports were _____.

$300; $700

Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. If 2018 is the base year, real GDP in 2019 was:

$420.

(Table: Lemonade and Cookies) Use Table: Lemonade and Cookies. Assume that an economy produces only lemonade and cookies. Nominal GDP in 2019 was:

$445.

(Table: Price and Output Data) Use Table: Price and Output Data. Nominal GDP in year 5 is:

$63. ​

A friend comes up to you and offers you a free ticket to a Yankees game that night, and you decide to attend the game. The game takes five hours and costs you $25 for transportation. If you had not attended the game, you would have worked at your part-time job for $12 an hour. What is the cost to you of attending the game?

$85

If a farmer in Indiana can produce 200 pounds of beets and no corn or no beets and 100 pounds of corn, and he faces a linear production possibility frontier, the opportunity cost of producing an additional pound of beets is _____ pound(s) of corn.

0.5

(Scenario: Linear Production Possibility Frontier) Use Scenario: Linear Production Possibility Frontier. If Smallville decides to devote half of its labor time to the production of cowboy hats and half to the production of pants, it can produce _____ pants and _____ cowboy hats.

10; 20

Gertrude has a linear production possibility frontier when she produces sunflowers and garbanzo beans. If she uses all of her resources, she can produce 400 bushels of sunflowers or 800 bushels of garbanzo beans. Gertrude is NOT producing efficiently if she produces _____ bushels of sunflowers and _____ bushels of garbanzo beans.

200; 200

If the price index in year 1 is 110, and the price index in year 2 is 115, then the inflation rate is exactly ____% from year 1 to year 2.

4.54

(Figure: Wheat and Trains) Use Figure: Wheat and Trains. Suppose the economy is operating at point C. The opportunity cost of producing the fourth train would be:

80 tons of wheat.

(Figure: Shifts in Demand and Supply IV) Use Figure: Shifts in Demand and Supply IV. The figure shows how supply and demand might shift in response to specific events. Suppose the Surgeon General announces that eating potato chips causes heart disease. Which panel BEST illustrates how this announcement will affect the market for potato chips?

Demand shift left

(Figure: Shifts in Demand and Supply II) Use Figure: Shifts in Demand and Supply II. The figure shows how supply and demand might shift in response to specific events. Suppose vast new oilfields are discovered offshore of Washington state, so that gasoline prices fall. Which panel BEST illustrates how this development will affect the market for luxury sport utility vehicles? ​

Demand shifts to the right

Which statement is positive? Which statement is normative? I. Government spending on defense was $500 billion in 2019. II. The federal government should spend more on defense to protect us from our enemies.

I is positive; II is normative.

Which statement about gross domestic product is FALSE?

It is the total output of all final and intermediate goods and services.

Which of the following statements is normative?

Scientists should not make normative statements.

An increase in the price of beets (an ingredient in kombucha) and an increased concern about the potential negative health effects of kombucha consumption will have which result in in the kombucha market?

The equilibrium quantity will decrease, but the equilibrium price may decrease, increase, or stay the same.

Which statement is normative?

The minimum wage is necessary to help fight poverty.

Which statement is TRUE regarding a normal good?

When income increases, the demand for the good increases.

A movement along the demand curve for a good generally results from:

a change in the price of the good.

The market for lobster is in equilibrium. Which factor is most likely to INCREASE the equilibrium price of lobster?

an increase in the price of salmon, a substitute in consumption

Which item is NOT included in calculations of GDP?

a monthly Social Security payment

An economy is efficient when:

all opportunities to make some people better off without making other people worse off have been exhausted.

If chicken and pork are substitutes, then a fall in the price of chicken will cause:

an increase in the demand for pork.

Which factor would NOT cause a supply curve to shift?

an increase in the price of a good

Economists tend to believe that to change people's behavior, you must:

change people's incentives.

Real GDP is nominal GDP adjusted for:

changes in prices.

Monetary policy makers seek to affect the overall level of spending through:

changes in the quantity of money and interest rates.

An economy is said to have a(n) _____ in the production of a good if it can produce that good _____.

comparative advantage; at a lower opportunity cost than another economy

Spaghetti and salad are related. If the price of spaghetti increases and the demand curve for salad shifts leftward, these goods are:

complements.

Suppose the input costs associated with manufacturing office furniture increase over time. This would lead to a(n):

decrease in the supply of furniture, higher prices, and a decrease in the equilibrium quantity.

In a supply and demand diagram, if the supply curve is upward sloping, a shift of the demand curve to the left, all other things equal, will:

decrease the equilibrium price and quantity.

If an economy is in equilibrium, and no individual can improve her or his well-being by taking a different action, then the economy is:

efficient.

