Macro Exam Practice 1

In the spending approach to GDP, consumption expenditures are

private spending on all final goods and services excluding investment purchases

A variable that tends to move in the same direction as the growth rate of real GDP is said to be ______

procyclical

Suppose that GDP growth in 2014 was higher than normal in 2014 due to new methods for energy exploration called "fracking". Identify why the growth rate in real GDP may overstate the effect on welfare

fracking may result in environmental degradation

Someone who consumes a resource without working or contributing to the resource's upkeep is call a(n)

free rider

GDP is the market value of all

final goods and services produced within a country in a year

GDP is the market value of all

final goods and services produced within a given country

Conditional convergence implies that countries are _____ away from the steady state will have _____ per capita real GDP growth

further; faster

When referring to the role of institutions in economics, "private property" means

goods and ideas can be owned by individuals or businesses

Which variable appears to be neither procyclical or countercyclical

government purchases

______ protect private property, uphold laws, enforce private contracts and encourage free entry and competition

inclusive institutions

Increases in the level of political stability in a country tend to

increase per capita GDP

Private spending on tools, plants, and equipment that are used to produce future output is called

investment

The most volatile component of GDP is

investment

If real GDP was 4% in the fourth quarter in 2014, above its long run trend of 3%, we would expect that ________ would be _______ than the 4% in real GDP growth

investment, greater

Because of spillovers, the social benefit of research and development

is greater than the private benefit

The correlation between life expectancy and per capita real GDP is

positive

In the US most scientists who research and develop new products work for

private firms

Member nations of the Organization for Economic Co-Operation and Development (OECD) with a lower GDP per capita in 1960 experienced what sort of growth during the subsequent 40 years?

relatively faster growth than higher GDP per capita countries

When investment is just enough to keep up with population growth and depreciation, the per capita capital stock

remains constant

Which of the following is not one of the growth facts listed in the text

the amount of physical capital is the primary determinant of real GDP per capita

The sale of sugar will contribute to GDP when

the buyer is a mother baking cookies for her children

Consider an industrialized country where the growth rate of real GDP is -1% per year. However, the growth rate of real GDP per capita is positive. What is the most likely reason this is occurring?

the country's population is growing slower than the growth of nominal GDP

What is the most proximate (direct) cause of growth in real GDP per capita

the factors of production

When it comes to the safety of pharmaceutical drugs

the govt's lengthy testing of new drugs to ensure that they are safe may cost some people their lives

If a country's GDP per capita rises, this means that 1. the country has fewer poorer people 2. some people in the country have more wealth 3. the country's standard of living is rising

2 and 3 are correct (some people in the country have more wealth and the country's standard of living is rising if a country's GDP per capita is rising)

Suppose a country has real GDP of 10,000 at the beginning of the year 2015. Each year the economy grows by 7%. What will be the value of GDP in the year 2035

40,000

According to the Penn World tables, real per capita GDP in China in 1988 was approximately $2,000 and by the year 2002 real per capita income in China was approximately $4,000. Over this time the growth rate of per capita GDP was approximately

5% (2,000-4,000/4,000)

Which of the following choices best illustrates Adam Smith's concept of the "invisible hand"

A farmer in Vietnam grows rice for his income; that rice is exported to the US by an export company; a grocery in NY sells the rice at a profit to a buyer who is seeking Vietnamese rice

The difference between nominal and real GDP is that normal GDP is valued in ______ year prices and real GDP is valued in _____ year prices

current; base

Countries with more human capital tend to have

higher GDP per capita

What defines the "rules of the game" that structure economic incentives?

institutions

Birmingham Steel sells steel to Winston Gold Club Manufacturers for $300,000. Winston sells its golf clubs to Academy Sports for $1,000,000. Academy Sports sells Winston golf clubs for $1,500,000. How much is added to GDP?

