ECON 212 CH 6-8

Q. What kinds of goods are excludable? A. Common resources and public goods. B. Private goods and artificially scarce goods.

B. Private goods and artificially scarce goods. Excludability is the ability to keep someone who has not paid for a good or service from using it. Private goods and artificially scarce goods (also called "club goods") are both excludable.

Q. Scotty invents a new technology to teleport objects that revolutionizes the transportation industry. This technology has A. positive externalities because Scotty will receive large benefits from this new technology. B. positive externalities because the benefits of this new technology for society areI greater than the private benefit of Scotty. C. negative externalities because this new technology will cause cargo airlines to lose jobs and therefore has overall negative benefits for society.

B. positive externalities because the benefits of this new technology for society are greater than the private benefit of Scotty.

Q. Which of the following market has positive externalities? A. Perfect weather leads to a bumper crop (significantly greater than average) of ranges. B. An oil spill in the Gulf of Mexico. C. Honey production because bees also help pollinate fruits trees and increase fruit crop yield.

C. Honey production because bees also help pollinate fruits trees and increase fruit crop yield. The social benefit include the private benefit for the beekeepers as well as the external benefit for the tree growers who do not keep the bees but still benefit from them.

Q. The government of Jacksonia produces and sells cream cheese. Nobody is allowed to consume cream cheese without paying for it, and only one person can consume a given block of cream cheese. What kind of good is cream cheese? A. Artificially scarce. B. Public good. C. Private good.

C. private good. Private goods are excludable and rival. Cream cheese is excludable because you have to buy it before making cream cheese toast, and its rival because only one person can consume the same bite of cream cheese at any given time.

Q. Which of the following policy interventions will theoretically reduce the deadweight loss generated by a monopoly? A. A lump sum subsidy to the monopolist. B. A per unit tax on the monopolist. C. A binding price floor on the monopolist. D. A lump sum tax on the monopolist. E. A per-unit subsidy to the monopolist.

E. A per-unit subsidy to the monopolist. An effective market intervention to correct, or lessen, a market failure must address the behavior that leads to the market failure. A monopolist produces a quantity that is less than allocatively efficient because its profit-maximizing quantity is less than the allocatively efficient quantity. A per-unit subsidy increases the firm's profit-maximizing quantity by decreasing the firm's marginal cost curve.

Q. An increase in the marginal propensity to consume will make the spending multiplier smaller. True False

False

Q. Based on the Circular Flow Diagram, the value of total production cannot be equal to the value of total income. True False

False

Q. Suppose you purchase a new vehicle in 2015 and sell it in 2018. The sale of your vehicle counts towards GDP in 2018. True False

False

Q. What must be true about private goods?

Governments sometimes produce them. Sometimes governments choose to produce private goods for a variety of reasons. For example, the private sector might provide an inefficient quantity if there are positive externalities, or the government simply wants to provide a good for free.

Q. For all points above the 45-degree line, planned aggregate expenditure will be greater than GDP. True False

True

Q. If the Bureau of Economic Analysis reports that real GDP growth has increased for four consecutive calendar quarters, the economy is most likely in the expansion phase of the business cycle. True False

True

Q. When consumption spending declines, firms cut back on production so as not to accumulate inventories. True False

True

Q. While you may spend the time and effort to cook for your friends, that time and effort is excluded in the national GDP, but the full price of a restaurant meal would be counted in GDP. True False

True

Q. Year CPI 2015 237 2016 240 Refer to the table above. Consider the following values of the consumer price index for 2015 and 2016. The inflation rate for 2016 was approximately equal to a. 1.3 % b. 8.0 % c. 2.8 % d. .013 %

a. 1.3 %

Q. Most economists believe that GDP underestimates total production because of these two factors which are not included in GDP: a. Household production and the underground economy. b. Interest rates and price level changes. c. Globalization and long-run growth. d. Labor force and unemployment.

a. Household production and the underground economy.

Q. In the Aggregate Expenditure Model, generally speaking, what can we say for all points above the 45 degree Spending = Output line? a. for all points above the 45 degree line, spending is greater than output and inventories are falling. b. for all points above the 45 degree, spending is less than output and inventories are rising. c. all points above the 45 degree line are in equilibrium.

a. for all points above the 45 degree line, spending is greater than output and inventories are falling.

