Macro Test 1

In a competitive market, if the existing price is below the equilibrium price, market forces will drive the price: A. Up and quantity supplied up B. Up and quantity supplied down C. Up and supply up D. Down and demand down

A. Up and quantity supplied up

Real Income Equation

nominal income / (CPI/100)

cost-push inflation

occurs when overall prices increase (inflation) due to increases in the cost of wages and raw materials

When Price Rises.....

the quantity demanded decreases along the demand curve, quantity supplied increases also.

frictional unemployment

the unemployment which exists in any economy due to people being in the process of moving from one job to another

cyclical unemployment

unemployment caused by a business cycle recession

structural unemployment

unemployment resulting from industrial reorganization, typically due to technological change, rather than fluctuations in supply or demand.

Slope Equation

y=mx+b

Unemployment Equation

Unemployed People/ Labor force (Which is the Population-the people that are retired or under 16) x 100

Supply curve shifts right

increase in supply

What is GDP in the economy given the following numbers (in billions$)? Gross private domestic investment = $320, Imports = $35, personal consumption expenditures = $2,460, exports = $22, government purchases = $470 A) $3,237 B) $3,263 C) $3,307 D) $3,290

A) $3,237

GDP in an economy is $4,600. Consumer spending is $3,500, government purchases are $900, gross private domestic investment is $400. Net exports are: A) -$200 B) -$400 C) $400 D) $200

A) -$200

An increase in the demand for computers indicates that: A) More will be demanded because sellers are selling more B) More will be demanded at lower prices C) More will be purchased even if prices stayed the same D) More will be purchased because sellers are putting them on sale

A) More will be demanded because sellers are selling more

What is the real salary of a professor who earned $32,500 in 1994? CPI Numbers: 1994: 148.2 2017: 237.017 A) $21,929.82 B) $52,000.00 C) $13,712.10 D) $32,500.06

A) because 32,500/(148.2/100)= $21,929.82

A college graduate using the summer following graduation to search for a job would best be classified as A) frictionally unemployed B) cyclically unemployed C) structurally unemployed D) not yet a member of the labor force

A) frictionally unemployed

In the "Invention of the Economy" podcast it was reported that Italy was able to increase its GDP dramatically by A) including black market activities in its GDP calculation B) joining the European Union C) decreasing corporate income taxes D) signing a free trade agreement with Asia

A) including black market activities in its GDP calculation

When inflation occurs: A. All prices are rising B. Each dollar of income will buy more output than before C. The purchasing power of money increases D. The purchasing power of money decreases

A. All prices are rising

Inflation caused by a rise in the prices of inputs is referred to as: A. Cost-push inflation B. Demand-pull inflation C. Unanticipated inflation D. Hyperinflation

A. Cost-push inflation

In calculating the unemployment rate, "discouraged" workers who are not actively seeking employment are: A. Excluded from the labor force B. Included as part of the unemployed C. Treated the same as part-time workers D. Used to determine the size of the labor force

A. Excluded from the labor force

New college graduates still looking for their first jobs would be classified in the BLS data as: A. Frictionally unemployed B. Not yet in the labor force C. Cyclically unemployed D. Part of structural unemployment

A. Frictionally unemployed

Business inventories increase when firms produce: A. More than they sell, and the inventory increase is added to GDP B. Less than they sell, and the inventory increase is added to GDP C. More than they sell, and the inventory increase is subtracted from GDP D. Less than they sell, and the inventory increase is subtracted from GDP

A. More than they sell, and the inventory increase is added to GDP

GDP measured using current prices is called: A. Nominal GDP B. Real GDP C. Constant GDP D. Deflated GDP

A. Nominal GDP

To avoid multiple counting in national income accounts: A. Only final goods and services should be counted B. Intermediate goods and services should be counted C. Both final and intermediate goods and services should be counted D. Primary, intermediate, and final goods and services should be counted

A. Only final goods and services should be counted

If peanut butter and cheese spread are substitute products, what is the effect on the peanut butter market of a decrease in the price of cheese spread? A) Equilibrium price and quantity will increase B) Equilibrium price and quantity will decrease C) No impact D) Equilibrium price will increase and quantity will decrease

B) Equilibrium price and quantity will decrease

If peanut butter and grape jelly are complementary products, what is the effect in the peanut butter market of a decrease in the price of grape jelly? A) Equilibrium price and quantity will decrease B) Equilibrium price will decrease and quantity will increase C) Equilibrium price will increase and quantity will decrease D) Equilibrium price and quantity will increase

B) Equilibrium price will decrease and quantity will increase

A television station reports that the price of orange juice has declined but the quantity traded has increased. This situation could be caused by a(n): A) Significant decrease in the harvest of oranges in the nation's orchards B) Improvement in the technology of producing orange juice C) Increased preference for orange juice among buyers D) Decrease in income, and orange juice is a normal good

B) Improvement in the technology of producing orange juice

What is something that is NOT counted in Gross Private Domestic Investment? A) Purchases of equipment B) Purchases of stocks and bonds C) Inventory D) Construction

