Practice Exam 2

In a small economy, consumption spending in 2012 is $6,000, government spending is $1,200, gross investment is $1,500, exports are $2,000, and imports are $1,000. What is gross domestic product in 2012?

$9,700

Which of the following is the best example of a tariff?

A $5,000 per-car fee imposed on all sports utility vehicles imported into the United States

When Sophie, a French citizen, purchases a Dell computer in Paris that was produced in Texas, the purchase is

A U.S. export and an French import.

The minimum wage is an example of

A price floor.

Which of the following would cause an increase in the supply of cheese?

An increase in the number of firms that produce cheese

The law of demand implies, holding everything else constant, that as the price of yogurt

Increases, the quantity of yogurt demanded will decrease

Adam Smith's ________ refers to the process by which individuals acting in their own self-interest bring about a market outcome that benefits society as a whole.

Invisible hand

The GDP deflator is equal to

Nominal GDP divided by real GDP, multiplied by 100

Opportunity cost is defined as

The highest valued alternative that must be given up to engage in an activity.

Which of the following is a positive economic statement?

The minimum wage law causes unemployment.

Which of the following statements is false?

Within each country, some individuals are made better off as a result of international trade, but one of the countries will be worse off overall.

Which of the following transactions would be included in the official calculation of GDP?

You buy a new iPad

In a market economy, who decides what goods and services will be produced?

Consumers and producers

A production possibilities frontier with a ________ shape indicates increasing opportunity costs as more and more of one good is produced.

Bowed outward

Scarcity refers to the situation in which

Unlimited wants exceed limited resources.