$1,500,000

This summer you are taking a class in Art. The class meets 20 times during the summer and the cost of the course is 1000. Instead of attending the class, you could work at a restaurant making $10 an hour in the kitchen or $7 clearing tables. The opportunity cost of attending each class is

$10

You are given a ticket to a Molly Cyprus concert. The face value of the ticket is $50. You value attending the Cyprus concert at $40. You can sell your Molly Cyprus ticket to a friend for $10 and buy a $70 ticket to go see Bugundy 6. The opportunity cost of attending the Burgundy 6 concert is

$100 ($50+$40+$10)

Sydney buys a used car from Lemon Drop Used Cars in 2015 for $3,000. Francis, a salesperson at Lemon Drop, receives $200 in commission for selling the car to Sydney. How much does this transaction contribute to 2015 GDP

$200

Suppose you currently have $600 worth of music on your computer, and each year you invest in $300 worth of FLAC music files. Either because the songs go out of fashion or they somehow get damaged each year you lose 5% of your music catalog; that is, the depreciation rate is 5%. What is the steady-state value of your music catelog

$6,000

*table GDP chart Using the above GDP Table, suppose the economy produces only the four goods listed in the table. All of the country's tomatoes are used int he production of pizzas and all of the shovels produced in the country are exported to foreign firms where the shovels are used by firms that produce landscaping services. What is the value of GDP in the economy?

$7,200

*table: GDP Table Suppose an economy produces only the four goods listed in this table. All of the country's tomatoes are used in the production of pizzas and all of its shovels are purchased by foreign firms hat produce landscaping services. What is the value of GDP in this country?

$7,200

The opportunity cost of winning a free ticket to the Super Bowl worth $950 and attending the game is

$950, representing the lost market value of selling the ticket to somebody else

Which of the following variable(s) tends to move in the same direction as the growth rate of real GDP

(all of the above) consumption, investment, employment

The growth rate of GDP is

(none of the answers are correct) GDP adjusted for changes in the inflation rate, changes in the price level, or in population growth

Communal returns to work often lead to low worker effort. Why does this happen? 1. it happens because of the free-rider problem 2. since the final payout depends on the number of people in the pool rather than an individual workers effort, a worker doesn't have much incentive 3. it happens because workers learned from seeing the Chinese experience during "the great leap forward"

1 and 2 are correct

Why will growth in China slow down 1. the productivity of its capital will decline 2. there are problems within its systems of government, banking, and education 3. it has too many people to sustain this level of production

1 and 2 are correct

Why does South Korea have a higher level of physical and human capital than North Korea 1. Markets constitute much more of the primary organizations of economic activity in South Korea than they do in North Korea 2. Economic incentives are better installed in South Korea 3. South Korea has a different culture from North Korea

1 and 2 are correct (S Korea has a higher level of physical capital because markets constitute much more of the primary organizations of economic activity in S Korea than in North Korea and economic incentives are better installed in South Korea)

Which of the following components of GDP are procyclical? 1. Consumption 2. Investment 3. Government spending

1 and 2 are correct (consumption and investment are procyclical components of GDP)

The Solow model helps us to understand 1. how the factors of production relate to differences in real per capita GDP 2. why countries grow at different rates over time 3. how the factors that influence the unemployment rate how the factors determine inflation in the long run

1 and 2 are correct (the solow model helps us understand how the factors of production relate to differences in real per capita GDP and why countries grow at different rates over time)

If a country's saving preference decreased from 15% to 10% of disposable income and it was operating at its steady state before the change, we would expect to see which of the following? 1. a decrease in capital stock 2. a decrease in real GDP 3. an increase in real GDP 4. an increase in capital stock

1 and 2 are correct (we would expect a decrease in capital stock and in real GDP if a country's saving preference decreased of disposable income and operating at its steady state)

Why does S Korea have a higher level of real GDP, more physical capital and more human capital than North Korea 1. South Korea has better natural resources than North Korea 2. Economic incentives for economic growth are better installed in South Korea 3. Historically South Korea's culture is different than North Korea

1 and 2 are correct South Korea has a higher level or real GDP because South Korea has better natural resources and economic incentives for economic growth are better installed

Which of the following components of GDP are procyclical? 1. consumption 2. investment 3. government expenditures

1 and 2 are correct consumption and investment are procyclical with GDP

Why do grocery stores offer "buy one, get one half off" specials? 1. It's a way to offer an incentive to consumers (who might not ordinarily buy two units of the same item) to buy the extra item 2. They are thinking at the margin, and they stand to make positive profit even if they sell the second unit at a lower price than the first 3. Government regulations require them to hold such promotions from time to time

1 and 2 are true (it's a way to offer an incentive to consumers to buy the extra item, and they are thinking at the margin and they stand to make positive profit even if they sell the second unit at a lower price than the first)

