Macro Econ Studyguide

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Which of the following would cause an increase in quantity supplied of wheat? The price farmers receive for their wheat rises. The price of fertilizer farmers' use in their fields decreases. The price firms pay for liability insurance falls. New, better technology for farming is introduced.

The price farmers receive for their wheat rises.An increase in price causes a movement up and along the supply curve.

The minimum payment you are willing to accept to do a job is your: Select one: a. nominal wage. b. real wage. c. reservation price. d. value of marginal product.

c. reservation price.

When prices are predetermined, the level of output that equals planned aggregate expenditure is called ______ output. Select one: a. the natural rate of b. potential c. short-run equilibrium d. induced

c. short-run equilibrium

quantity equation

the equation M x V = P x Y, which relates the quantity of money, the velocity of money, and the dollar value of the economy's output of goods and services inc in money supply= inc in price level

In Macroland, autonomous consumption equals 100, the marginal propensity to consume equals 0.75, net taxes are fixed at 40, planned investment is fixed at 50, government purchases are fixed at 150, and net exports are fixed at 20. Autonomous expenditure equals: A. 290 + 0.75Y.B. 320 + 0.25Y.C. 290. D. 320. Short-run equilibrium output in this economy equals: A. 1,440.B. 1,000.C. 1,280.D. 1,160. The vertical intercept of the expenditure line is: Select one: a. 0.25.b. 0.75. c. 290.d. 320. Planned aggregate expenditure equals: Select one: a. 290 + 0.25Y. b. 320 + 0.25Y. c. 320 + 0.75Y. d. 290 + 0.75Y.

C. 290. Autonomous expenditure is expenditure which is independent of income. In this case, because C = 100 + 0.75(Y - T), we have PAE = C + I + G + NX = [100 + 0.75(Y - 40)] + 50 + 150 + 20 = 100 + 0.75Y - 30 + 50 + 150 + 20 = 290 + 0.75Y. Autonomous expenditure is the vertical intercept of 290. D. 1,160. PAE = C + I + G + NX = [100 + 0.75(Y - 40)] + 50 + 150 + 20 = 100 + 0.75Y - 30 + 50 + 150 + 20 = 290 + 0.75Y. Short-run equilibrium output occurs when Y equals PAE. The only value for Y in the answer choices that would also be equal to 290 + 0.75Y is 1,160 c. 290. d. 290 + 0.75Y.

The field of economics that would be most concerned with a recent fall in interest rates is: Select one: a. microeconomics. b. macroeconomics. c. economic naturalism. d. marginal economics.

The correct answer is: macroeconomics.

Government policies that increase the long-term economic growth rate by a small amount result in ______ in average living standards. Select one: a. large increases b. small increases c. small decreases d. no change

a. large increases

Capital income in the U.S. equals approximately ______ of GDP. Select one: a. one third b. two fifths c. one half d. two thirds

a. one third

The CPI equals 1.00 in year one and 1.15 in year two. If the nominal wage is $15 in year one and a contract calls for the wage to be indexed to the CPI, what will be the nominal wage in year two? Select one: a. $15.00 b. $16.15 c. $17.25 d. $22.50

c. $17.25

Natural Rate of Unemployment/Full Employment *u

sum of frictional and structural employment rates (4-6%)

The following table provides data for an economy in a certain year. Consumption expenditures-1000 Imports- 600 Government purchases of goods and services- 700 Construction of new homes- 500 Sales of existing homes and apartments-600 Exports-500 Government payments to retirees- 200 Household purchases of durable goods- 300 Beginning of year inventory- 500 End of year inventory- 600 Business fixed investment- 300 Given the data in the table, how much did households spend on nondurables and services? 300 700 1,000 1,300 Compute the biz investments

700 (1000-300) 900 (600+300)

On a graph of a production possibilities curve, an inefficient point is: Select one: a. necessarily an attainable point. b. not necessarily an attainable point. c. necessarily an unattainable point. d. possibly an unattainable point.

a. necessarily an attainable point.

Physical capital is: Select one: a. the factories and machinery used to produce other goods and services. b. the talents, training, and education of workers. c. the financial resources available for investment. d. the physical labor of workers.

a. the factories and machinery used to produce other goods and services.