The circular-flow diagram is important because it shows that the flow of money going into each market or sector of the economy is _____ the flow of money coming out of that sector.

equal to

A dozen friends get together for a bachelorette party to celebrate an upcoming wedding. If cake is served and cut into 12 pieces of the same size, and each of the 12 attendees gets a slice, the cake distribution is:

equitable.

Among the tools available to macroeconomic policy makers is:

fiscal policy, to influence overall spending.

A transfer payment is a payment:

for which no services are rendered by the government.

In the markets for goods and services:

households buy goods and services.

If steak is a normal good, when incomes rise, the equilibrium price will _____, and the equilibrium quantity will _____.

increase; increase

The fact that a society's production possibility frontier is bowed out from the origin demonstrates the law of _____ opportunity cost.

increasing

Suppose that, upon changing jobs, you experience an increase in income (otherwise, why change jobs?). If, as a result, you decide to purchase more sushi and fewer hamburgers, then hamburgers for you are a(n) _____ good.

inferior

Trade can be beneficial to an economy because:

it enables more goods and services to be obtained at a lower opportunity cost.

One role of government policy, suggested by macroeconomic analysis, is to:

manage short-run economic fluctuations.

A busy mechanic needs to decide whether to stay at the garage and work on one more car or to go meet his wife for dinner. This is an example of:

marginal analysis.

An increase in the value of nominal GDP over time:

may be due to an increase in prices, in the production of goods and services, or both.

A simplified representation of a real situation that is used to better understand real-life situations is called a(n):

model.

Statements that make value judgments are:

normative.

(Table: The Market for Salt and Vinegar Chips) Use Table: The Market for Salt and Vinegar Chips. If the price of salt and vinegar chips is $0.60, the price will:

not change.

Your sister tells you, "I haven't been running the half marathon as before because I'm concerned about reinjuring my knee. See, there is always a cost to doing something. But if you don't do anything, then there is no cost." Your sister does not understand the economic concept of:

opportunity cost.

A country's living standard is BEST measured by:

per capita real GDP.

The trade-off between equity and efficiency is seen in the fact that:

policies that promote equity often come at a cost of decreased efficiency.

Statements about the way the economy actually works are generally referred to as:

positive economics.

If the price of beef decreases, you can usually expect the:

quantity of beef supplied to decrease.

The "other things equal" assumption means that:

relevant variables other than those examined do not change.

Fiscal policy entails:

setting levels of taxation and/or government spending.

If spaghetti and meatballs are complements, when the price of spaghetti rises, the demand curve for meatballs:

shifts to the left.

You notice that the price of notebooks falls and that the quantity of notebooks sold increases. You suspect that the _____ notebooks shifts to the _____.

supply of; right.

The market for smoothies is in equilibrium, and the price of yoghurt (an ingredient in smoothies) rises. In the smoothies market, _____ will _____, _____ the price and _____ the quantity.

supply; decrease; increasing; decreasing

(Figure: An Expanded Circular-Flow Diagram) Figure: An Expanded Circular-Flow Diagram. How does the government finance its spending? ​

taxes of $150 plus borrowing of $70

Which item would NOT be included in GDP?

the dollar value of a repair job done by your cousin on her own car

In contrast to the conclusion of microeconomic analysis that competitive markets (assuming no market imperfections and perfect information) will lead to full employment, many economists argue, based on macroeconomic analysis, that:

the economy can suffer from prolonged unemployment as a result of an overall deficiency of demand.

(Figure: Production Possibility Frontier for Trains and Planes) Use Figure: Production Possibility Frontier for Trains and Planes. If the economy is producing 8 trains and 12 planes per period:

the economy suffers from unemployment and/or inefficiency in production.

(Figure: The Apple TV Rental Market) Use Figure: The Apple TV Rental Market. If the rental price of Apple TV movies rises from $5 to $7:

the quantity demanded will decrease from 50 to 30 rentals per weekend.

It is certain that the equilibrium quantity will fall when:

the supply curve and the demand curve both shift to the left.

The direct calculation of aggregate output does NOT include the value of:

the tires on brand-new Volvo station wagons.

Which example illustrates an intermediate good?

tires General Motors purchased from Goodyear for new electric cars

While buying refreshments for an upcoming party, you notice that a six-pack of Bud Lite Beer costs $6 and that a six-pack of Miller Lite Beer costs $8. You buy the six-pack of Miller Lite Beer, although you wonder if maybe two six-packs of Bud Lite Beer would have been a better choice. The opportunity cost of the Miller Lite Beer is:

two six-packs of Bud Lite Beer.

Economic models:

vary greatly in their assumptions and simplifications.

Trade surpluses occur:

when the value of imports is less than the value exports.