Countries that have more ______ tend to produce more output 1. human capital 2. physical capital 3. government capital

1 and 2 only

In 1950 both North and South Korea real GDP per capita were nearly identical (roughly $1,000). Since that time period, real GDP per capita in North Korea grew at 1% per year and real GDP per capita in S Korea grew at roughly 5. At this growth rate, 1. North Korea's per capita real GDP will double every 70 years 2. South Korea's per capita real GDP will double every 20 years 3. By 2020, South Korea's real per capita GDP will be 16 times higher than North Korea's real GDP

1 and 3 are correct (North Korea's per capita real GDP will double every 70 years and by 2020 S Korea's real per capita GDP will be 16 times higher than North Korea's real GDP)

Consider with higher levels of real per capita GDP tend to have 1. better educational opportunities 2. higher infant death rates 3. higher life expectancy rates

1 and 3 are correct (higher levels of real per capita GDP tend to have better educational opportunities and higher life expectancy rates

Why is it likely that real GDP growth in China will slow down? 1. The productivity of its capital will decline 2. It has too many people to sustain this level of production 3. The institutions that would allow China to sustain economic growth are not in place

1 and 3 are correct (it's likely that real GDP growth in China will slow down because the productivity of its capital will decline and the institutions that would allow China to sustain economic growth are not in place)

Why should a country be expected to have a higher growth rate after a war? 1. Since much of the capital would have been destroyed during the war, any new capital would contribute greatly to growth 2. Capital accumulation always causes higher growth rates 3. After a war, a country would be growing from a lower base and its growth rate would be higher

1 and 3 are true (country's would have a higher growth rate after war since much of the capital would have been destroyed during the war so any new capital would contribute also after a war a country would be growing from a lower base and its growth rate would be higher)

If a country's real GDP per capita declines, this means that the following may have occurred 1. the country has more people and GDP didn't change 2. real GDP increased but the population declined 3. the country's standard of living is falling

1 and 3 only if a country's real GDP per capita declines, the country has more people and GDP didn't change or the country's standard of living is falling

If a country's saving preference INCREASED from 20% to 25% of disposable income and it was operating at its steady state before the change, we would expect to see which of the following? 1. an increase in the per capita capital stock 2. a decrease in real GDP per capita 3. an increase in real population growth rate 4. an increase in capital stock

1 and 4 are correct (we would expect an increase in the per capita capital stock and an increase in capital stock if there was an increase from 20 to 25% of disposable income

Suppose you purchased a new BMW that was produced in Germany. Using the expenditure approach to GDP accounting this transaction would 1. increase consumption by the price of the car 2. increase imports by the price of the car 3. have no effect on real GDP

1, 2, and 3 are correct (the transaction of a new BMW produced in Germany would increase consumption by the price of the car, increase imports by the price of the car, would have no effect on real GDP)

If you want to compare real GDP in 2010 and 2015, what prices can you use 1. 2010 prices for GDP in both years 2. 2015 prices for GDP in both years 3. 2007 prices for GDP in 2010 and 2015

1, 2, and 3 are correct (you can use 2010 prices in both years, 2015 prices in both years, and 2007 prices in 2010 and 2015 to compare real GDP)

What are the facts of economic growth discussed in class 1. all countries were once poor 2. there have been growth miracles and growth disasters 3. all countries will catch-up some day 4. real GDP per capita varies enormously across countries

1, 2, and 4 are correct

What are the facts of economic growth discussed in class 1. all countries were once poor 2. there have been growth miracles and growth disasters 3. all countries will catch-up some day 4. real GDP per capita varies enormously across countries

1, 2, and 4 are correct (the facts of economic growth are all countries were once poor, there have been growth miracles and growth disasters, and real GDP per capita varies enormously across the countries

In the introductory lecture of the course, we stated that one of the objectives of the course was to understand the structure and performance of the macro economy. The performance measures that we will focus on are 1. the level and growth rate of a nations' income (production) 2. how firms choose production and understand how profits are made 3. the growth rate of the money supply 4. the unemployment rate 5. the rate of inflation 6. consumer choices and varieties

1, 3, and 5 are correct the level and growth rate of nation's income, the growth rate of the money supply, the rate of inflation

