Macroeconomics Midterm 1

On a coordinate graph, what is the Y intercept of the function X=3Y+60? A) -20 B) 0.1 C) 3.0 D) 20 E) 60

A) -20

Suppose that the quantity of orange juice demanded falls from 103,000 quarts per week to 97,000 quarts per week as a result of a 10 percent increase in its price. The price elasticity of demanded for orange juice is therefore... A) 0.6 B) 6.0 C) 1.97 D) 1.03 E) .43

A) 0.6

If a demand curve and supply curve can be stated functionally as Qd =-.01p+500 and Qs=0.4p+440, respectively, then the equilibrium quantity and price (Q, P) would be... A) 488; 120 B) 120; 488 C) 150; 485 D) 150; 150 E) 500; 440

A) 488;120

An economist has data showing U.S. GDP for the years 1945-2008. The best way to illustrate these dates are... A) a cross-sectional bar-chart graph. B) a time-series line graph C) a time-series bar chart diagram. D) a logarithmic scale diagram. E) a scatter diagram.

B) a time-series line graph

A basic underlying point in economics is that... A) people have unlimited wants in the face of limited resources. B) governments should satisfy the needs of the people. C) governments should never interfere in the working of a market economy. D) there are unlimited resources. E) people have limited wants in the face of limited resources.

A) People have unlimited wants in the face of limited resources.

If the income elasticity of demand for some good is 2.4, a 10 percent increase in income results in... A) a 24 percent increase in the quantity demanded. B) a 24 percent decrease in quantity demanded. C) a 2.4 percent increase in the quantity demanded. D) a 240 percent increase in quantity demanded. E) a 240 percent decrease in quantity demanded.

A) a 24 percent increase in the quantity demanded.

If an increase in income leads to an increase in the demand for sushi, then sushi is... A) a normal good. B) a neutral good. C) a complement. D) a necessity. E) an inferior good.

A) a normal good.

An economic theory requires all of the following EXCEPT... A) a set of definitions of the variables to be considered. B) a set of assumptions about the conditions under which the theory applies. C) a set of hypotheses about the relationship between the variables. D) a set of value judgements to interpret the empirical evidence. E) assumptions about motives of the people or firms involved.

A) a set of value judgements to interpret the empirical evidence.

Suppose there is a theory that several things influence the price of fish in Boston, one of which is the weather during fishing season. When examining the determinants of the price of fish, the weather is... A) an exogenous variable, as it is determined outside the theory. B) a stock, as it influences the quantity of fish caught. C) an endogenous variable, as it influences the price of fish. D) an act of God and, therefore, has no legitimate connection with the theory. E) an endogenous variable, as it is determined within the theory.

A) an exogenous variable, as it is determined outside the theory.

Farmers can raise either goats or ostriches on their land. Which of the following would cause the supply of goats to decrease? A) an increase in the price of ostriches. B) a decrease in the price of goats. C) an increase in the demand for goats. D) an increase in the demand for ostriches. E) a technological advancement in raising goats

A) an increase in the price of ostriches.

Suppose fires destroy many millions of acres of valuable U.S. forrest. The effect on the U.S. economy would be best illustrated by ______ the production possibilities boundary. A) an inward shift of B) a shift outward of C) a movement inside D) a movement to a point beyond E) a movement along

A) an inward shift of

value judgements... A) are subjective opinions that cannot be proven. B) should be the only basis for public policies. C) can be tested and verified. D) are basically the same for all individuals. E) are the basis for all economic models.

A) are subjective opinions that can not be proven.

Income elasticity measures the change in quantity demanded of some product with respect to changes in... A) households income. B) the price of another related product. C) its price. D) the supply of the product. E) the demand of the product.

A) households income.

In command economies, economic behavior is... A) largely determined by a central authority. B) based primarily on custom and habit. C) directed by individual self interest. D) largely affected by elements of tradition and market incentives. E) random and unpredictable

A) largely determined by central authority.

