Macro final 3

At what price would there be an excess demand of 200 units of the good?

$20

If the CPI was 68 in 1965 and is 285 today, then $100 today purchases the same amount of goods and services as

$23.86 purchased in 1965.

Consider the following data (in billions of dollars) for an economy: • Consumption 3,500 • Investment 800 • Government Spending 900 • Export 50 • Import 100 Gross domestic product (in billions of dollars) for this economy equals

$5,150

Suppose that in some state the adult population is 3 million, the labor force participation rate is 80%, and 240,000 people are unemployed. What is the unemployment rate?

10%

Suppose you lend $1,000 at an interest rate of 10 percent. If the expected real interest rate is 4 percent (based on your expected inflation), then the rate of inflation over the upcoming year that would be most beneficial to you (among the following choices) would be a rate of inflation

equal to 0%

If price in this market is currently $14, then there would be a(n)

excess supply of 40 units. The law of supply and demand predicts that the price will fall from $14 to a lower price.

Social Security payments are

excluded from GDP because they do not reflect the economy's production.

Which of the following pairs correctly identify W and Y?

firms and households

A price floor means that

government is imposing a minimum legal price that is typically below the equilibrium price.

A binding minimal wage leads to

higher unemployment rate.

The movement from point A to point B on the graph shows a(n)

increase in quantity demanded

Which shows demand and supply conditions in the competitive market for product X. A shift in the demand curve from D0to D1 might be caused by a(n)

increase in the price of complementary good Y.

Which shows demand and supply conditions in the competitive market for product X. Other things equal, a shift of the supply curve from S0 to S1 might be caused by a(n)

increase in the wage rates paid to laborers employed in the production of X.

A professional gambler moves from a state where gambling is illegal to a state where gambling is legal. Most of his income was, and continues to be, from gambling. His move

raises GDP

Suppose that over the past year, the real interest rate was 5 percent and the inflation rate was 3 percent. It follows that

the dollar value of savings increased at 8 percent, and the purchasing power of savings increased at 5 percent.

If, at the current price, there is a shortage of a good, then

the price is below the equilibrium price.

In comparing GDP data over a period of years, a difference between nominal and real GDP may arise because:

the price level may change over time.

The natural rate of unemployment is:

the sum of frictional and structural unemployment.

A decrease in the number of sellers in the market causes

the supply curve to shift to the left.

If the supply of a product increases, then we would expect equilibrium price

to decrease and equilibrium quantity to increase

The graph below pertains to the supply of paper to colleges and universities. All else equal, the return of college students to campus in the fall would cause a move from

x to y

Unanticipated inflation

reduces the real burden of the public debt to the Federal government.

Year CPI 2002 180 2003 184 The inflation rate between 2002 to 2003 equals

2.2%

Real GDP

P1*Q1 + P1*Q2

A likely example of substitute goods for most people would be

apple juice and orange juice

The current price of blue jeans is $30 per pair, but the equilibrium price of blue jeans is $25 per pair. As a result,

-The quantity supplied of blue jeans exceeds the quantity demanded of blue jeans at $30 price -The equilibrium quantity of blue jeans exceeds the quantity demanded at the $30 price -There is a surplus of blue jeans at the $30 price

Which shows demand and supply conditions in the competitive market for product X. If the initial demand and supply curves are D0 and S0, equilibrium price and quantity will be:

0F and 0C respectively.

Which shows demand and supply conditions in the competitive market for product X. If supply is S1and demand D0, then

0F represents a price that would result in a shortage of AC

If the Consumer Price Index rises from 300 to 333 in a particular year, the rate of inflation in that year is:

11%

Elizabeth just received her Ph.D. in economics and has two competing job offers. The first is in Washington, D.C. and pays a salary of $200,000. She has a similar job offer in Austin, TX that pays $90,000. What CPIs would make the two salaries have the same purchasing power?

160 in Washington, D.C. and 72 in Austin, TX

The following table shows the value of the Consumer Price Index and the nominal interest rate for 2013-2015. What was the real interest rate in 2015?​

2.0%

If the nominal interest rate is 5 percent and the real interest rate is 2 percent, then the inflation is:

3%

Suppose that the adult population in the country of Atlantis is 115 million. If 80 million people are employed and 5 million are unemployed, then

30 million are not in the labor force.

Imagine that you borrow $5,000 for one year and at the end of the year you repay the $5,000 plus $600 of interest. If the inflation rate was 4%, what was the real interest rate you paid?

8%

Bob is looking for work after school, but everywhere he fills out an application, the managers say they always have a lot more applications than open positions. Tom has a law degree. Several firms have made him offers, but he thinks he might be able to find a firm where his talents could be put to better use.

Bob is structurally unemployed, and Tom is frictionally unemployed

Adam is looking for a job in marketing. He has had some offers and his prospects are promising, but he has not yet accepted a job. Amanda lost her job working for Mercury Bicycles because many customers decided they prefer bicycles manufactured by Ultimate Bicycles instead. Who is frictionally unemployed?

