ECON 2301 Final Review

Refer to Exhibit 2-5. Which of the following labeled points are productive efficient?

A, B, C, D, and E

In 2011, the U.S. GDP was approximately

$15.27 trillion

Refer to Exhibit 7-1. Which of the following summations represents GDP using the expenditure approach?

$4,150 + $751 + $850 + $331 + $300 - $320

In year 1 the CPI is 181, and in year 2 the CPI is 195. If Dennis's salary was $95,000 in year 1, what is the minimum salary he must earn in year 2 to "keep up with inflation"?

102348

Refer to Exhibit 7-3. Investment is equal to

1050

Refer to Exhibit 7-3. GDP is equal to

11450

If an economy can increase its steady annual growth rate from 2 percent to 3.5 percent, this reduces the time it takes for the economy to double in size by __________ years.

15

Look at the following data: Employed persons = 100 million; civilian labor force = 135 million persons; civilian noninstitutional population = 190 million. The unemployment rate is __________ percent and the employment rate is __________ percent.

18.5; 57.9

If an economy can produce a maximum of 10 units of good X and the opportunity cost of 1X is always 2Y, then what is the maximum units of good Y the economy can produce?

20

If Real GDP is $6 billion and the population is 300,000, per-capita Real GDP is

20000

In an eight-hour day, Andy can produce either 24 loaves of bread or 8 pounds of butter. In an eight-hour day, John can produce either 8 loaves of bread or 8 pounds of butter. The opportunity cost of producing 1 pound of butter is

3 loaves of bread for Andy and 1 loaf of bread for John

Refer to Exhibit 7-1. What is the value of disposable income?

4207

Refer to Exhibit 6-2. How many people are not in the labor force in year 1?

50 million

Refer to Exhibit 6-2. How many unemployed persons are there in year 3?

50 million

A useful rule of thumb called the "Rule of 70" states that if something grows at a constant rate if Z percent per year, it doubles in size approximately every __________ years.

70/Z

Refer to Exhibit 4-1. The number of units exchanged at the price ceiling is

75

Refer to Exhibit 3-13. Fill in the blanks (A) and (B) respectively with the market quantity demanded at each given price.

96; 86

Refer to Exhibit 8-1. Assume that the economy is originally in equilibrium at point B. If businesses become pessimistic about future sales, at which point is the economy most likely to end up in the short run?

A

Refer to Exhibit 9-3. The economy is in long-run equilibrium at point

B

How is scarcity related to competition?

Competition is an effect of scarcity.

In general, all markets equilibrium at the same speed.

FALSE

The NCAA rule governing the limits on the amount of a scholarship a college can offer an athlete is an effective price floor.

FALSE

The base year is always the year in which prices were the lowest.

FALSE

The law of diminishing marginal utility helps to explain why supply curves are generally upward sloping.

FALSE

The supply curve for space on the freeway is perfectly horizontal.

FALSE

The demand to attend a certain college is represented by a downward-sloping demand curve. The supply of spots at the college is represented by a vertical supply curve. At the tuition that students are charged, there is a shortage of spots at the college. If the demand to attend the college rises, but the tuition stays constant, it follows that the

GPA required to attend the college will probably rise

Refer to Exhibit 4-4. Which of the following is false?

Graph (2): As supply increases, equilibrium price remains constant

Which of the following is false? If Mexican restaurant owners provide free chips and salsa to their customers, the quantity demanded of chips and salsa will be greater than if customers had to pay for them. If the price of a good falls, then the demand for its complements will increase. If the price of a good rises, then the price of its complements will rise. If chips and salsa are offered for free to Mexican restaurant customers, then restaurants can charge a higher price for products that are complements to chips and salsa (such as beer).

If the price of a good rises, then the price of its complements will rise.

Which statement uses the term ceteris paribus correctly?

If you exercise regularly, you will be healthier, ceteris paribus

Which set of changes is definitely predicted to raise Real GDP in the short run?

Individuals expect higher (future) incomes and wage rates fall

Refer to Exhibit 4-7. How many unskilled workers are employed at the minimum wage?

N3

Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. Which toll creates equilibrium at 8 a.m.?