B) Purchases of stocks and bonds

What will happen in the following situation? In the market for gasoline, when the price of oil, which is used to produce gasoline, increases because of reduced production by major oil-producing nations. A) Demand for gasoline will decrease B) Supply of gasoline will decrease C) Supply of gasoline will increase D) Demand for gasoline will increase

B) Supply of gasoline will decrease

What would best explain why the equilibrium price of pink salmon decreased and the equilibrium quantity increased? A) The decrease in supply was greater than the increase in demand B) The increase in supply was greater than the decrease in demand C) The decrease in demand was greater than the decrease in supply D) The increase in demand was greater than the decrease in supply

B) The increase in supply was greater than the decrease in demand

Which type of industry will be most affected by a recession? A) military goods B) construction C) education D) food

B) construction

In what phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates? A) Peak B) Expansion C) Recession D) Trough

B) expansion

The inflation rate is A) understated because people use coupons and bargain shop B) overstated because people do a lot of substituting when shopping C) overstated because people rarely change their shopping habits (generally every 10 years) D) understated because people buy in bulk

B) overstated because people do a lot of substituting when shopping

If the government says that new automobile prices cannot exceed $5,000 then A) The supply of automobiles will decrease B) A shortage of automobiles will result C) A surplus of automobiles will result D) The demand for automobiles will increase

B) shortage of automobiles will result

The GDP tends to A) overstate economic welfare because it does not include nonmarket activities B) understate economic welfare because it does not take into account increases in leisure C) overstate economic welfare because it does not reflect improvements in product quality D) understate economic welfare because it includes expenditures undertaken to correct pollution

B) understate economic welfare because it does not take into account increases in leisure

GDP is the market value of: A. Resources (land, labor, capita, and entrepreneurship) in an economy in a given year B. All final goods and services produced in an economy in a given year C. Consumption and investment spending in an economy in a given year D. All output produced and accumulated over the years

B. All final goods and services produced in an economy in a given year

A headline states: "Real GDP falls again as the economy slumps." This condition is most likely to produce what type of unemployment? A. Structural B. Cyclical C. Frictional D. Natural

B. Cyclical

GDP tends to overstate economic well-being because it takes into account: A. Improvements in product quality over time B. Expenditures undertaken to correct pollution C. Illegal activities of individuals and business

B. Expenditures undertaken to correct pollution

Which of the following is included in GDP? A. Welfare payments received by some households B. Fees received by stockbrokers C. Cash gifts from relatives during the holidays D. Payments received from selling stocks in one's portfolio

B. Fees received by stockbrokers

An example of final goods in national income accounts would be: A. New lawn mowers purchased by Cut-rite Lawn Equipment & Supplies B. Flowers and pots purchased by homeowner Lenny Davis C. Chemicals purchased by Green Grass Lawn Care Services D. Seedlings and saplings purchased for resale by Wendy Lee's Garden Center

B. Flowers and pots purchased by homeowner Lenny Davis

Which goods would usually be an inferior good? A. French wines B. Generic beer C. Theater tickets D. Steak

B. Generic Beer

The unemployment rate is interpreted as the percentage of the: A. Adult population who are unemployed B. Labor force that are not employed C. Able-bodied population who are not working D. Work force that have been laid off

B. Labor force that are not employed

If you benefited from a decrease in the price of gasoline, the whole economy must have benefited. This statement is an example of: A. Ceteris paribus B. The fallacy of composition C. A factual statement D. Policy economics

B. The fallacy of composition

Which of the following is not a component of GDP in the expenditures approach? A. Government purchases B. Workers' wages and other compensation C. Gross private domestic investment D. The difference between exports and imports

B. Workers' wages and other compensation

A nation has a population of 300 million people. Of these, 80 million are retired, in institutions, or under age 16. There are 210 million who are employed and 10 who are unemployed. What is the unemployment rate? A) 3.3% B) 4.8% C) 4.5% D) 5.2%

C) 4.5% because 300-80= 220 then take the 10 mill that aren't employed and divide it by 220. 10/220= 4.5%

Suppose the total monetary value of all final goods and services produced in a particular country in 2015 is $500 billion and the total monetary value of final goods and services sold is $450 billion. We can conclude that A) GDP in 2015 is $450 billion B) NDP in 2015 is $450 billion C) GDP in 2015 is $500 billion D) inventories fell by $50 billion in 2015

C) GDP in 2015 is $500 billion

What is something that might be used to demonstrate economic development but not economic growth? A) US Trade balance B) Government spending C) Literacy rates D) Changes in consumer expenditures

C) Literacy rates

What is something that is relatively new item counted in the US GDP? A) Food B) Oil C) NIght nannies D) Automobiles

C) NIght nannies (personal use, does not add to US GDP)

Efficiency Wage Theory is an explanation for the fact that prices are sticky. Efficiency Wage Theory states that A) Paying high wages leads to increased slacking off B) Menu prices should stay the same C) Paying high wages decreases employee turnover D) Paying high wages reduces profits

