ECO 201 Midterm
If real income increases, then nominal income
rises faster than prices
A good is ______ if it takes even a small amount of time, energy, or money to acquire
scarce
A member of the labor force is defined as someone who is
already employed or actively seeking work.
The phase of the business cycle where the economy is growing faster than usual is called
an economic expansion.
When consumers discard their gasoline-powered automobiles for electric-powered ones, this partially reflects the ______ of gasoline
scarcity
Refer to the accompanying diagram for the questions that follow... An increase in the number of buyers would cause the demand curve to
shift from D1 to D2
Refer to the accompanying diagram for the questions that follow.. If consumers expect the price of a good to decrease in the future and all else is held constant, we would assume that the demand curve would
shift from D1 to D3
If the cost of flour increases from $3 to $5 a bag, we could predict the supply curve for bagels to
shift to the left.
The business cycle measures
short-run fluctuations in economic activity.
Refer to the table to answer the following questions. If the price of this good is $2.00, there would be a ________ of ________ units.
shortage; 30
What creates comparative advantage?
specialization
Workers who lose their jobs because the skill set they possess is no longer required in the economy are considered to be
structurally unemployed.
Natural unemployment is the
sum of structural and frictional unemployment
A technological advancement for Good A will shift the ______ curve of Good A to the ______, making the equilibrium price ______.
supply; right; decrease
Inflation necessarily occurs when
the overall price level, such as the consumer price index (CPI), rises.
According to the law of demand, all other things being equal, ----
the quantity demanded falls when the price rises, and the quantity demanded rises when the price falls
According to the figure below, at the price of $5,
the quantity demanded is 500
The law of supply states that, all other things being equal,
the quantity supplied falls when the price falls, and the quantity supplied rises when the price rises.
During periods of recession
the unemployment rate rises.
To avoid double counting when calculating gross domestic product (GDP), it is best to count
the value added at each stage of production.
Let's say a bottle of Dr. Wells (an actual soft drink still available but hard to obtain) cost $0.15 in 1970. If the consumer price index (CPI) in 1970 was 37.8 and the current CPI is 240, then the inflation-adjusted price of Dr. Wells would be (rounded to the nearest penny)
$0.95
Consider the following data that gives the quantity produced and unit price for three different goods across two different years to answer the following questions. Assume that the base year is 2015. What was the real gross domestic product (GDP) in 2016?
$3,600
Refer to the table to answer the following questions. The equilibrium price and quantity in this market are
$4.00 and 40 units.
Suppose a particular model of smartphone contains $150 worth of raw materials and requires $175 worth of labor to produce. One day, one of these phones sells for $400. The seller would have been willing to sell it for as little as $375, whereas the buyer would have been willing to pay as much as $425. Which dollar amount would be used to calculate this transaction's contribution to gross domestic product (GDP)?
$400
Annual real per capita gross domestic product (GDP) in the United States was roughly $44,000 in 2010. If it grew by 3 percent the following year, by 2011 the annual real per capita GDP would be
$45,320
A company produces a computer. It pays $100 for the keyboard and outer case, $200 for the internal hardware, and $100 for the software. It sells the computer to a consumer for $500. The contribution to gross domestic product (GDP) is
$500
Consider the following data, where gross domestic product (GDP) values are measured in millions of dollars, to answer the following questions: What is the value of nominal gross domestic product (GDP) in 2009?
$500 million
Consider the following data, which shows the quantities and prices of two goods produced in the economy, to answer the following questions: The market value of cell phones is
$500 million.
Consider the following data, where gross domestic product (GDP) values are measured in millions of dollars, to answer the following questions: What is the value of real gross domestic product (GDP) in 2010? Round to the nearest second decimal.
$520.00 million
In 2014, U.S. gross domestic product (GDP) was roughly $17.4 trillion. Given that the U.S. population was roughly 319 million people, per capita GDP in the United States in 2014 was roughly
$54,545.
Consider the following data, which shows the quantities and prices of two goods produced in the economy, to answer the following questions: Assuming these are the only two goods produced in the economy, what is the value of the gross domestic product (GDP)?
$750 million
The percentage change in any economic variable, including the consumer price index (CPI), is measured by which equation?
((Current Year - Previous Year) / Previous Year) × 100
Refer to the figure to answer the following questions. Which of the quantity (Q) and price (P) combinations in the accompanying figure represents the market at competitive equilibrium?
(22, $8)
Real gross domestic product (GDP) can be calculated as
(nominal GDP)/(the GDP deflator) x 100
Refer to the table to answer the following questions: As presented in the table, the rate of inflation (or deflation) from 2002-2003 was (rounded to two decimal places)
-3.57 percent
Assume that the market for nachos has only two suppliers: Firm 1 and Firm 2. According to the table below, if the price of nachos is $6, the market will supply ________ nachos.