Absolute convergence predicts that _______ 1. a country with a higher initial level of real per capita GDP will grow faster than a country with a lower initial level of real per capita GDP 2. a country with a lower initial level of real per capita GDP will grow faster than a country with a higher initial level of real per capita GDP 3. all countries will have the same level of per capita real GDP in the long run 4. real per capita GDP will diverge in the long run

2 and 3 are correct (absolute convergence predicts that a country with a lower initial level of real per capita GDP will grow faster than a country with a higher initial level of real per capita GDP and all countries will have the same level of per capita real GDP in the long run

The Solow model predicts that a country with a higher investment (savings) rate will 1. have a higher real per capita real GDP growth 2. have a higher steady state level of real per capita GDP 3. have a faster real per capita GDP growth 4. a lower steady state level of nominal GDP

2 is correct (a country with a higher investment rate will have a higher steady state level of real per capita GDP)

If a nation doubles its GDP per capita in 28 years, what is its annual growth rate?

2.5%

The value of a car produced and sold in 2014, and sold again in 2016 should be included in GDP for

2014 only

Suppose Greenville General Electric plant produces and sells a wind turbine engine to a company in China and sold in the US. Which of the following statements are true regarding US GDP 1. the sale of the wind turbine will have no impact on US GDP 2. the value of the wind turbine engine will count toward investment spending in the US 3. the value of the wind turbine engine will be counted as part of export sales

3 only

Recessions can be defined as 1. significant and widespread declines in real GDP per capita and falling unemployment 2. significant and widespread declines in nominal GDP 3. a significant and widespread decline in economic activity with falling real GDP, rising unemployment, falling production, and falling sales

3 only (recessions can be defined as a significant and widespread decline in economic activity with falling real GDP, rising unemployment, falling production, and falling sales

_____ is the theory that states per capita GDP in poorer countries will tend to grow faster than rich countries

Absolute convergence

Enforced property rights are important to increase which of the following?

All of the factors are correct (physical, human capital, and technological knowledge)

Last month, Trevor purchased $177 of Swedish Fish from an online retailer in Sweden. How does this transaction contribute to GDP in 2016

Consumption increases by $177 and net exports fall by $177

*table: celebrity income refer to the table above. GDP is sometimes an imperfect measure of well-being for several reasons. Which of the 4 reasons below highlights an issue with GDP as a measure of well-being?

GDP doesn't measure the distribution of wealth

The reason economists focus on measuring GDP is because

GDP is highly correlated with other measures of well-being

Which of the definitions below best defines Gross Domestic Product

GDP is the market value of all final goods and services produced within a country within a year

Ice Cube is a performer who can sing and act. He could earn 5,000,000 singing and 3,000,000 acting. Ice T can sing for 5,000,000 or 4,000,000 to act. Vanilla Ice can earn 3,000,000 singing and 100,000 dancing. Assuming all 3 individuals have only 2 options for work, and can only pursue one of these activities, who has the highest opportunity cost of singing

Ice T

What is true about a recession

It's a significant decline in economic activity lasting more than a few months and must be widespread geographically

*table: celebrity income (in millions of US dollars) In 2016, which of these four individuals has contributed the most to the rise in the standard of living in this economy

James

From 1948 to 2003 the US experienced an average growth rate of real GDP of 3.5%. Guatemala had an average growth rate of real GDP of 3.6% from 1993-2003. Can you say that Guatemala's standard of living grew more than the US' standard of living from 1993 to 2003

No, because we don't know the population growth rates of either country or the real GDP growth rate of the US during 1993-2003

The name of the speaker was

Robert Craig

Which of the following would be included in GDP for the US

The production of Hondas, a Japanese car company, producing cars in Ohio

Why do some economists think that GDP may overestimate the actual level of economic activity in an economy

There is no negative adjustment for pollution

What is meant by the steady state level of capital?