Both Adam and Amanda

Sam, an American citizen, prepares meals for his family at home. Ellen, a Canadian citizen, commutes to the U.S. to help prepare meals at a restaurant in Idaho. Whose value of services preparing meals is included in U.S. GDP?

Ellen's but not Sam's

Suppose the income of buyers in a market for an inferior good decreases and a technological advancement occurs also. What would we expect to happen in the market?

Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous

Which of the following statement is correct? A. In the national income accounts GDP can be measured as production, income, or expenditures. B. Both the market value of final goods and the market value of intermediate goods are included in GDP. C. The purchases of financial assets like stocks and bonds are Investment. D. Meals served by a restaurant located in Canada but owned by an American citizen is included in US GDP

In the national income accounts GDP can be measured as production, income, or expenditures.

Who would be included in the labor force?

Lisa, who is unhappy with her current job

Which of the following people are NOT included in the labor force?

Lizzie who is a full time student

Recently a labor union argued that the standard of living of its members was falling. A critic of the union argued that this could not possibly be true because the union had been acquiring increases in the nominal incomes of its members through collective bargaining. Is the critic correct?

No, because real income may fall if prices increase more proportionately than the increase in nominal income.

In which of the following cases would purchasing power rise? A. Nominal income rises by 8 percent, and the price level rises by 10 percent. B. Nominal income rises by 2 percent, and the price level remains unchanged. C. Nominal income falls by 4 percent, and the price level fall by 4 percent. D. Purchasing power will rise in all of the above cases.

Nominal income rises by 2 percent, and the price level remains unchanged.

Nominal GDP Formula

P1*Q1 + P2*Q2

Which of the four panels illustrates a decrease in quantity supplied?

Panel (b)

Which of the four panels illustrates an increase in quantity demanded?

Panel (c)

Suppose that the federal government is concerned about obesity in the United States. Congress is considering two plans. One would require "junk food" producers to include warning labels on all junk food. The other would impose a tax on all products considered to be junk food (tax on the producers). We could illustrate the tax as producing a movement from

Point A to Point C in Panel 2

Which of the following movements would illustrate the effect in the market for wedding cakes resulting from a decrease in the number of pastry chefs? On a quantity price diagram with demand one being A and B, demand 2 being D and C, supply 1 being A and D, and supply 2 B and C D A C B

Point C to Point D

A binding rent controls are best illustrated by

Price A

A government-set binding price ceiling is best illustrated by:

Price A

A government minimal price support program to aid farmers is best illustrated by:

Price C

A government-set binding price floor is best illustrated by:

Price C

A binding minimal wage is best illustrated by:

Price C (above the market equilibrium, surplus)

The graph below pertains to the supply of paper to colleges and universities. All else equal, a major paper manufacturer filing for bankruptcy and shutting down as a result of an IRS tax evasion investigation would cause a move from

SB to SA

The graph below pertains to the supply of paper to colleges and universities. All else equal, an increase in the price of the pulp used in the paper production process would cause a move from

SB to SA

The U.S. government pays an economist at the U.S. Department of Commerce $100,000 in salary in 2013. The economist then retires. In 2014, the government pays him $60,000 in Social Security benefits. Which of the following is correct? A. The 2013 payment is included in 2013 GDP as government purchases, and the 2014 payment is included in 2014 GDP as government purchases. B. The 2013 payment is included in 2013 GDP as government purchases, but the 2014 payment is not included in 2014 GDP. C. The 2013 payment is included in 2013 GDP as government purchases, and the 2014 payment is included in 2014 GDP as government transfer payments. D. The 2013 payment is included in 2013 GDP as government purchases, and the 2014 payment is allocated to previous years' GDP according to the amount of work performed by the economist each year.

The 2013 payment is included in 2013 GDP as government purchases, but the 2014 payment is not included in 2014 GDP.

In January, buyers of gold expect that the price of gold will fall by February. What happens in the gold market in January, holding all else constant?

The demand curve shifts to the left.

several studies have shown promising links between green tea consumption and cancer prevention. How does this affect the market for green tea?

The demand for green tea curve shifts to the right because of a change in tastes and preferences in favor of green tea.

Which of the following could cause nominal GDP to decrease, but real GDP to increase? A. The price level rises and the quantity of final goods and services produced rises. B. The price level rises and the quantity of final goods and services produced rises. C. The price level rises and the quantity of final goods and services produced falls. D. The price level falls and the quantity of final goods and services produced falls.

The price level rises and the quantity of final goods and services produced rises.

Which of the following is not correct? A. If there is deflation, then the purchasing power of an interest-earning deposit rises by more than the nominal interest rate over time. B. If the inflation rate exceeds the nominal interest rate, then the purchasing power of an interest-earning deposit falls over time. C. The purchasing power of an interest-earning deposit can increase or decrease over time, but it cannot stay the same. D. The higher the rate of inflation, the smaller the increase in the purchasing power of an interest-earning deposit.

The purchasing power of an interest-earning deposit can increase or decrease over time, but it cannot stay the same.