10
Use the table to answer the following questions: According to the table, the unemployment rate in this economy is equal to
10.1 percent
Consider the following data that gives the quantity produced and unit price for three different goods across two different years to answer the following questions. Assume that the base year is 2012. What was the CPI in 2012?
100
The value of the consumer price index (CPI) in 2011 was 229 compared to the base period's, which will always have the value of
100
Suppose a basket of goods and services has been selected to calculate the consumer price index (CPI) and 2002 has been selected as the base year. In 2002, the basket's cost was $600; in 2004, the basket's cost was $650; and in 2006, the basket's cost was $700. The value of the CPI in 2004 was (rounded to one decimal place)
108.3
Consider the following data that gives the quantity produced and unit price for three different goods across two different years to answer the following questions. Assume that the base year is 2012. What was the CPI in 2013?
119.44
At the price of $3 a pound of pork, Jason buys 8 pounds of pork and Noelle buys 10 pounds of pork. When the price rises to $5 a pound, Jason buys 5 pounds of pork and Noelle buys 7 pounds of pork. What is the market demand at $5?
12
Use the table to answer the following questions: According to the table, the number of employed in this economy is equal to
161 million.
Consider the following data that gives the quantity produced and unit price for three different goods across two different years to answer the following questions. Assume that the base year is 2012. What was the rate of inflation between the two years?
19.44 percent
Use the table to answer the following questions: According to the table, the relevant population is equal to
274 million.
In 2010, per capita real gross domestic product (GDP) in the United States was roughly $46,000. In 2011, per capita real GDP in the United States was roughly $48,400. Therefore, between 2010 and 2011, the rate of economic growth in the United States was
5.2 percent
Consider a country with a nominal gross domestic product (GDP) of $10 billion in 2010 and $15 billion in 2015. In the same period the population increased by 2 percent and price levels decreased by 10 percent. What is the economic growth for this country?
58 percent
Use the table to answer the following questions: According to the table, the labor force participation rate in this economy is equal to
65.3 percent
Consider the data to answer the following questions: Which country has the lowest average living standard?
D: GDP=$10,000; Population=2,000
Consider a nation in which the price index was 150 last year and this year it is 130. Which statement is correct?
Deflation was 13.33 percent this year
What would happen to the equilibrium price and quantity for the market for cigarettes if the government increased the tax and a scientific study came out confirming that smoking cigarettes increased the rate of heart disease?
Equilibrium price will be indeterminate and equilibrium quantity will go down.
Refer to the accompanying figure. What event would cause the supply curve to shift out?
Firms entered the market.
As a government official, Nolan wants fewer people to smoke. He has decided to use taxes to discourage people from smoking. How would he describe his decision to an economist?
If I increase taxes on cigarettes, there will be a decrease in demand, which means fewer people are smoking.
Consider the equation %ΔM + %ΔV ≈ %ΔP + %ΔY. If the velocity of money does not change (%ΔV = 0), and the change in real GDP exactly keeps pace with the change in the money supply (%ΔM = %ΔY), what will happen to the price level (P)?
It will stay the same, %ΔP = 0
As electric cars have become more acceptable to drivers, more companies are building and selling such cars. What would we expect to see happen to prices of electric cars in the future?
Prices for electric cars will fall in the future as more companies produce these cars.
What is the consumer price index (CPI)?
The CPI is a measure of the price level based on the consumption patterns of a typical consumer.
Instead of deciding to finish high school, Cecily could have decided to work full-time. How would an economist explain her decision to receive her high school degree?
The benefit of going to high school was greater than the benefit of working full-time.
When the price for computers is expected to fall in the future, what happens?
The demand for computers decreases.
What would we expect to happen to the priceand quantity of Pepsi if the price of Coke increases and Pepsi develops a new technology that makes its production process more efficient?
The equilibrium price will be indeterminate and the equilibrium quantity will go up
Shoes are considered to be a normal good. What would happen to the equilibrium price and equilibrium quantity of shoes if income increases and the cost of labor to produce shoes increases?
The equilibrium price will go up and equilibrium quantity will be indeterminate.
What would happen to the equilibrium price and quantity of shirts if the price of cotton decreases and all else is held constant?
The price falls and the quantity rises.
Refer to the accompanying diagram. Which of the following scenarios would explain thischange in equilibrium?
The price of a substitute of this good increased.
The equilibrium price of peanut butter is $5. A study comes out that says the fat in peanut butter is good for the heart. Holding all other factors constant, which of the following scenarios could happen?
The price of peanut butter increases to $7 because of a demand shift.
