midterm 1

Which of the following statements is correct?

The opportunity cost of an additional 200 shoes increases as more shoes are produced.

When we move along a given demand curve,

all nonprice determinants of demand are held constant.

In order to include many different goods and services in an aggregate measure, GDP is computed using, primarily,

b. market prices.

Two goods are complements when an increase in the price of one good

decreases the demand for the other good.

A rational decisionmaker

takes an action only if they believe the marginal benefit of that action exceeds the marginal cost of that action.

If the price of Italian shoes imported into the United States decreases, then

the GDP deflator will not change.

A competitive market is a market in which

the forces of supply and demand determine prices and quantities.

When a seller expects the price of its product to increase in the future, the seller's supply curve shifts left now.

True

Which of the following demonstrates the law of supply?

When sweater prices fell, sweater producers decreased their quantity supplied of sweaters.

A Texas household receives a Social Security check for $2000, which it uses to purchase a $50 pair of shoes made in Florida by a Thai firm, a $1340 television made by an American firm in Korea, and $180 on groceries from a local store. As a result, U.S. GDP

180+50=230. increases by 230

The country of Caspir produces only cereal and milk. Quantities and prices of these goods for the last several years are shown in the following table. The base year is 2015. This country's inflation rate from 2017 to 2018 was___. Use GDP deflator to calculate inflation rate.

2018: nominal GDP: (6*180)+(3.5*240)=1920 Real GDP: (base year 2015 price)*Q(of 2018) so (4*180)+(1.5*240)=1080 GDP deflator: nominal/Real GDP=1920/1080*100=177.78 2017: nominal GDP: (5*150)+(2.50*200)=1250 real gdp= (4*150)+(1.50*200)=900 1250/900=138.89 inflation rate: GDP def 2018-GDP def 2017/GDP deflator 2017=177.78-138.89/138.89*100=28%

If the production possibilities frontier is bowed outward, then which of the following could be the maximum number of tennis balls produced when 300 tennis rackets are produced?

8000-2500=2500

Which of the following events would unambiguously cause a decrease in the equilibrium PRICE of orange juice?

A decrease in the price of apple juice and a decrease in the price of orange.

Which of the following events would unambiguously cause a decrease in the equilibrium QUANITITY of cotton shirts?

A decrease in the price of wool shirts and an increase in the price of raw cotton

Which of the following is an example of a normative, as opposed to a positive, statement?

A law requiring the federal government to balance its budget increases economic growth. An increase in the cigarette tax causes a decrease in the number of smokers. A decrease in the minimum wage decreases unemployment. Correct! None of them.

Which of the following transactions does not take place in the markets for factors of production in the circular-flow diagram?

A woman buys corn for dinner

Which of the following is an example of a positive, as opposed to normative, statement?

An increase in money supply will result in lower interest rates.

If the base year is Year 2, then the inflation rate in Year 3 is_____. Use CPI to calculate inflation rate.

CPI 2-CPI 1/CPI 1=inflation rate basket for year 2:(base year) (1*20)+(8*10)=100 100*100/100=100 CPI for year 2 basket for year 3: (3*20)+(6*10)=120 100*120/100=120=CPI for year 3 120-100/100(base year)*100=20%

Which of the following statements is true?

Economists make assumptions to focus their thinking on the essence of the problem at hand.

If total spending rises from one year to the next, then the economy must be producing a larger output of goods and services.

False

Which of the following is correct?

GDP data is released every quarter.

Many things that society values, such as good health, high-quality education, enjoyable recreation opportunities, and desirable moral attributes of the population, are not measured as part of GDP. It follows that

GDP is still a useful measure of society's welfare because it measures a nation's ability to purchase the inputs that can be used to help produce the things that contribute to welfare.

Which of the following claims is consistent with the views of mainstream economists?

If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will temporarily fall. -the AD curve shifts to the right leading an increase in price level and real output. this inc in real output reduces unemployment

Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time. Which of the following explanations would be most consistent with this observation?

New medical evidence has been released that indicates a negative correlation between a person's beef consumption and life expectancy.

Which of the following statements about trade is false?

North Korea does not trade with any country since its economy is centrally planned economy.