Behavior in free-market economies is... A) mostly directed by self interest. B) mostly affected by elements of tradition and government command. C) based primarily on custom and habit. D) determined by a central authority. E) random and unpredictable.

A) mostly directed by self interest.

Suppose a scientific breakthrough leads to a lower-cost method of producing battery-operated cars in Canada. The likely effect would be to move Canada's current production... A) possibilities boundary outward. B) to a point inside its new production possibilities boundary. C) above the level of U.S. production. D) to a point beyond its new production possibilities boundary. E) possibilities boundary inward.

A) possibilities boundary outward.

The price elasticity of demand measures the responsiveness of... A) quantity demanded to change in the price. B) the price to changes in quantity demanded. C) demand to supply changes. D) supply to demand changes. E) equilibrium changes.

A) quantity demanded to change in the price.

Suppose economists at the World Bank discover a positive correlation between family income and female education levels in developing countries. We can say that... A) the observed correlation is consistent with a theory that an increase in female education levels causes an increase in family income. B) the correlation is inconsistent with a theory that an increase in female education levels causes an increase in family income. C) there is a causal relationship between family income and female education. D) an increase in female education levels causes an increase in family incomes. E) an increase in family income causes an increase in female education levels.

A) the observed correlation is consistent with a theory that an increase in female education levels causes an increase in family income.

consider a production possibilities boundary showing the quantity of military goods and the quantity of civilian goods on two axes. A movement along the production possibilities boundary could be caused by... A) the reallocation of resources between military and civilian goods. B) an increase in the labor supply. C) the growth of productive capacity. D) the employment of previously idle resources. E) technological progress.

A) the reallocation of resources between military and civilian goods.

The statement "Y is a function of X" means that... A) value of Y depends on that of X B) value of X depends on that of Y C) value of Y and X are the same D) values of Y and X are independent E) values of Y and X are related to some third variable.

A) value of Y depends on that of X

A positive statement is one that states... A) what is, was, or will be B) what is and what should be C) what should be but is not D) what is desirable E) non-negative numbers

A) what is, was, or will be

An economist collects data comparing per-capita expenditures on education across states for the year 2008. The best way to illustrate this data is... A) a time-series line graph. B) a cross-sectional bar-chart graph. C) a scatter diagram. D) a logarithmic scale diagram. E) a time-series bar chart diagram.

B) a cross-sectional bar-chart graph

The U.S. economy is best described as... A) traditional. B) a mixed economic system. C) primarily free-market decision making. D) a command economy. E)primarily a public ownership economy.

B) a mixed economic system.

An economist has data showing household income and energy consumption for 10,000 households. The best way to illustrate this data is... A) a time-series line graph. B) a scatter diagram. C) a time-series bar chart diagram. D) a logarithmic scale diagram. E) a cross-sectional bar-chart graph.

B) a scatter diagram.

Disagreements over positive statements... A) are basically devoid of any emotion. B) are best handled by an appeal to the facts. C) never occur. D) cannot arise because positive statements are facts. E) arise from the failure to distinguish between a positive and a normative statement.

B) are best handled by an appeal to the facts.

In traditional economies, economic behavior is... A) directed only by self interest. B) based primarily on costum and habit. C) affected by elements of tradition, government command, and market incentives. D) largely determined by a central authority. E) random and unpredictable.

B) based primarily on custom and habit.

If a country's production possibilities boundary is drawn as a straight (downward-sloping) line it indicates... A) increasing opportunity cost of producing more of either good. B) constant opportunity cost of producing more of either good. C) an unfair distribution of resources in an economy. D) decreasing opportunity cost of producing more of either good. E) the use of the scarce resources in the economy.

B) constant opportunity cost of producing more of either good.

When considering how a family's level of consumption changes in response to changes in its income,... A) income is the dependent variable and family consumption is the independent variable. B) consumption is the dependent variable and income is the independent variable. C) both of the variables are independent. D) both of the variables are dependent. E) there is no relationship between the variables.

B) consumption is the dependent variable and income is the independent variable.