Production data for Joe's Pizza Parlor are as follows. For simplicity assume that labor is the only input. Each pizza sells for $5. Assume each worker costs $35. How much labor will the firm employ? Select one: a. 1 b. 2 c. 3 d. 4

b. 2

Every time you go to the grocery store, you try to wait in the shortest line. But the lines always seem to be roughly the same length. Why? Select one: a. Random chance equalizes the length of the lines. b. Other people are trying to choose the shortest line too. c. The cashiers work at the same speed. d. The cashiers do not have an incentive to work faster.

b. Other people are trying to choose the shortest line too.

Holding other factors constant, if new environmental regulations increase firms' cost of operating capital, then the real interest rate will ______ and the equilibrium quantity of national saving and investment will ____. Select one: a. increase; increase b. increase; decrease c. decrease; decrease d. decrease; increase

b. increase; decrease

The increase in wage inequality resulting from globalization can be reversed through: Select one: a. revoking the principle of comparative advantage. b. increases in worker mobility. c. decreases in worker mobility. d. making markets more competitive.

b. increases in worker mobility.

Earth Movers & Shakers operates 3 iron ore mines. The table below shows each mine's total daily production and the current number of miners at each mine. All miners work for the same wage, and each miner in any given mine produces the same number of tons per day as every other miner in that mine. Suppose Earth Movers & Shakers needs to fill an order for 60 tons of ore in a single day. If it has no other orders for that day, it should: Select one: a. take it all from Mother Lode. b. take it all from Middle Drift. c. take 30 tons from Scraping Bottom and 30 tons from Middle Drift. d. take 20 tons from each of the three mines.

b. take it all from Middle Drift.

recessionary is to depression what expansion is to ______

boom

The Hatfields and the McCoys both earn $50,000 per year in real terms in the labor market, and both families are able to earn a 5% real interest rate on their savings. In the year 2010, both families began to save. The Hatfields saved 8% of their income each year; the McCoys saved 10%. In 2010, the Hatfields consumed ______ more than the McCoys; in 2011, the Hatfields consumed ______ than the McCoys. Select one: a. $1,000; about $960 less b. $2,000; about $960 more c. $1,000; about $960 more d. $2,000; about $960 less

c. $1,000; about $960 more

You won a free ticket to see the latest Star Trek movie this Friday night (which you can costlessly resell for its face value of $15). Your favorite band is also performing on Friday and is your only alternative activity. Friday is your last chance to see either the movie or the band. Tickets to see your favorite band cost $30, and on any given day, you would be willing to pay as much as $50 for a ticket. Based on this information, what is your opportunity cost of going to see the Star Trek movie on Friday? Select one: a. $0 b. $30 c. $35 d. $50

c. $35

Suppose that average labor productivity in Country C is $6,000, and that Countries C and A have the same real GDP per capita. Based on the information in the table, what must be the average labor productivity in Country A? Select one: a. $1,800 b. $2,400 c. $5,000 d. $7,200

c. $5,000

Based on the information in the table, what is the unemployment rate? Select one: a. 7.2% b. 8.0% c. 10.0% d. 28.0%

c. 10.0%

Refer to the figure above. Assume the market is originally at point W. Movement to point Y is a combination of: Select one: a. an increase in quantity supplied and an increase in demand. b. an increase in supply and an increase in demand. c. an increase in supply and an increase in quantity demanded. d. a decrease in supply and an increase in quantity demanded.

c. an increase in supply and an increase in quantity demanded.

Indexing is the process of: Select one: a. dividing a real quantity by a price index. b. dividing a nominal quantity by a price index. c. increasing a nominal quantity by an amount equal to the percentage change in a price index. d. increasing a real quantity by an amount equal to the percentage change in a price index.

c. increasing a nominal quantity by an amount equal to the percentage change in a price index.

A change in the average price level is called _____, while a change in the price of a specific good in comparison with other goods and services is called _______. Select one: a. a quality adjustment; a substitution bias b. a change in a relative price; inflation c. inflation; a change in a relative price d. a price level adjustment; a quality adjustment

c. inflation; a change in a relative price

The coupon rate is the: Select one: a. amount originally lent. b. regular payment of interest to a bondholder. c. interest rate promised when a bond is issued. d. maximum interest rate that can be paid on a bond.

c. interest rate promised when a bond is issued.