Joe and Jim purchase vegetables at a grocery store, but Jim also grows vegetables in his backyard. Regarding these two practices, which of the following statements is correct?

Only Joe's and Jim's grocery store purchases are included in GDP.

Which of the following is not a result of the shift of the economy's production possibilities frontier from Graph (a) to Graph (b)?

Production of 2 tractors and 2 trucks becomes efficient.

Which of the following areas of study typifies microeconomics as opposed to macroeconomics?

The effects of rent control on the availability of housing in New York City

What basket of goods and services are used to construct the CPI?

The goods and services that are typically bought by consumers as determined by government surveys

Beef is a normal good. You observe that both the equilibrium price and quantity of beef have risen over time. Which of the following explanations would be most consistent with this observation?

The price of chicken has risen.

Which of the following is included in the calculation of GDP?

The purchase of tutoring services from a tutor who holds citizenship outside the country but resides within the country.

Which of the following can be measured by the level of real GDP per person?

The standard of living but not total production

The current price of blue jeans is $25 per pair, but the equilibrium price of blue jeans is $30 per pair. As a result, which of the following statements is not true?

There is a surplus of blue jeans at the $25 price.

Which of the following demonstrates the law of supply?

answer:When ketchup prices rose, ketchup sellers increased their quantity supplied of ketchup. a higher price will induce producers to supply a higher quantity to the market.

A farmer produces lemons and sells them to Fresh Juice, which makes lemon juice. The lemons produced by the farmer are called

d. intermediate goods.

When the government redistributes income from the wealthy to the poor,

equality is improved, but efficiency is harmed.

Transfer payments and Social Security payments are

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

Inflation is the primary determinant of a country's living standards.

false

Economists make assumptions to

focus their thinking on the essence of the problem at hand.

The "invisible hand's" ability to coordinate the decisions of the firms and households in the economy can be hindered by

government actions that distort prices.

In the markets for factors of productions in the circular-flow diagram,

households provide firms with labor, land, and capital.

The largest category of goods and services in the CPI basket in July 2019 is

housing.

If an economy's GDP increases, then it must be the case that the economy's

income and expenditure both rise.

Economists differ in their views of the role of the government in promoting economic growth. At the very least, the government should

lend support to the invisible hand by maintaining property rights and political stability.

Consider a small economy in which consumers buy only two goods: pretzels and cookies. In order to compute the consumer price index for this economy for two or more consecutive years, we assume that

neither the number of pretzels nor the number of cookies bought by the typical consumer changes from year to year.

What were country A's net exports in 2019?

net exports=exports-imports so -63 foreign purchase-domestic purchase

Consider Luis's decision to go to college. If he goes to college, he will spend $20,000 on tuition, $11,200 on room and board, and $1,000 on books. If he does not go to college, he will earn $15,000 working in a store and spend $7,000 on room and board. Luis's cost of going to college is

opportunity cost=salary for working in store-room and board expense=15000-7000=8000 20000+11200+1000+8000=40200

While pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms' owners, workers, and customers. This statement illustrates the principle that

people face tradeoffs.

What was the growth rate of real GDP for 1931?

real GDP growth rate=(final GDP-intitial GDP)/initial GDP*100 834.9-892.8/892.8=-6.49 real GDP is a better guage of economic well being than nominal GDP

In a market economy, economic activity is guided by

self-interest and prices.

As a student, Jordyn spends 40 hours per week writing term papers and completing homework assignments. On one axis of her production possibilities frontier is measured the number of term papers written per week. On the other axis is measured the number of homework assignments completed per week. Jordyn's production possibilities frontier is a straight line if

the opportunity cost of writing term papers in terms of homework assignments is constant.

During the 1990s, the United Kingdom experienced low levels of inflation while Turkey experienced high levels of inflation. A likely explanation of these facts is that

the rate of growth of the quantity of money was slower in the United Kingdom than in Turkey.

If net exports is a positive number for a particular year, then

the value of goods sold to foreign countries exceeded the value of foreign goods purchased during the year.

When a production possibilities frontier is bowed outward, the opportunity cost of the first good in terms of the second good increases as more of the first good is produced.

true

GDP is defined as the

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

​GDP and GNP are identical when

​all domestic production is by domestically owned producers and no foreign production is carried out by domestic producers.