C) Paying high wages decreases employee turnover

Net exports is a positive number when: A. A nation's exports of goods and services are increasing B. A nation exports goods and services to other nations C. A nation's exports of goods and services exceed its imports D. A nation's exports of goods and services fall short of its imports

C. A nation's exports of goods and services exceed its imports

In which industry or sector of the economy is output least likely to be affected by the business cycle? A. Housing construction B. Automobile production C. Agricultural commodities D. Capital goods production

C. Agricultural commodities

The law of increasing opportunity costs says that: A. Costs of production increase and then decrease B. Increases in wages cause increases in the costs of production C. Along a production possibilities curve, increases in the production of one good require larger and larger sacrifices of the other good D. Along a production possibilities curve, increases in the production of one good make the production of that good become easier and easier

C. Along a production possibilities curve, increases in the production of one good require larger and larger sacrifices of the other good

In the circular flow model, households: A. Buy products and resources B. Sell products and resources C. Buy products and sell resources D. Sell products and buy resources

C. Buy products and sell resources

Gross domestic private investment, as defined in national income accounts, would include: A. Additions to business inventories B. Personal consumption expenditures on durable goods C. Government construction of new highways and dams D. Purchases of shares of stock in corporate businesses

C. Government construction of new highways and dams

Nominal GDP differs from real GDP because: A. Nominal GDP is based on constant prices B. Real GDP is based on current prices C. Real GDP results from adjusting for changes in the price level D. Nominal GDP results from adjusting for changes in the price level

C. Real GDP results from adjusting for changes in the price level

Depreciation is all of the following, except: A. The difference between GDP and NDP B. The difference between gross investment and net investment C. The accumulation of capital stock D. The consumption of fixed capital

C. The accumulation of capital stock

What will happen in the following scenario. In the market for wheat, when the cost of fertilizer decreases. A) Equilibrium price will increase and quantity will decrease B) Equilibrium price will decrease and quantity will increase C) Equilibrium price and quantity will decrease D) Equilibrium price and quantity will increase

D) Equilibrium price and quantity will increase

What is the effect on the peanut butter market of a higher wage rate for peanut workers? A) Equilibrium price and quantity will decrease B) Equilibrium price and quantity will increase C) Equilibrium price will decrease and quantity will increase D) Equilibrium price will increase and quantity will decrease

D) Equilibrium price will increase and quantity will decrease

In the video "200 Countries, 200 Years, 4 minutes" what 2 variables were examined? A) GDP growth rate and infant mortality rate B) Unemployment and Inflation C) Income per capita and literacy rates D) Income per capita and life expectancy

D) Income per capita and life expectancy

Leon lost his job in an automobile plant because of the use of robots for welding on the assembly line. Leon is going back to school to learn how to repair computers. What type of unemployment is Leon faced with? A) Seasonal B) Cyclical C) Frictional D) Structural

D) Structural

What does it mean to be underemployed? A) You are not a member of the labor force B) You gave up looking for work 4 or more weeks ago C) You are retired at age 45 D) You are working at a job that does not fully utilize your skill set

D) You are working at a job that does not fully utilize your skill set

In which of the following cases would real income rise? A) nominal income falls by 4% and the price level falls by 4% B) nominal income rises by 8 % and the price level rises by 10% C) nominal income falls by 8 % and the price level rises by 10% D) nominal income rises by 2 % and the price level remains unchanged

D) nominal income rises by 2 % and the price level remains unchanged

Which would be considered investment according to economists? A) the sale of government bonds by the nation's central bank B) the purchase of newly issued shares of stock in Microsoft C) the purchase of shares of stock by Fidelity, a mutual fund company D) the construction of a new computer chip factory

D) the construction of a new computer chip factory

On a production possibilities curve, the single optimal or best combination of output for any society: A. Is at a point near the top of the curve B. Is at the precise midpoint of the curve C. Is at a point near the bottom of the curve D. Depends upon the preferences of society

D. Depends upon the preferences of society

In the expansion phase of the business cycle: A. The inflation rate decreases, but productive capacity increases B. The inflation rate and productive capacity decrease C. Employment increases, but output decreases D. Employment and output increase

D. Employment and output increase

If an economy is being "productively efficient," then that means the economy is: A. Producing the products most wanted by society B. Fully employing all economic resources C. Maximizing the returns to factors of production D. Using the least costly production techniques

D. Using the least costly production techniques

Official unemployment rate statistics may: A. Overstate the amount of unemployment by including part-time workers in the calculations B. Understate the amount of unemployment by excluding part-time workers in the calculations C. Overstate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment D. Understate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment

D. Understate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment

True or false: An increase in the price of staplers will cause the Demand for staplers to decrease.

False

GDP Equation

GDP= Consumption + Investment + Government Spending + Net Exports (NX is Net exports and that is Exports-Imports)

Inflation Rate Equation

Inflation Rate= ( (current year-previous year) / (previous year) ) x 100

Demand Curve shifts left

decrease in demand

Supply curve shifts left

decrease in supply

Demand Curve shifts right

increase in demand

demand-pull inflation

inflation that is caused by an increase in aggregate demand