Econ Exam 1

The GDP price index is

a measure of the price of a specified collection of goods and services compared to the price of a highly similar collection of goods and services in a reference year.

Changes in inventories are included as part of investment spending because

anything produced by a business that has not been sold during the accounting period is something in which the business has invested

If inventories decline by $1 billion during 2025, then $1 billion would be

subtracted from both gross private domestic investment and gross domestic product

An export supply curve is

the difference between quantity supplied and quantity demanded in the domestic market for a price above the domestic equilibrium price

An import demand curve is

the difference between quantity supplied and quantity demanded in the domestic market for a price below the domestic equilibrium price

Nominal GDP is

the market or money value of all final goods and services produced by the economy in a given year, whereas real GDP is adjusted for inflation

An economy's output, in essence, is also equal to its income because

the value of everything that is produced is also the value of everything sold

When measuring GDP, economists don't include the value of the used furniture bought and sold because

this value was already counted in GDP in some previous year

The area beyond the budget line represents combinations of goods that (given your current income) are

unattainable

Studies indicate that married men on average earn more income than unmarried men of the same age and education level. Therefore, we can conclude that

we do not have enough information to definitively state that any of the above statements are true

In a market system, the allocation of scarce goods involves the consideration of

what must be sacrificed in using a resource for its next-best use

A small economy starts the year with $1 million in capital. During the course of the year, gross investment is $150,000 and depreciation is $50,000. What is the economy's capital stock at the end of the year?

$1,100,000

Which statement is consistent with the law of demand?

A reduction in market price will lead to an increase in quantity demanded

How is a market demand curve derived from individual demand curves?

Add up quantities demanded by all individual consumers for each price

Which of the following characteristics lead to a downward-sloping demand curve?

Diminishing marginal utility and an increase in purchasing power as market price decreases

True or False: A "change in quantity demanded" is a shift of the entire demand curve to the right or to the left.

False

True or False: Money must be issued by a government for people to accept it

False

Suppose that the current international price of wheat is $6 per bushel and that the United States is currently exporting 30 million bushels per year. If the United States suddenly became a closed economy with respect to wheat, would the domestic price of wheat in the United States end up higher or lower than $6?

Lower

For each stock in the stock market, the number of shares sold daily equals the number of shares purchased. That is, the quantity of each firm's shares demanded equals the quantity supplied. Why, then, do the prices of stock shares change?

Prices change in reaction to a mismatch between quantity demanded and quantity supplied

Which of the following best describes the concept of "utility" and purposeful behavior?

Satisfaction from consuming goods or services

The eurozone is

a common currency zone in which members have adopted the euro as their common currency

The World Trade Organization (WTO) is

a group that oversees trade agreements reached by member nations and arbitrates trade disputes among them

USMCA is

a trade bloc made up of the United States, Canada, and Mexico whose purpose is to reduce tariffs and other trade barriers among the three countries

The European Union (EU) is

a trading bloc of 27 (not 28) European countries who have agreed to abolish tariffs and import quotas on most products and have liberalized the movement of labor and capital

Statistics derived from national income accounting

are useful to assess the health of an economy and formulate policies to maintain and improve that health

Budget lines always slope_________because there is a(n)_________relationship between the two goods represented by the budget line

downward: inverse

Gross domestic product does not include the value of the stocks and bonds bought and sold because these transactions are considered

financial investment and should not be counted as production of final goods and services

Suppose a city block was going to be used for a parking lot in both New York City and a small town. The opportunity cost would be

greater in New York City because the alternative uses of the city block are more valuable

Suppose that this year's nominal GDP is $16 trillion. To account for the effects of inflation, we construct a price-level index in which an index value of 100 represents the price level 5 years ago. Using that index, we find that this year's real GDP is $15 trillion. Given those numbers, we can conclude that the current value of the index is:

higher than 100

Economists include only final goods and services when measuring GDP because

if intermediate goods were counted, then multiple counting would occur

Over the past few decades, offshoring has

increased to countries with an educated labor force such as India

The equilibrium world price of a tradable good is determined by the

intersection of the world supply and demand schedules

Price ceilings during a hyperinflation are problematic because

many producers will go out of business because the costs of production will soon exceed the legal selling price

Protective tariffs might reduce both the imports and the exports of the nation that levies tariffs because

other countries may follow with their own import tariffs

A Venezuelan-style economic collapse would be less likely in a mixed economy like the United States because

private industry has strong financial incentives to produce efficiently and corruption is less likely when economic power is more diffused

Import competition can lead to

quality improvements and cost reductions by American firms

The more reliable measure for comparing changes in the standard of living over a series of years is

real GDP

Offshoring of white-collar service jobs

refers to jobs relating to data entry, book composition, and software coding

In percentage terms, United States exports of goods and services are

small when compared to other industrialized countries