P2

Refer to Exhibit 4-3. If P1 is a price ceiling, the highest price for good Y, which is tied (a tie-in sale) to good X, is

P3-P1

Which of the following statements is false? Microeconomics is the branch of economics that deals with human behavior and choices as they relate to relatively small units-an individual, a firm, an industry, and a single market. Macroeconomics is the branch of economics that deals with human behavior and choices as they relate to highly aggregate markets. Positive economics attempts to determine what is. Normative economics addresses what should be. Positive and normative economics both address what should be.

Positive and normative economics both address what should be.

A tax placed on a good can make that good relatively more expensive and its substitutes relatively less expensive.

TRUE

If hot dogs are an inferior good, a decrease in income will cause the equilibrium price of hot dogs to rise.

TRUE

In order for a price floor to have an impact on a market it must be set above the equilibrium price.

TRUE

Net domestic product (NDP) is the total value of new goods available in the economy after worn out capital goods have been replaced.

TRUE

Only a change in the price level can cause a movement from one point to another point along a given aggregate demand curve.

TRUE

The law of increasing opportunity cost helps to explain why PPFs are typically bowed-outward.

TRUE

The term human capital refers to education, training and experience

TRUE

What does it mean if a person makes a "decision at the margin"?

The person compares additional benefits and additional costs when deciding what to do.

Refer to Exhibit 3-2. Suppose equilibrium is at point A. Something then changes and equilibrium becomes point C. Which of the following is consistent with the change in equilibrium from point A to C (assuming that good X is a normal good)?

There was an increase in the number of buyers and business taxes decreased

Some of our farm fields are being left unused. Does this have any implications for the economy's PPF diagram (with agricultural products on one axis and all other products on the other axis)?

With unemployed resources, we are at a point below the PPF

Is it possible for mandatory seatbelt laws to increase vehicle fatalities?

Yes, if the number of accidents increases by a greater percentage than the number of deaths per accident decreases.

Is it possible for a country with a relatively large GDP to have a relatively small per-capita GDP?

Yes, since the country with a relatively large GDP could have a relatively large population

Which of the following would not be included in the calculation of this year's GDP?

a headlight bulb purchased by Ford Motor Co. from a supplier

The structural unemployment rate is 1.3 percent, the frictional unemployment rate is 2.1 percent, and the current unemployment rate is 4.9 percent. The economy is in

a recessionary gap producing less than Natural Real GDP

Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. A roll of P1 creates __________ at 8 a.m. and __________ at 11 p.m.

a shortage; a surplus

Jake is an excellent barber. However, all customers who come to him for a haircut must buy a bottle of shampoo. This type of arrangement is known as

a tie-in sale

Which of the following would cause a rightward shift in the AD curve?

an increase in government purchases of goods and services

Refer to Situation 4-1. If no price controls had been in place, the effect of the oil embargo on the equilibrium price and quantity of gasoline would have been

an increase in price and a decrease in quantity

In a "self-regulating" economy, inflationary and recessionary gaps

are eliminated by forces internal to the economy, without government intervention

Points inside (below) the production possibilities frontier (PPF) are

attainable, but productive inefficient

University A sets tuition at the equilibrium level based on price and then imposes entrance requirements in the form of minimum high school GPA and SAT scores. Enrollment at this school will likely be

below equilibrium because of the non-price rationing

The classical economists felt that wages and prices were flexible in

both the upward and downward directions

An increase in the price level

causes an upward movement along the existing AD curve

If a price a buyer pays for a good is $50 and the maximum price she would be willing and able to pay is $53, then __________ is __________.

consumers' surplus; $3

In the United States, the largest expenditure component in GDP is

consumption expenditures

The cyclical unemployment rate is defined as the __________ unemployment rates.

difference between the existing (actual) and the natural

One reason that helps to explain the law of supply is the law of

diminishing marginal returns

If the economy is producing Natural Real GDP, then the

economy is at full employment; economy is operating at the natural unemployment rate (c and d)

Some years ago, chemists at 3M Corporation were trying to create a super-strong glue. Somehow they got their molecules twisted and came up with one of the weakest glues ever made. But, rather than pouring it down the drain, they tried coating some paper with it, and the "Post-It Note" was born. In this case, 3M was acting as a(n)

entrepreneur

If the current unemployment rate is equal to the natural unemployment rate, then current Real GDP is

equal to Natural Real GDP; equal to the Real GDP produced at full employment (b and c)

Real GDP is the value of all __________ goods and services produced in a given year in __________ prices.