The government recently imposed a number of regulations on companies that will make it more expensive for companies to hire workers. What consequence will this have on market?
The regulations raise the cost of labor and shift supply to the left.
During a job search, individuals will sometimes accept the lower of two competing salary offers. What would best explain this decision?
The total benefits of the lower paying job are greater than the total benefits of the higher paying job.
When the price falls, what happens?
There is a decrease in the quantity supplied.
The latest data from the movie studios reveals that attendance at movies has declined as well as the average ticket price. How could this have possibly happened?
There was a decrease in demand and an increase in supply.
Roger currently runs a restaurant on a busy street filled with many other restaurants. The local health inspector, however, has plans to shut down many of these restaurants. What impact will the closure of restaurants have?
There will be a decrease in supply.
If all else is held constant, what would happen to the equilibrium price and quantity of iPhones if the price of an Android phone decreased?
They would both decrease.
You bought a popular video game last year for $75 and sold it to a store this year for $20. The store sells the used game to a consumer for $40. When you sell your game to the store, how is this included in gross domestic product (GDP)?
This does not count in GDP.
There is often only one major league baseball team in a city. What is the consequence of this in terms of ticket prices?
Ticket prices will be higher because each team is a monopoly in the city.
Refer to the figure to answer the following questions: As presented in the figure, one could correctly state that
U.S. inflation and E.U. inflation were directly related, but E.U. inflation was generally more than U.S. inflation.
Which of the following is a macroeconomic question
What is the rate of unemployment?
Which of the following is a sign that an economy is in poor health?
a prolonged decline in total output
Which of the following is a service?
a visit to your doctor
Quality changes are
at least partially adjusted for in the consumer price index (CPI).
One improvement of the chained consumer price index (CPI) over the traditional CPI is that the
chained CPI more quickly takes into account new goods
Companies use advertising to shift consumer demand. On which of the following demand shifters do advertisers most often rely?
changes in tastes and preferences
______ show(s) how resources and final goods and services flow through the economy
circular flow
Which of the following is NOT a type of incentive
complementary
Two goods that are used together are called
complements.
The four major expenditure categories of gross domestic product (GDP) are
consumption, investment, government purchases, and net exports.
An opportunity cost is the
cost of a purchase or decision as measured by what is given up
Nominal gross domestic product (GDP) increases if
current prices or current quantities increase.
Which type of unemployment can be negative?
cyclical
Some individuals are unemployed because they are laid off from their jobs when the economy is sluggish. These individuals would be considered
cyclically unemployed.
Refer to the accompanying figure. When the price changes from P1 to P2, we will see a(n)
decrease in quantity supplied from Q2 to Q1
When the price of ground beef increases and all else is held constant, we would expect the supply of hamburgers to ______, causing the price to ______.
decrease; increase
Sabrina decided to start selling lemonade on her street. The other kids in the neighborhood noticed that Sabrina was making a lot of money selling lemonade. These kids decided to open their own lemonade stand, the equilibrium price ______ and the equilibrium quantity ______.
decreased; increased
When supply shifts to the right and demand stays constant, the equilibrium price ________ and the equilibrium quantity ________.
decreases; increases
In the first few months of 2012, the price of gasoline increased by approximately 15 percent. Because of this increase, we would expect the ________ curve in the market for hybrid cars to ________.
demand; shift to the right
The U.S. federal government offers homeowners a tax deduction for their home loan interest payments. This reduction in taxes serves as a(n) ______ incentive to buy a house
direct
The root cause of cyclical unemployment is
downturns in the business cycle.
For a market to be competitive
each buyer and seller is small, relative to the whole market; no single decision maker has any influence over the market price.
The two highest paid midcareer jobs with only a bachelor's degree are
economics and computer egineering
A shortcoming of using real gross domestic product (GDP) as a measure of economic well-being is that it does not measure changes in
environmental quality.
An activity's marginal benefit is ______ at the optimal quantity
equal to the marginal cost
The equation M × V = P × Y is called the
equation of exchange
A monopoly
exists when a single company supplies the entire market for a particular good or service.
Which of the following is both a shift in supply and a shift in demand?
expectations of future prices
Thalia graduates from college and begins to look for a job. After two months she finds a job. This is an example of ________ unemployment.
frictional
Which of the following two types of unemployment occur even when the economy is healthy and growing?
frictional and structural
Some individuals are unemployed because it takes time for them to find jobs that fit their skill sets. These individuals would be considered to be
frictionally unemployed.