Farmers can plant either corn or soybeans in their fields. Suppose that a new technology for converting corn into liquid fuel increases the demand for corn. Which of the following is most likely to occur?

The supply of soybeans will decrease.

Rachel cuts her sister's hair for free. When she cuts the hair of her customers in her shop, she charges $10. When is Rachel's haircutting included in GDP?

When she cuts her customers' hair, but not her sister's.

Suppose there's an unanticipated increase in the rate of inflation. Which of the following is likely to be true?

Workers whose nominal wages are set at the beginning of the year are likely to suffer a decrease in real wages (purchasing power).

A movement along the demand curve for Aquafresh toothpaste is caused by

a change in the price of Aquafresh toothpaste.

Panel (d) shows which of the following?

a decrease in quantity demanded and a decrease in supply

If toast and butter are complements, then which of the following would increase the demand for toast?

a decrease in the price of butter

An decrease in the price of oranges would lead to a(n)

a movement down and to the left along the supply curve for oranges.

Suppose the figure shows the market demand for coffee. Suppose the price of tea, a substitute good, increases. Which of the following changes would occur?

a shift from D2 to D1

A surplus of a product will arise when price is:

above equilibrium with the result that quantity supplied exceeds quantity demanded.

If mayonnaise and Miracle Whip are substitutes, then which of the following would increase the demand for Miracle Whip?

an increase in the price of mayonnaise

The movement from point A to point B on the graph is caused by

an increase in the price of the good.

To be officially unemployed a person must:

be in the labor force

Which of the following is not included in GDP?

carrots grown in your garden and eaten by your family

A person who is not employed and claims to be trying hard to find a job but really is not trying hard to find a job is

counted as unemployed but should be counted as out of the labor force

Lead is an important input in the production of crystal. If the price of lead decreases, then we would expect the supply of

crystal to increase

If the unemployment rate is 9 percent and the natural rate of unemployment is 5 percent, then the:

cyclical unemployment rate is 4%

If the price level rose in three consecutive years from 100 to 120 to 140, then the inflation rate over those years would

decrease

Suppose you like to make, from scratch, pies filled with banana cream and vanilla pudding. You notice that the price of bananas has increased. As a result, your demand for vanilla pudding would

decrease

Suppose that coffee growers sell 200 million pounds of coffee beans at $2 per pound in 2007, and sell 240 million pounds for $3 per pound in 2008. Based on this information we can conclude that the:

demand for coffee beans has increased.

Funsters, Inc., the largest toy company in the country, sells its most popular doll for $15. It has just learned that its leading competitor, Toysorama, is mass-producing an excellent copy and plans to flood the market with their $5 doll in six weeks. Funsters should

increase the supply of its doll now before the other doll hits the market.

Price floors and price ceilings:

interfere with the rationing function of prices.

A lender need not be penalized by inflation if the:

lender correctly anticipates inflation and increases the nominal interest rate accordingly.

Which of the following is included in GDP? A. marijuana purchased legally in Colorado. B. marijuana purchased illegally from a drug dealer. C. marijuana produced and consumed by a man in his attic D. All of the above are included in GDP.

marijuana purchased legally in Colorado.

GDP is defined as the

market value of all final goods and services produced within a country in a given period of time.

If the prices of all goods and services produced in the economy rose while the quantity of all goods and services stayed the same, which would rise?

nominal GDP but not real GDP.

Suppose that when income rises, the demand curve for doctor's visits shifts to the right. In this case, we know doctor's visits are

normal goods

Unemployment compensation is

not part of GDP because it is a transfer payment.

The unemployment rate is the:

percentage of the labor force that is unemployed.

A market supply curve shows how the total quantity supplied of a good varies as

price varies

Nominal GDP will definitely increase when

prices increase and output increases.

Suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105. The person's purchasing power will:

rise by about 15%

At a price of $12, there is a

shortage of 4 units

Suppose that a decrease in the price of good X results in fewer units of good Y being demanded. This implies that X and Y are

substitute goods

A improvement in production technology will shift the

supply curve to the right.

Which shows demand and supply conditions in the competitive market for product X. Given D0, if the supply curve moved from S0 to S1, then:

supply has decreased and equilibrium quantity has decreased.

Suppose that salsa manufacturers sell 2 million bottles at $3.50 in one year, and 3 million bottles at $3 in the next year. Based on this information we can conclude that the:

supply of salsa has increased.

Suppose chocolate-dipped strawberries are currently selling for $30 per dozen, but the equilibrium price of chocolate-dipped strawberries is $20 per dozen. We would expect a

surplus to exist and the market price of chocolate-dipped strawberries to decrease.

If the price of SUVs increases, we would expect

the demand for gasoline to decrease.

Suppose that over the past year, the real interest rate was 3 percent and the inflation rate was 1 percent. It follows that

the dollar value of savings increased at 4 percent, and the purchasing power of savings increased at 3 percent.

Suppose that over the past year, the real interest rate was 6 percent and the inflation rate was -2 percent. It follows that

the dollar value of savings increased at 4 percent, and the purchasing power of savings increased at 6 percent.