There is no new net investment or any growth

A local politician states that it's imperative that we fix our failing infrastructure because "one life lost is because of the condition of our bridges and roads." After reading chapter 1, it's likely you would disagree with this statement because

Thinking on the Margin: because placing an "infinite value" on one life is too much to be on the margin

Identify the "bad" that isn't counted in GDP

a decrease in air quality

Identify the "bad" that is not counted in GDP

a decrease in the water quality

What are the institutions that help foster the appropriate incentives for economic growth

a dependable legal system, property rights, and competitive and open markets

All else equal, an increase in the economy's savings will result in

a higher steady state level of real per capita GDP

Which of the following illustrates the principle of free riding

a member of a club who refuses to do fund-raising for club activities

An economist would not count the purchase of a(n) ______ as an example of investment

a share of Google stock

________ is the theory that states per capita GDP in poorer countries will tend to grow faster than richer countries

absolute convergence

Reasons that countries may not switch to growth promoting institutions include 1. high per capita GDP may not be part of that society's goals or objectives 2. the people in positions of power may have the most to lose from the change in institutions 3. real per capita GDP may fall as an economy transitions from one set of institutions to a new set of institutions

all 3 are correct

Suppose you purchase a new shirt that was produced in China and sold in the US. Which of the following statements are true regarding US GDP 1. the purchase of the shirt will have no impact on US GDP 2. the value of the shirt will count toward consumption spending 3. the value of the shirt will be counted as part of import spending

all 3 are correct

Which of the following illustrates the "free-rider problem"

all are examples of the "free-rider problem" three classmates working on a group project all know they will receive the same grade and one of the students contributes very little effort to the project local residents on the island of Mauritius pay taxes to have its beaches cleaned. Tourists visiting the island leave garbage on the beaches because they know that the beaches are cleaned regularly The servers at a restaurant agree to split all of the tips equally and some diners receive poor service

We focus on real GDP per capita because nations that have high GDP per capita also tend to have

all of the above (better educational opportunities, higher infant survival rates, longer life expectancy rates)

As was the case with the Xiogang farmers in China, history has shown that when collective property rights are converted to private property rights

all of the above (investment in physical capital increases, work effort increases, productivity increases)

The development of new and better ideas leads to

all of the above (more output, more consumption and investment, and more capital accumulation)

The institutions of economic growth include

all of the above (property rights, a dependable legal system, competitive and open markets, honest governments)

The economics of ideas

all of the above (refers to cutting edge growth, helps explain why countries like the Unites States have been growing for the past 2 centuries, explains why the simple Solow growth model incorrectly predicts no long-run economic growth

Why is Nigeria considered to be a growth disaster in spite of the fact that it has large deposits of oil

all of the above (the occurrence of civil war, rulers who were dictators and spent the wealth on arms purchases, corruption that siphoned away oil wealth into secret Swiss bank accounts`

Which of the following types of incentives do economists believe people respond to?

all types of incentives

Which of the following is NOT an institution that leads to sustained long-term economic growth?

an equitable income redistribution system

Marshall, living in Aching,SC purchases a seismograph from a company in S Korea. This transaction would be recorded in the GDP accounts as

an increase in consumption and a decrease in net exports so there is no change in GDP

If real GDP per capita in the US is currently $50,000 and grows at 1% per year, how many years will it take to reach $200,000

approximately 140 years

Which of the following would be most effective in reducing "free riding" on a communal farming system?

assigning property rights

Which of the following choices represents the sources of growth identified by the Solow growth model Y=AF(K,H)?

capital sock, technology, and labor (skilled and unskilled)

Why is real GDP not seen as a perfect measure of production in an economy?

because it doesn't count the underground economy or non-market production

Economists think that people are self-interested

because they respond to incentives in predictable ways

Adam Smith's metaphor of the "invisible hand" refers to the notion that

behavior based on self-interest can lead to an overall benefit to society

Which of the following is NOT a reason for high growth rates in Germany and Japan following World War 2

both countries had higher growth rates than the US before WW2

What data are used to calculate GDP

both quantities and prices of goods

Catch-up growth can be differentiated from cutting-edge growth follows

catch-up growth comes primarily from capital accumulation while cutting-edge growth comes from technological development

The basic postulate of economists indicates that changes in incentives influence the

choices of individuals with regard to a wide range of activities, including those generally perceived as social or political

In terms of convergence, the cross-country data tend to provide more support for _______ convergence

conditional

Which of the following correctly and fully defines conditional convergence

conditional convergence refers to the tendency for poorer countries to grow faster than richer countries given similar steady state capital stocks.