final; base year

Good weather in cities such as San Diego

imposes indirect payments for the residents of that city

A line is parallel to the vertical axis. The slope of the line is

infinite

Consider two straight-line PPFs. They have the same vertical intercept, but curve I is flatter than curve II. The opportunity cost of producing the good on the vertical acis

is greater along curve I

Refer to Exhibit 9-1. The economy is currently producing Q1. An economist who believes wages are flexible in the downward direction would argue that

it is likely the economy will soon move to point A

An appreciation of the U.S. dollar tends to __________ U.S. net exports and shift the U.S. AD curve to the __________.

lower; left

Examples of physical capital include __________. Examples of human capital include __________.

machines and factories; knowledge one picks up through education and training

When interest rates fall in a given economy, it causes firms to borrow __________ funds used for purchasing capital goods. The result will be a(n) __________ in the level of capital employed in the economy. In terms of the production function (graphed with labor on the horizontal axis and Real GDP on the vertical axis), this then causes __________ which makes the LRAS curve shift __________ resulting in __________.

more; increase; the production function to shift upward; rightward; economic growth

Opportunity cost is the __________ alternative forfeited when a choice is made.

most highly-valued

When a production function is graphed with Real GDP on the vertical axis and labor on the horizontal axis, a rise in labor __________, and a rise in capital __________.

moves us up along a given production function; shifts the production function upward

If the cyclical unemployment rate is negative, then the

natural unemployment rate is greater than the actual unemployment rate in the economy

In year 1 the CPI is 180, and in year 2 the CPI is 192. From year 1 to year 2, Javier's salary rises from $40,000 to $42,000, and Tom's salary rises from $55,000 to $57,000. Who is "more than keeping up with inflation"?

neither Tom nor Javier

The purchases made by the foreign sector are called __________; the purchases made by the household sector are called __________; the purchases made by the government sector are called __________; and the purchases made by the business sector are called investment.

net exports; consumption; government purchases

Which of the following factors can shift the AD curve?

net exports; government purchases; the money supply (a, b, and c)

Refer to Exhibit 4-6. Suppose the minimum wage is set at $5. The result will be

no effect on the unskilled labor market

Colleges and universities use such things as grade point averages and standardized test scores as

non-price rationing devices

According to classical economists,

none of the above

The unemployment rate equals the

number of unemployed persons divided by the civilian labor force

Suppose the population of a country falls, but Real GDP remains constant. There is __________ economic growth.

per-capita real, but not absolute

The space on the freeway is fixed at any instant of time. A supply curve that shows this is

perfectly vertical

Refer to Exhibit 2-5. "In order to produce one more television set, we must forfeit the production of one fax machine." This statement describes a movement from

point D to point C

The economy is currently operating at a point on its physical production possibilities frontier (physical PPF). It is

producing more than Natural Real GDP and operating below the natural unemployment rate

The range of laws, rules, and regulations that define the allowed forms of use and transfer of resources is called the __________ structure of the economy.

property rights

A depreciation of the U.S. dollar tends to __________ U.S. net exports and shift the U.S. AD curve to the __________.

raise; right

An increase in labor's productivity will cause the SRAS curve to shift __________ and the price level to __________.

rightward; decrease

Economic growth causes the PPF to

shift rightward

A decrease in the quantity of resources

shifts the PPF leftward

Juan lost his job as a nuclear physicist working for a defense contractor. He can not find a job because no firms in the defense industry or any other industry are hiring people with her skills. Juan is __________ unemployed.

structurally

Resource X is necessary to the production of good Y. If the price of resource X rises, the __________ curve for good Y will shift __________ resulting in a(n) __________ in the equilibrium price of Y and a(n) __________ in the equilibrium quantity of Y.

supply; leftward; increase; decrease

At a price for which the quantity supplied exceeds the quantity demanded, a __________ is experienced, which pushes the price __________ toward its equilibrium value.

surplus; downward

A production function specifies the relation between __________ and the __________ to __________.

technology; the factor inputs; Real GDP

Refer to Exhibit 4-3. If price P2 is a price ceiling, then

the price at which exchange legally takes place in the market for good X is P2

In moving along a demand curve, which of the following is NOT held constant?

the price of the good for which the demand curve is relevant

Refer to Exhibit 9-4. Assuming the economy is in an inflationary gap at a short-run equilibrium point with the price level at P2, the movement toward long-run equilibrium will be

up and along AD2

Scarcity is defined as the condition in which

wants are infinite and resources finite

In all cases, positive economics deals with

what is.