Suppose an individual wheat farmer's income is influenced by the region's average daily temperature. When examining the determinants of individual farmer income, the average daily temperature is a(n) ______ variable. A) endogenous B) exogenous C) flow D) dependent E) induced

B) exogenous

The key decision makers in a market economy are: A) corporations and governments. B) households, firms, and government. C) individual citizens and non-profit organizations. D) government and all institutions under government control. E) large corporations and labor organizations.

B) households, firms, and government.

If the total expenditure on automobiles increases when the price of automobiles rises, the price elasticity of demand for automobiles is... A) greater than one (demand is elastic). B) less than one (demand is inelastic). C) equal to one (demand is unit elastic). D) exactly zero. E) not determinable from the info given.

B) less than one (demand is inelastic)

A point lying inside the production possibilities boundary is one at which... A) the opportunity cost of producing more output is negative. B) more output could be produced with existing resources. C) there is no scarcity D) it is not possible to produce more output with existing resources. E) the economy has run out of resources.

B) more output could be produced with existing resources.

Suppose an economist tells you that the U.S. unemployment rate last year was 4.5 percent. This is an example of a(n) ______ statement. A) autonomous B) positive C) normative D) induced E) imputed

B) positive

Consider the law of demanded. Other things being equal, the quantity of beer demanded will be greater if the... A) incomes of beer drinkers are higher. B) price of beer is lower. C) price of wine is higher D) number of beer drinkers is higher. E) demand for beer rises.

B) price of beer is lower

If goods X and Y are complements and the price of X falls, all other things being equal, the demand curve for Y will... A) shift to the left. B) shift to the right. C) not shift at all. D) shift upward. E) shift downward.

B) shift to the right.

It has been observed that college enrollment is higher during periods of high unemployment. A possible explanation for this is... A) when prospects for getting a job are poor, the opportunity cost of doing nothing is higher. B) when prospects for getting a job are poor, the opportunity cost of going to university is lower. C) when prospects for getting a job are poor, the opportunity cost of getting a job is lower. D) during periods of high unemployment, professors teach better. E) during periods of high unemployment, tuition fees are reduced.

B) when prospects for getting a job are poor, the opportunity cost of going to university is lower.

The concept of scarcity in economics usually refers to a condition... A) where society is not employing all of its available resources in an efficient manner. B) where people's wants can never be satisfied by the available resources. C) that afflicts only poor countries. D) where too many frivolous goods and services are produced at the expense of socially desirable goods and services. E) where production is efficient, but distribution is inefficient.

B) where people's wants can never be satisfied by the available resources.

Suppose that one unit of labor can produce 5 units of wool or 2 pineapples. What is the opportunity cost or producing 1 pineapple? A) 5 units of wool B) 2 units of wool C) 2/5 units of wool D) 5/2 units of wool E) None

D) 5/2 units of wool

Suppose your expenses for this term are as follows: tuition: $5,000, room and board: $3,000, books and other educational supplies: $500. Further, during the term, you can only work part-time and earn $4,000 instead of your full-time salary of $10,000. What is the opportunity cost of going to college this term, assuming that your room and board expenses would be the same even if you did not go to college? A) $5,500 B) $8,500 C) $11,500 D) $14,500 E) $9,500

C) $11,500

If there is always a three-forgone trade-off between the production of goods X and Y, then the production of possibilities boundary for X and Y is... A) a downward-sloping curve convex to the origin. B) semi-circular. C) a downward-sloping straight line. D) a downward-sloping straight line that is broken at one point. E) a downward-sloping curve concave to the origin.

C) a downward-sloping straight line.

Specializing in the production of a good or service in which one has a comparative advantage enables a country to do which of the following? A) never have to engage in trade with other nations B) increase the variety of products that can produce with a decrease in resources C) consume a combination of goods that lies outside its own production possibilities frontier D) produce a combination of goods that lies outside its own production possibilities frontier E) None of the above

C) consume a combination of goods that lies outside its own production possibilities frontier

When the percentage change in quantity demanded is less than the percentage change in price that brought it about, demand is said to be... A) zero elastic. B) unelastic. C) inelastic. D) unit elastic. E) elastic.