A seller's reservation price is generally equal to: Select one: a. the buyer's reservation price. b. the seller's average cost. c. the seller's marginal cost. d. the market price.

c. the seller's marginal cost.

Payments by the government to the public for which the government receives no current goods or services in return are called: Select one: a. public saving. b. net taxes. c. transfer payments. d. capital losses.

c. transfer payments.

If in the economy, business saving equals $240 billion, household saving equals $15 billion and government saving equals -$150 billion, what is the value of national saving? Select one: a. $415 billion b. $265 billion c. $250 billion d. $105 billion

d. $105 billion Spriv (household+biz)+ Spub(gov)

Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000 scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at $15,000 per year. Larry's opportunity cost of attending State College is: Select one: a. $35,000 b. $30,000 c. $20,000 d. $15,000

d. $15,000

The United States was unable to maintain its dominance in the production of televisions because: Select one: a. the highly technical skills necessary to produce televisions are greater in other countries. b. the raw materials necessary to build televisions became scarce in the United States. c. the product designs evolved too rapidly for engineers in the United States to keep up. d. automated techniques allowed production to be outsourced to countries with less-skilled workers.

d. automated techniques allowed production to be outsourced to countries with less-skilled workers.

The four components of aggregate expenditures are: Select one: a. consumption, imports, government spending, and net exports. b. consumption, interest payments, government spending, and net exports. c. consumer durables, investment, government spending, and net exports. d. consumption, investment, government spending, and net exports.

d. consumption, investment, government spending, and net exports.

Holding other factors constant, if food prices decline relative to the prices of other products, then the real wages of agricultural workers will ______ and employment of agricultural workers will _____. Select one: a. increase; increase b. increase; decrease c. decrease; not change d. decrease; decrease

d. decrease; decrease

The Scarcity Principle applies to: Select one: a. poor people primarily. b. consumers primarily. c. firms primarily. d. everyone.

d. everyone.

The cost-benefit model used by economists is: Select one: a. unrealistic because it is too detailed and specific to apply to most situations. b. unrealistic because everyone can think of times when he or she violated the principle. c. useful because everyone follows it all of the time. d. useful because most people follow it most of the time.

d. useful because most people follow it most of the time.

For two goods X and Y to be classified as substitutes, it must be the case that: Select one: a. X and Y are identical. b. consumers tend to purchase both items. c. when the price of X rises, the demand for Y decreases. d. when the price of X rises, the demand for Y increases.

d. when the price of X rises, the demand for Y increases.

As the price of flour (an input into the cookie production process) increases, firms that produce cookies will:increase the supply of cookies.increase the quantity of cookies supplied.decrease the supply of cookies.decrease the quantity of cookies supplied.

decrease the supply of cookies. An increase in the price of an input causes supply to shift upward and to the left.

If short-run equilibrium output equals 10,000, the income-expenditure multiplier equals 5, the mpc equals 0.8, and potential output (Y*) equals 9,000, then taxes must be ______ by approximately ______ to eliminate any output gap. Select one: a. decreased; 250 b. decreased; 200 c. increased; 250 d. increased; 200

decreased; 250 {1,000/5=200 , 200/0.8=250}

Refer to the figure below. Based on the figure, the income-expenditure multiplier in the economy illustrated equals: Select one: a. 0.75 b. 4 c. 4,000 d. 1,000

slope i.e. y-axis/x-axis or output/expenditure 16k/4k, 20k/5k, etc

Expansionary Gap (actual output above potential)

the amount by which actual output in the short run exceeds the economy's potential output threatens to ignite inflation

cyclical unemployment

unemployment caused by a business cycle recession u-u* u (actual unemployment) u* (natural rate)

recessionary gap (actual output below potential)

what occurs when the equilibrium quantity of output is below potential output reflects waste of resources

Okun's Law

1% more unemployment results in 2% less real gap output 1% less unemployment results in 2% more real gdp output cyclical uneployment and output gap. each percentage point inc in cyclical unemployment -2% neg output