Final goods are goods

consumed or held in personal inventories

In the US, the largest component of GDP is

consumption

It's often said that ________ is the "main driver" the economy because its share of GDP is larger than any of the other expenditure components

consumption

The least volatile component of GDP is

consumption

Which is the least volatile component of GDP

consumption

GDP is equal to

consumption + investment + gov spending + net exports

What are the components of the National Spending Approach to calculate GDP

consumption of goods and services, investment goods, government purchases, and net exports

Which of the following statements regarding GDP is true?

consumption spending accounts for nearly 2/3 of total GDP

Which of the following correctly and fully defines conditional convergence?

countries with similar stead-state levels of output to grow faster when they're poor than when they're rich until their per capita GDP levels converge

Increases in the level of corruption in a country tend to

decrease per capita GDP

a corrupt government may lead to a(n)_____ in entrepreneurship bc the risk of expropriation will likely ______ for potential entrepreneurs

decrease; lower the marginal benefit curve

A corrupt government may lead to a(n)_____ in entrepreneurship bc bribes raise the _____ for potential entrepreneurs

decrease; total opportunity cost

Increases in the level of corruption in a country tend to

decreased per capita GDP

We have used the terminology proximate and ultimate causes as explanations of economic outcomes. What is another term for proximate causes for wealth of nations?

direct causes

When industries are limited by the size of the domestic market, opening trade to the world markets will likely lead to ______ and _______ real GDP per capita in the domestic country

economies of scale; increase

All else equal, the Solow model predicts that countries with ______ population growth rates will tend to have a ______ steady state level of per capita real GDP

higher; lower

Absolute convergence implies that countries that have _____ initial real per capita GDP will have ______ per capita real GDP growth

higher; slower

A recent proposal by President Obama to reduce the cost of community colleges is an attempt to raise increase society's ________

human capital

In the Solow model, if the first unit of capital increases output by one unit, then the second unit of capital will cause total output to

increase, but by less than one unit

In the solow model, an increase in the savings rate will _____ the steady-state capital and ______ steady-state of output

increase; increase

Adam Smith's metaphor of the "invisible hand can lead to benefits to society when

institutions align the private interests with the social interest

All of the high-income market economies of the world have ______ that generally provide incentives for individuals' self-interest by using _____

institutions; profit-seeking motives

Considering the incentives for the private market to conduct research and development, we expect that the amount of research and development conducted by the private sector would be _____ the efficient level because of the ______ property of new knowledge

less than; nonrivalrous

One of the basic underlying messages of the speaker's talk was that change is _____

like water and everyone including fish need water

In the long run, real GDP growth can continue because

new ideas allow the factors of production to be used more efficiently

The speaker referred to a book by one of the authors of our textbook. He claimed that the automation may result in ____ for some workers and that it may no longer be possible to be ____ and be part of the middle class

lower demand, skilled

Decreases in political stability in a country will typically result in

lower levels of real GDP per capita

According to the Solow model, countries that have ____ rates of population growth will tend to have a _____ real GDP per capita

lower; higher level of

According to the Solow model, countries that have ______ rates of population growth will tend to have a ______ real GDP per capita

lower; higher level of

All else equal, the Solow model predicts that countries with ______ savings rate will tend to have a ______ steady state level of per capita real GDP

lower; lower

Real per capita GDP is typically used as a measure of welfare in this class because

many variables that reflect the standard of living are positively correlate with per capita real GDP

Gross Domestic Product uses ______ to account for differences in the _______ final goods and services

market prices; value of

GDP is best defined as the ______ value of all ______ goods and service that are produced _______

market; final; within a country in a year

The differences between nominal GDP and real GDP is that nominal GDP

measures the country's production of final goods and services at current prices, whereas real GDP measures a country's production of all final goods and services at fixed historical prices

The correlation between infant mortality and real GDP per capita is

negative

The growth rate of GDP is

non of the above (GDP adjusted for changes in the inflation rate, GDP adjusted changes in the price level, GDP adjusted for changes in population growth)

Wheat flour purchased by Bakeries Corporation to make Wonder Bread is a transaction that is

not added to the GDP

Throughout human history we know that

not until the early 19th century were a few countries able to establish sustained long-run economic growth

The production function expresses a relationship between

output and the factors of production

In class, we wrote the production function as y= AF(K,H). This production function tells us that

output is a function of the technology (A), physical capital stock (K), and human capital (H)

One measure of student output is number of completed math problems produced. Using pen and paper only, a student can complete 50 math problems in 2 hours. Using pen, paper and calculator, this same student can complete 100 math problems in 2 hours. (The student is already familiar with, and knows how to use, the calculator) This scenario illustrates the use of which factor of production?