C) inelastic

In command economies, economic behavior is... A) random and unpredictable. B) based primarily on custom and habit. C)largely determined by a central authority. D) largely affected by elements of tradition and market incentives. E) directed by individual self interest.

C) largely determined by a central authority.

To say that the demand curve for movies is negatively sloped means that... A) less quantity will be demanded at lower prices. B) more quantity will be demanded as home theatre systems become more expensive. C) less quantity will be demanded at higher prices. D) less quantity will be demanded as movies become poorer in quality. E) less quantity will be demanded at the same price.

C) less quantity will be demanded at higher prices.

The use of money for transactions... A) fosters self-sufficiency. B) enables humanity to satisfy all wants. C) makes exchange easier and thus promotes the specialization of labor. D) increases the use of barter. E) makes specialization of labor more difficult.

C) makes exchange easier and thus promotes the specialization of labor.

A theory... A) is only useful if its underlying assumptions are realistic. B) will be useful as long as it is logically consistent. C) must be judged on its ability to explain and predict real-world phenomena. D) will predict more accurately if it contained a greater number of mathematical equations. E) will be useful only if all human behavior is rational.

C) must be judged on its ability to explain and predict real-world phenomena

A scatter diagram... A) relates time series data only. B) shows the dependence of one variable on another. C) plots a series of observations, showing the relationship between two variables. D) relates cross-sectional data only. E) is a graph of a theoretical relationship between two variables.

C) plots a series of observations, showing the relationship between two variables.

The slope of a curve is... A) always constant. B) always positive. C) positive if the curve rises to the right. D) always negative. E) negative if the curve rises to the right.

C) positive if the curve rises to the right.

Excess demand is the same thing as... A) excess supply. B) demand. C) quantity demanded minus quantity supplied. D) quantity supplied exceeding quantity demanded. E) an equilibrium condition.

C) quantity demanded minus quantity supplied

For an inferior good, the quantity demanded... A) falls when income falls. B) rises when income rises. C) rises when income falls. D) responds directly to changes in income. E) does not change when income rises or falls.

C) rises when income falls.

An insight first fully developed by Adam Smith is that... A) without benevolence, production would not occur. B) benevolence in society is unimportant. C) self-interest, not benevolence, is the foundation of economic order. D) self-interest undermines effective economic order. E) individual self-interest is the only necessary force for social order.

C) self-interest, not benevolence, is the foundation of economic order.

Suppose that a particular theory predicts that on sunny days consumption will rise and that on cloudy days consumption will fall. If an economist tests this theory and finds that over a six-month period the theory predicts accurately, the economist would likely say... A) the theory has been proven correct. B) the theory is always reliable C) the evidence fails to reject the theory D) the theory shouldn't be taken seriously E) that the theory is not useful because consumption involves irrational human behavior.

C) the evidence fails to reject the theory.

Suppose that as the price of some product increases from $4 to $5 per unit the quantity supplied rises from 500 to 1,000 units per month. The price elasticity of supply for this product is... A) 0.33 B) 2.0 C) 2.5 D) 3.0 E) 1.0

D) 3.0

If the price elasticity of demand is 1.4, a 10 percent increase in the price of the good results in... A) a 1.4 percent decrease in the quantity demanded. B) a 1.4 percent increase in the quantity demanded C) a 14 percent increase in the quantity demanded. D) a 14 percent decrease in the quantity demanded. E) not determinable from the info given.

D) a 14 percent decrease in the quantity demanded.

When it is said that variable A depends on variable B, then A is... A) a derivative of B. B) proportional to B. C) partially exclusive of B. D) a function of B. E) independent of B.

D) a function of B

An assertion about the desirability of reducing unemployment by lowering payroll taxes is most likely... A) a theory. B) a positive statement. C) a hypothesis. D) a normative statement. E) a testable proposition.