Suppose a jar of DeLux popcorn that is ultimately sold to a customer at Friendly Groceries is produced by the following production process: What is the value added of Friendly Groceries? Select one: a. $1.50 b. $2.50 c. $3.50 d. $4.00

a. $1.50

Suppose Cathy and Lewis work in a bakery making pies and cakes. Suppose it takes Cathy 1.5 hours to make a pie and 1 hour to make a cake, and suppose it takes Lewis 2 hours to make a pie and 1.5 hours to make a cake. What is the opportunity cost to Cathy of making a cake? Select one: a. 2/3 of a pie. b. 1 pie. c. 1.5 pies. d. 1.33 pies.

a. 2/3 of a pie. 1/3 per 30 min so 2/3 in an hour

Planned aggregate expenditure (PAE) equals: Select one: a. C + Ip + G + NX. b. Cp + I + G + NX. c. C + I + Gp + NX. d. C + I + G + NXp.

a. C + Ip + G + NX.

All of the following describe trends in U.S. labor markets except: Select one: a. growing wage equality in the United States in recent decades. b. a slowdown in real wage growth since the 1970s. c. substantial growth in the level of employment in the United States. d. substantial growth in real wages during the last century.

a. growing wage equality in the United States in recent decades.

Empirical evidence indicates that higher real interest rates lead to ______ in savings. Select one: a. modest increases b. substantial increases c. no change in d. modest decreases

a. modest increases

You paid $35 for a ticket (which is non-refundable) to see SPAM, a local rock band, in concert on Saturday. Assume that $35 is the most you would have been willing to pay for a ticket. Your boss called, and she is looking for someone to cover a shift on Saturday at the same time as the concert. You would have to work 4 hours and she would pay you $11/hr. The psychic cost to you of working is $2/hr. Your economic surplus from going to work instead of seeing SPAM on Saturday is: Select one: a. $0 b. $1 c. $35 d. $36

b. $1

The table below shows the relationship between the number of times you get your car washed each month and your total monthly benefit from car washes. Each car wash costs $15. Number of Car Washes Per Month Total Monthly Benefit from Car Washes 0 $0 1 $20 2 $36 3 $48 4 $56 5 $60 What is the marginal benefit of the 3rd car wash each month? Select one: a. $4 b. $12 c. $16 d. $48

b. $12

In Econoland in 2005, people with incomes between $20,000 and $30,000 paid 12% of their income in taxes and people with incomes between $30,001 and $40,000 paid 15%. In 2005, the CPI in Econoland equaled 1.20, and it increased to 1.26 in 2006. If the government of Econoland wants to keep households with a given real income from being pushed up into a higher tax bracket by inflation, the $20,000-to-$30,000 bracket will be changed in 2006 to: Select one: a. $15,873-to-$23,810 b. $21,000-to-$31,500 c. $24,000-to-$37,800 d. $25,200-to-$37,800

b. $21,000-to-$31,500 x .06 + original

Your classmates from the University of Chicago are planning to go to Miami for spring break, and you are undecided about whether you should go with them. The round-trip airfares are $600, but you have a frequent-flyer coupon worth $500 that you could use to pay part of the airfare. All other costs for the vacation are exactly $900. The most you would be willing to pay for the trip is $1400. Your only alternative use for your frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your sister's graduation, which your parents are forcing you to attend. The Chicago-Atlanta round-trip airfares are $450. What is the opportunity cost of using the coupon for the Miami trip? Select one: a. $100 b. $450 c. $500 d. $550

b. $450

The Principle of Increasing Opportunity Costs states that: Select one: a. productive people do the hardest tasks first. b. when increasing production, resources with the lowest opportunity costs should be used first. c. when increasing production, resources with the lowest opportunity costs should be used last. d. opportunity costs increase when too little is produced.

b. when increasing production, resources with the lowest opportunity costs should be used first.

he number of U.S. households with access to the Internet is growing rapidly. Compared to 50 years ago, one would predict that when considering a major purchase, people today will gather: Select one: a. less information because the Internet has lowered the cost of gathering information. b. less information because the Internet has increased the benefit of gathering information. c. more information because the Internet has lowered the cost of gathering information. d. more information because the Internet has increased the cost of gathering information.

c. more information because the Internet has lowered the cost of gathering information.