physical capital

One measure of student output is number of completed math problems. Using pen and paper only, a student can complete 50 math problems in 2 hours. Using pen, paper, and calculator this same student can complete 100 math problems in 2 hours. This scenario illustrates how the addition of which factor of production can increase output

physical capital

To perform several calculations, students use computers instead of pencil and paper. As a result, they are able to complete their homework more quickly. Which factor of production explains this result?

physical capital

Factors of production that contribute to growth in per capita GDP include

physical capital, skilled labor, and technological know-how

The most important factor that contributed to China's rapid growth at the end of the 1970s and early 1980s was

property rights

The most important factor that contributed to China's rapid growth at the end of the 1970s and early 80s was

property rights

In this course, we use ______ as a proxy for a country's standard of living

real GDP per capita

Which of the following is the best measure of a country's standard of living?

real GDP per capita

Business cycles are short-term movements in real GDP around

real GDP's long-term trend

The idea that markets work efficiently

refers to the fact that self-interest can be aligned with social interest

One of the Big Ideas presented in the first chapter of the text is that Trade-offs are Everywhere occurs because

scarcity is everywhere and this forces individuals and society to make choices

A business cycle refers to ______ movements in _______ around _______

short-run; real GDP; a long-term trend in real GDP

Physical capital is the

stock of tools including machines, structures, and equipment

When deciding how much to study, economists would recommend students to study until:

the marginal costs exceed marginal benefits

Fluctuations in college applications correlate positively with fluctuations in unemployment. What is the most likely reason why?

the opportunity cost of going to college is low when jobs are hard to find

Suppose congress passes a law that permits the death penalty as a possible sentence for selling illegal drugs. As a result, we might expect the murder rate to increase because

the opportunity costs have changed and once a dealer is spotted selling drugs by law enforcement officials there is no additional penalty imposed for killing the officials

When you get a haircut

the price of the haircut gets counted as part of GDP

If nominal GDP increases in 2014, we know that

the prices of goods and/or the quantity of goods increased

The opportunity cost of receiving a free ticket to the NCAA championship game with a face-value of $450 and attending the game is:

the resale value of the lost market value of selling the ticket and the time to go

When people choose to recycle and buy appliances that conserve on energy, they are acting in _______ and ________

the social interest; their self-interest

Government has a role in subsidizing research and development when

the spillovers are large

*chart unemployment GDP growth The chart above depicts real GDP growth and unemployment rate. Looking at these two data series, we can infer that

the unemployment rate is countercyclical

The opportunity cost of a choice is

the value of the next best choice not taken

When it comes to getting the flu shot, most people consider ______, not _______.

their self-interest; the social interest

What is a result of a high level of government corruption

there are few entrepreneurs

Every day we rely on the work of millions of other people to provide us with the food, clothing, and shelter. People work for our benefit because:

they benefit by doing so

Economists think that incentives matter

to all human beings irrespective of the environment

As a share of GDP, _____ accounts for roughly 2/3 of GDP and is _____ over time

total labor compensation, stable

In an effort to clean the air, many places impose restrictions on the burning of garbage. This policy causes more garbage to be buried underground, potentially increasing groundwater contamination. What concept does this example represent?

trade-offs

You are considering going to Fort Lauderdale for spring break and you are choosing between flying from Greenville to Miami and taking a bus. The flight costs $600 and takes 3 hours; a bus ticket between the cities costs $125 and takes 14 hours. Choosing between these two options is an example of which of the Big Ideas?

trade-offs are everywhere

Institutions and incentives are _____ causes and factors of production are ____ causes of wealth of nations

ultimate; proximate

Institutions and incentives are ______ causes and factors of production are ______ causes of wealth of nations

ultimate; proximate

Because some economic activities in the underground economy go unreported, real gross domestic product is

understated

Intermediate goods are

used up in the production process

The factor income approach to calculating GDP can be summarized as the summation of

wages, interest, rent, and profit

Which of the following choices shows a good or service (produced in the current period) that is NOT counted in GDP for this year

wood that is used for making furniture by Ashley Furniture

Which of the following choices shows a good or service (produced in a current period) that is NOT counted in GDP for this year

wood used for making furniture

Which of the following services does NOT count towards GDP

you paint your garage