econ final exam

Correlation implies causation.

False

Economic models are not useful because they are much simpler than real life

False

Which of the following equations sums up the components of Gross Domestic Product?

Y = C + I + G + NX

Comparative advantage is the ability of an individual, firm, or country to produce a good or service at

a lower opportunity cost than competitors

Which of the following is an example of intellectual property?

a movie

Economists generally assume people

all of the above

Economics is largely a(n) _______ discipline because ________

amoral - it takes peoples wants as given

Which of the following would cause a decrease in aggregate demand?

an increase in taxes

Why does the consumer price index include the number of goods consumed in its calculation?

because quantities consumed provide a sense of how important different prices are

Suppose that the inflation rate turns out to be higher than most people expected. In that case,

borrowers gain and lenders lose

How are resources allocated in a market economy?

by the decisions of households and firms interacting in markets

The long-run aggregate supply curve is vertical because in the long run

changes in the price level do not affect potential GDP, as potential GDP depends on the size of the labor force, capital stock, and technology

The British historian Thomas Macaulay once remarked that copyrights are "a tax on readers." Copyrights are a 'tax' on readers in the sense that

copyrights limit of the supply of related creative work which results in higher prices

A Wall Street Journal article noted that a study by the U.S. Congressional Budget Office "estimated raising the minimum wage to $10.10 an hour would reduce U.S. employment by 500,000 but lift 900,000 Americans out of poverty." The minimum wage might reduce employment because

employer costs would increase

Scarcity is central to the study of economics because it implies that

every choice involves an opportunity cost

True or False. The aggregate demand curve slopes downward because as price levels fall, real property becomes more valuable.

false

True or false: GDP includes the value of household production

false

True or false: If Janet can solve more math problems than you in one hour, Janet definitely has a comparative advantage in math

false

True or false: The labor market is a zero-sum game for society.

false

True or false: When an industry receives tariff or quota protection there is no effect on other domestic industries.

false

Inventories are part of investment and therefore included in GDP because

firms produce goods, however sometimes the goods may be unsold at the time GDP is computed

All of the following are problems in measuring the unemployment rate except that

full-time students are counted as unemployed

) Which of the following statements about prices and inflation is NOT correct?

if the price level is higher this year than last, then inflation is higher this year than last

In the production possibilities frontier below, movement along the curve from points A to B to C illustrates

increasing marginal opportunity costs

Property rights are the rights

individuals or firms have to the exclusive use of their property, including the right to buy and sell it

it is impossible to know whether a particular nominal interest rate is "high" or "low" because

it depends on the inflation rate

For the United States economy, imports and exports represent a _______ fraction of GDP today compared to 40 years ago

larger

Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when

marginal benefit equals marginal cost

A price ceiling is a legally determined _____ sellers may charge; a price floor is a legally determined _____ sellers may receive

maximum; minimum

Consumer and producer surplus measure the _____ benefit rather than the _____ benefit.

net;total

Suppose a house is built and sold in the year 2008. If the house is resold in the year 2019, is the value of the house included in Gross Domestic Product for 2019

no - GDP for 2019 includes only production that occurs during 2019

Suppose a family member gifts you $100 for Christmas. By how much does GDP change this year?

no change

The difference between a nominal variable and a real variable is that

nominal variables are calculated in current-year prices and the real variables are measured in dollars of the base year for the price index to correct the effects of inflation

What type of economic analysis is concerned with the way things ought to be?

normative analysis

The employment-population ratio measures the

percentage of the working age population that is employed

Juan notices healthy people tend to have higher incomes than less healthy people. Health and income are

positively correlated

Why does the short-run aggregate supply curve slope upward?

profits rise when the prices of the goods and services firms sell rise more rapidly than the prices they pay for inputs

Because economists usually cannot implement randomized control trials, they frequently look for ________ to identify situations where artificial treatment and control groups arise by chance.

quasi-experiments

Which of the following is considered the "gold standard" for inferring causality?

randomized control trials

Because of _________, people must make choices as they try to attain their goals.

scarcity

A production possibilities frontier (PPF) is a curve

showing the maximum attainable combinations of two products that may be produced with available resources and current technology

Economic theory suggests countries benefit from international trade by producing more of those good and services for which they have a comparative advantage (and less of that for which a country does not have a comparative advantage). However, countries rarely specialize completely. Why?

some goods and services cannot be traded internationally

hen the government imposes price floors or price ceilings,

some people win, some people lose, and there is a loss of economic efficiency

Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs is called

structural unemployment

What is absolute advantage?

the ability to produce more of a good or service than competitors using the same amount of resources

Tax incidence refers to

the actual division of the burden of a tax on between buyers and sellers in a market

Why do economists believe the Consumer Price Index overstates the true rate of inflation?

the basket of goods may not include relatively new products

Macroeconomics primarily examines

the economy as a whole, such as how quickly the economy grows

Equity is

the fair distribution of economic benefits

Consumer surplus is the difference between

the highest price a consumer is willing to pay and the price the consumer actually pays

Opportunity cost is

the highest valued alternative that must be give up to engage in an activity

Economists have historically distrusted survey data because

the incentive for respondents to report accurate information is weak

Gross domestic product is

the market value of all final goods and services produced in a country during a period of time

Which of the following is NOT responsible for the downward slope of the aggregate demand curve?

the substitution effect

If the price level increases, then

there will be a movement up along a stationary aggregate demand curve

West Virginia University wants to test whether a job training program can reduce the duration of unemployment for West Virginians who need jobs. The University offers the training to a randomly selected group of unemployed West Virginians across the state. Unemployed individuals who were offered the training form the _______ group; unemployed individuals who were not offered the training form the _______ group.

treatment; control

A fundamental difficulty in empirical economics is distinguishing causation from correlation.

true

Cindy claims the US is spending too much money on healthcare. Her claim is a "normative" statement

true

Economic surplus is the sum of consumer surplus and producer surplus

true

True or False. Parker et al. (2016) find evidence that infant mortality increased in the Democratic Republic of Congo after the United States imposed economic sanctions (trade restrictions) on the country

true

True or false: If Janet can solve more math problems than you in one hour, Janet definitely has an absolute advantage in math.

true

True or false: Milton Friedman argued that businesses do not and should not have a responsibility to engage in charity

true

When trying to infer causality, economists define bias as any source of difference between treatment and control groups that is correlated with the treatment but is not due to the treatment.

true

The type of inflation that is a greater problem to society is

unanticipated inflation since it causes greater redistribution of income between those making payments and those awaiting payments in the future