If planned aggregate expenditure (PAE) in an economy equals 3,000 + 0.75Y and potential output (Y*) equals 12,000, then this economy has: Select one: a. an expansionary gap. b. a recessionary gap. c. no output gap. d. no autonomous expenditure.

c. no output gap. plug in Y 3,000+ (.75x12000)=12,000

One shortcoming of real GDP as an indicator of society's social well-being is that it fails to take into account the: Select one: a. growth in productivity. b. increase in the quantity of goods. c. non-market production. d. change in the price level.

c. non-market production.

An editorial in the paper argues that a person only should be allowed to attend school if the marginal cost of educating that person is less than the marginal benefit of educating that person. The writer's reasoning is an application of: Select one: a. positive economics. b. negative economics. c. normative economics. d. economic naturalism.

c. normative economics.

Since the year2000, the share of the population holding or actively looking for jobs have _______ in the United States: Select one: a. been record high. b. increased. c. remained approximately constant. d. decreased.

d. decreased.

Where Y is GDP, C is consumption, I is investment, G is government spending, T is net taxes, and there is no international trade, the government budget deficit equals: Select one: a. T - G. b. Y - G. c. Y + T - G. d. G - T.

d. G - T. (surplus is T-G)

Features of the labor market that are likely to cause structural unemployment include all of the following except: Select one: a. labor unions. b. minimum wage laws. c. unemployment compensation. d. differences in the skills and experience of workers.

d. differences in the skills and experience of workers.

Larry has a comparative advantage over his classmates in writing term papers if he: Select one: a. can write term papers faster than his classmates. b. has an absolute advantage in writing term papers. c. always earns an A on his term papers. d. has a lower opportunity cost of writing term papers than his classmates.

d. has a lower opportunity cost of writing term papers than his classmates.

Although GDP is not the same as economic well-being, high levels of GDP are positively correlated with all of the following except: Select one: a. longer life expectancies. b. higher rates of literacy. c. higher material standards of living. d. higher rates of infant mortality.

d. higher rates of infant mortality.

real interest rate=

nominal rate - inflation rate

Suppose there are two parallel highways between two cities with approximately equal traffic. What would you expect to happen if the state began charging tolls to drive on one of those highways? Select one: a. More drivers would drive on the non-toll road, making the toll road less congested. b. More drivers would drive on the toll road making the non-toll road less congested. c. Traffic would remain evenly divided between the two roads as drivers continuously sought the less-congested route. d. Traffic would decrease on both roads.

a. More drivers would drive on the non-toll road, making the toll road less congested.

Which of the following policies would be expected to increase private saving? Select one: a. Replacing the income tax with a consumption tax b. Increasing the tax rate on capital gains c. Providing more generous Social Security retirement benefits d. Reducing the size of down payments needed to buy a house

a. Replacing the income tax with a consumption tax

Assume one investor bought a 10-year inflation-protected bond with a fixed annual real rate of 1.5% and another investor bought a 10-year bond without inflation protection with a nominal annual return of 4.2%. If inflation over the 10-year period averaged 3%, which investor earned a higher real return? Select one: a. The investor who purchased the inflation protected bond. b. The investor who purchased the bond without inflation protection. c. Both investors earned the same real return. d. Neither investor earned a positive real return.

a. The investor who purchased the inflation protected bond. Real interest rate = nominal rate - inflation

In symbolic terms where Y equals real GDP, POP equals total population, and N equals the number of employed workers, Y/POP must equal: Select one: a. Y/N×N/POP. b. N/Y×POP/N. c. Y/POP×N/POP d. N/Y×N/POP

a. Y/N×N/POP.

Economists believe the Cost-Benefit Principle is: Select one: a. a simple but useful model of how people should make choices. b. a comprehensive description all the factors that influence people's choices. c. an interesting intellectual exercise with little applicability to the real world. d. of little use to those who wish to learn how to make better decisions.

a. a simple but useful model of how people should make choices.