Q. If an increase in investment spending of $20 million results in a $120 million increase in equilibrium real GDP, then a. the multiplier is 6 b. the multiplier is 50 c. the multiplier is 2.5 d. the multiplier is 0.166

a. the multiplier is 6

Q. Product Quantity Price Sweatshirts. 100 $35.00 Dental examinations 35 $75.00 Coffee drinks 1,000 $4.00 Coffee beans (pounds) 2,000 $0.50 Refer to the table above. Suppose that a simple economy produces only four goods and services: sweatshirts, dental examinations, coffee drinks, and coffee beans. Assume all of the coffee beans are used in the production of the coffee drinks. Using the information in the above table, nominal GDP for this simple economy equals a. $11,125 b. $10,125 c. $9,750 d. 1,135 units

b. $10,125

Prod QTY BY 09 CY 17 Milk—-150 $1.50 $2.00 Bread-200 $1.00 $1.50 Refer to Table Above. Assume the market basket for the consumer price index has two products, bread and milk at the same quantity, and the prices for 2009 and 2017. Assuming that 2009 is the base year, the Consumer Price Index for 2017 equals: a. 118.2 b. 141.2 c. 1.16 d. 1.41

b. 141.2

Q. Suppose the nominal interest rate is 6% and the inflation rate for a given year is 2%, what is the real interest rate? a. 3% b. 4% c. 12% d. 8%

b. 4%

Q. When production in an economy grows more quickly than the population in that economy, which of the following must be occurring? a. Real GDP is falling. b. Real GDP per capita is rising. c. Incomes are growing at a slower rate than the population. d. Living standards are falling.

b. Real GDP per capita is rising.

Q. When calculating GDP, an example of an intermediate good would be a. a new car b. tires on a new car c. new tires to replace the old tires on a car d. a used car

b. tires on a new car

Q. If the MPS is .35, then a $15,000 increase in disposable income will increase consumption by how much? (Note: you are being given MPS, not MPC) a. $42,857 b. $525,000 c. $9,750 d. $5,250

c. $9,750

Q. In 2015, the working age population was 251.10 million; the labor force was 157.07 million. There were 194.04 million people employed and 0.62 million discouraged workers. What was the labor force participation rate? a. 80.9% b. 77.3% c. 62.6% d. 4%

c. 62.6%

Q. Which of the following would result in GDP for an economy equal to $12 trillion? a. C = $9 trillion, I = $2 trillion, G = $4 trillion, NX = $3 trillion b. C = $8 trillion, I = $2 trillion, G = $2 trillion, NX = - $2 trillion c. C = $7 trillion, I = $5 trillion, G = $2 trillion, NX = - $2 trillion d. C = $6 trillion, I = $3 trillion, G = $2 trillion, NX = - $1 trillion

c. C = $7 trillion, I = $5 trillion, G = $2 trillion, NX = - $2 trillion

Q. The most significant factor for economic growth over the long-run is: a. Production efficiency b. Human capital c. Technological change d. Production management

c. Technological change

Q. When studying changes in the economy over time, economists want a measure of the total quantity of goods and services the economy is producing that is not affected by changes in the prices of those goods and services. In other words, economists want to study a. nominal GDP b. GNP c. real GDP d. GDP deflator

c. real GDP

Q. The employment to population ratio equals: a. the ratio of employed to total population b. the ratio of labor force to total unemployed c. the ratio of employed to working age population

c. the ratio of employed to working age population

Q. Cyclical unemployment is primarily the result of a. the search process of matching workers with jobs. b. the ups and downs of inflation. c. the slowdown of the economy during the business cycle. d. a persistent mismatch between skills and job requirements.

c. the slowdown of the economy during the business cycle.

Q. Suppose housing prices and stock prices decline significantly and cause autonomous consumption spending to decrease by $55 billion. If the marginal propensity to consume equals 0.50, the equilibrium real GDP will change by: a. $82.5 billion b. no change in equilibrium real GDP c. $27.5 billion d. $110 billion

d. $110 billion

Q. Suppose booming economies in the BRIC nations causes net exports to rise by $135 million in the United States. If the MPC is 0.6 what will be the change in equilibrium GDP? a. $81 million b. $225 million c. will not change equilibrium real GDP d. $337.5 million

d. $337.5 million

Q. Given the table above, which level of output is the equilibrium level? a. $7,700 b. $8,000 c. $8,600 d. $8,300

d. $8,300

Q. According to the Rule of 72. If Real GDPpc grows at an annual rate of 4.5%, how many years will it take to double? a. 15 years b. 14 years c. 15.5 years d. 16 years

d. 16 years

Q. Which of the following price indices comes closest to measuring the cost of living of the typical household? a. PPI b. GDP Deflator c. S&P index d. consumer price index

d. consumer price index

Q. According to the phases of the Business Cycle, the event that occurs during the highest point of economic activity is called a(n): a. trough b. expansion c. recession d. peak

d. peak

Q. If your nominal wage increases have been more than the inflation over the same time period, we can say your nominal wage has ________ and the purchasing power of your income has _. a. fallen; fallen b. fallen; risen c. risen; fallen d. risen; risen

d. risen; risen

Q. The type of unemployment that arises from a mismatch between job skills and job requirements is: a. cyclical unemployment b. natural unemployment c. frictional unemployment d. structural employment

d. structural employment