The state of Florida spends $3 million to repave highways. This is included in the ________ category of gross domestic product (GDP).
government purchases
Saudi Arabia has a comparative advantage in producing oil because it
has specialized in the production of oil given its natural resources
Economics is the study of
how to allocate resources to satisfy wants and needs
If the government wanted to give people a negative direct incentive not to save money, what would be the appropriate policy
imposing a tax on individuals for saving their money
Oil is a main component in the manufacture of plastic bags. If the price of oil were to increase, the price of plastics bags would ________ and the quantity would ________.
increase; decrease
If the price of Gatorade increases, the equilibrium price of Powerade, a substitute good, will ________ because of a shift in ________.
increase; demand
If the number of buyers in a market increases from 50 to 100, you would expect the equilibrium price to ________ and the equilibrium quantity to ________, holding all else constant.
increase; increase
The change in equilibrium shown in the accompanying figure would be explained by a(n) ________ in the price of an input and a(n) ________ in the price of a ________.
increase; increase; complement
Something is an inferior good if the demand for the good
increases as the consumer's income decreases.
If 51 percent of all goods in the consumer price index (CPI) became more expensive and 49 percent became cheaper
inflation or deflation could occur, depending on the weight of these goods in the basket of goods and the actual percentage changes.
Goods that firms repackage with other goods for sale at a later stage are
intermediate goods.
A technological advance
introduces new techniques or methods so that firms can produce more valuable outputs per unit of input.
When George buys a new computer for his business, it is included in gross domestic product (GDP) as ________, and when he buys a new computer for use at home, it counts as ________.
investment; consumption
When both supply and demand decrease, the equilibrium price ______ and equilibrium quantity ______.
is indeterminate; decreases
The sum of the number of unemployed and the number of employed is the
labor force
The Internet has enabled workers and companies to find each other more quickly and to make better matches with substantially lower costs. The result is
lower frictional unemployment.
The term ______ means "additional"
marginal
______ is value added by making additional effort
marginal benefit
You get a pay raise and feel richer even though your raise did not keep up with inflation; this is best described as
money illusion
The government places warnings on cigarette and liquor packages. These warnings serve as a(n)
negative incentive
By definition, the velocity of money is the
number of times per year a unit of money changes hands
Imperfect markets
occur when the buyer or seller has an influence on the price.
A firm's human capital would increase with
on-the-job training.
To determine living standards for the average person, we calculate
per capita GDP
The opportunity cost of going to school rather than working is the cost of
potential wages
An example of a direct positive incentive is ---
providing a commission for sales
Consider the following data that identifies real gross domestic product (GDP) in comparison to the long-run trend of real GDP to answer the following questions: In what quarter did this economy enter a recession?
quarter 7
Economists believe that individuals compare the benefits and costs of various options when making decisions and in so doing act
rationally
In the equation M × V = P × Y, the variable Y stands for
real GDP
Economic growth is defined as the percent change of
real per capita gross domestic product (GDP).
Inputs are
resources that firms use in the production of final goods and services.
Refer to the figure to answer the following questions. According to the accompanying figure, if the price is $10, there is a ________ of ________ units.
surplus; 15
Inflation is occurring in a nation; the implication(s) of this is/are
that holding nominal wages constant, the real wage would fall.
The opportunity cost of a purchase is
the alternative good or service that one sacrifices because a different good was purchased
Pepsi and Coke are considered substitute goods. Because of this, one would predict that, holding all else constant, if the price of Pepsi increases, we would see
the demand curve for Coke shift to the right.
When supply shifts left and demand shifts right,
the equilibrium price always rises.
When the demand curve shifts to the right and the supply curve is held constant,
the equilibrium price decreases and the equilibrium quantity increases
If a Hershey's chocolate bar cost $0.05 in 1921 when the price index was 18 and the same size and weight Hershey's chocolate bar cost $0.05 in 1955 when the price index was 27, then
the inflation-adjusted price of the bar would be lower in 1955 than in 1921.
Which of the following is a topic of macroeconomics?
the number of unemployed people in the economy
Macroeconomics is the study of
the operation of the economy as a whole
Individuals who are working part-time but would prefer to be working full-time are defined as
underemployed workers.
Rational decision making under conditions of scarcity requires individuals to
understand that trade-offs are necessary
The wealth-redistribution effect of inflation requires that the inflation be
unexpected
Official unemployment is identified as when a worker
who is not currently employed is searching for a job unsuccessfully.
What is the indirect incentive in the unemployment insurance program?
workers have a reduced incentive to find a new job until the insurance runs out
Gross domestic product (GDP) is most often measured by the
year
You are offered two jobs, one in Chicago paying $67,000 and one in Philadelphia paying $79,000. The price index in Chicago is 110.8, and in Philadelphia it is 126.5. If real wages are the only consideration, then
you would definitely take the job in Philadelphia because the real wage is higher there.