D) a normative statement.

Given a positively sloped curve, a rise in the demand for that commodity causes... A) a shortage of other goods. B) a fall in sales of that commodity. C) a decrease in the equilibrium price and an increase in the equilibrium quantity exchanged. D) an increase in both the equilibrium price and the equilibrium quantity exchanged. E) a decrease in both the equilibrium price and the equilibrium quantity exchanged.

D) an increase in both the equilibrium price and the equilibrium quantity exchanged.

Suppose the cross-elasticity of demand for two goods, domestic beer and imported beer, is positive. If the price of imported beer falls, then quantity demand will... A) rise for both domestic and imported beer. B) fall for both domestic and imported beer. C) rise for domestic beer and fall for imported beer. D) fall for domestic beer and rise for imported beer. E) both will stay the same.

D) fall for domestic beer and rise for imported beer.

The price elasticity of demand for a product tends to be greater the... A) lower its price. B) more broadly the product is defined. C) fewer close substitutes for it there are. D) more close substitutes for it there are. E) shorter the time span being considered.

D) more close substitutes for it there are.

If the legal beer-drinking age is raised by two years, the changes to the equilibrium price and quantity of beer will be such that... A) price rises, quantity rises B) price falls, quantity rises C) price rises, quantity falls D) price falls, quantity falls E) no change in price or quantity

D) price falls, quantity falls

Which of the following pairs of goods are likely to be complements for a large group of consumers? A) televisions and radios B) cars and trucks C) tea and coffee D) televisions and DVD players E) tents and tent-trailers

D) televisions and DVD players

Which of the following best defines quantity demanded? A) the amount an individual purchases at its current price. B) the amount an individual purchases at his or her current income. C) the amount, per time period, that is desired at a given price. D) the amount, per time period, an individual desires and is able to purchase at the given price. E) the various amounts that a society desires at all relevant prices.

D) the amount, per time period, an individual is able to purchase at the given price.

The statement that a country's rate of GDP growth is influenced by individuals saying behavior is an example of a(n)... A) prediction. B) variable. C) normative statement. D) theory. E) economic law.

D) theory

"The distribution of income should be determined by the government" is an example of a positive economic statement. True False

False

In order to test a theory, one must... A) develop a better explanation that the one presented. B) present a series of normative statements and positive statements. C) use assumptions that most closely reflect reality. D) develop normative statements from the law of large numbers. E) confront the predictions of the theory with evidence.

E) confront the predictions of the theory with evidence.

On a diagram of a production possibilities boundary, the concept of opportunity cost is illustrated by the... A) boundary being concave to the origin. B) un attainable points outside the boundary. C) distance from the origin to the boundary. D) area bounded by the two axes and the boundary. E) negative slope of the boundary.

E) negative slope of the boundary.

If per capita income increases by 10% and household expenditures on leather coats increase by 15 percent, one can conclude that the price elasticity of demanded for leather coat is... A) elastic. B) inelastic. C) unity. D) positive. E) not determinable from the info given

E) not determinable from the info given

Economics is the study of... A) how to distribute income as equally as possible. B) how to plan an economy. C) why resources are scarce. D) how to best help the poor. E) the allocation of scarce resources among alternative uses.

E) the allocation of scarce resources among alternative uses.

The statement that a country's rate of economic growth is influenced by its firms investment behavior is an example of a(n)... A) normative statement. B) variable. C) prediction. D) economic law. E) theory.

E) theory

An increase in quantity supplied is represented by a rightward shift of the supply curve. True False

False

If the price of peaches, a substitute for plums, increases the demand for plums will decrease. True False

False

When voluntary exchange takes place, only one party games from the exchange. True False

False

"A decrease in the price of digital cameras will decrease the demand for camera film." This statement is an example of a positive economic statement. True False

True

A normal good is a good for which the demanded decreases as income decreases, holding everything else constant. True False

True

In a centrally planned economy, the government decides how economic resources will be allocated. True False

True