The substitution bias in the CPI refers to the failure of statisticians to: Select one: a. allow for the possibility that consumers switch from products whose prices are rising. b. allow for the possibility that consumers switch stores at which they shop. c. take into account improvements in goods and services. d. take into account new products purchased by consumers.

a. allow for the possibility that consumers switch from products whose prices are rising.

The nominal interest rate is the: Select one: a. annual percentage increase in the dollar value of a financial asset. b. annual percentage increase in the purchasing power of a financial asset. c. real rate of return on an asset. d. the real interest rate minus the inflation rate.

a. annual percentage increase in the dollar value of a financial asset.

The figure below shows Becky's daily production possibilities curve for dresses and skirts. Point T is: Select one: a. attainable b. efficient c. both attainable and efficient d. neither attainable nor efficient

a. attainable

Any combination of goods that can be produced with currently available resources is an: Select one: a. attainable point. b. efficient point. c. inefficient point. d. attainable and efficient point.

a. attainable point.

When the price of a good is below its equilibrium value: Select one: a. consumers will bid the price up. b. excess supply will occur. c. it will tend to stay below the equilibrium value. d. suppliers will notice their inventories are growing.

a. consumers will bid the price up.

For an economy starting at potential output, an increase in autonomous expenditure in the short run results in a(n): Select one: a. expansionary output gap. b. recessionary output gap. c. increase in potential output. d. decrease in potential output.

a. expansionary output gap.

House prices in the U.S. increased dramatically _____, and decreased dramatically ______. Select one: a. from 2001 to 2006; from 2007 to 2009 b. from 2007 to 2009; from 2001 to 2006 c. from 2001 to 2009; from 2006 to 2007 d. from 2006 to 2009; from 2001 to 2006

a. from 2001 to 2006; from 2007 to 2009

a. growing wage equality in the United States in recent decades.

Tony notes that an electronics store is offering a flat $20 off all prices in the store. Tony reasons that if he wants to buy something with a price of $50, then it is a good offer, but if he wants to buy something with a price of $500, then it is not a good offer. This is an example of: Select one: a. inconsistent reasoning; saving $20 is saving $20. b. the proper application of the Cost-Benefit Principle. c. rational choice because saving 40% is better than saving 4%. d. inconsistent reasoning because prices are sunk costs.

a. inconsistent reasoning; saving $20 is saving $20.

Holding other factors constant, if oil prices rise relative to the prices of other products, then the real wages of oil workers will ______ and employment of oil workers will _____. Select one: a. increase; increase b. increase; decrease c. decrease; not change d. decrease; increase

a. increase; increase

Suppose the CPI does indeed overstate the inflation rate. When the CPI increases by 5% and household incomes increase by 5%, we should conclude that real incomes of households have: Select one: a. increased. b. stayed constant. c. decreased. d. increased more slowly than has inflation.

a. increased.

Holding other factors constant, an increase in the capital stock ______ the real wage and ______ employment. Select one: a. increases; increases b. increases; decreases c. increases; does not change d. decreases; increases

a. increases; increases

A government policy of providing job training for unskilled youths is an example of a policy to promote economic growth by: Select one: a. increasing human capital. b. increasing physical capital. c. improving technology. d. increasing the availability of natural resources.

a. increasing human capital.

The following table shows the relationship between the speed of a computer's CPU and its benefits and costs. Assume that all other features of the computer are the same (that is, CPU speed is the only source of variation), and only the CPU speeds listed below are available for purchase. *refer to #16 on test* Choosing a 3.5GHz computer would be irrational because: Select one: a. its marginal benefit is less than its marginal cost. b. its marginal benefit is equal to its marginal cost. c. it is impossible to tell the difference compared to a 3.0GHz computer. d. its marginal benefit is greater than its marginal cost.

a. its marginal benefit is less than its marginal cost.

The larger the mpc, the ______ the income-expenditure multiplier and the ______ the effect of a change in autonomous spending on short-run equilibrium output. Select one: a. larger; larger b. larger; smaller c. smaller; smaller d. smaller; larger

a. larger; larger

GDP excludes important factors that affect people's well-being, such as the value of: Select one: a. leisure time. b. government purchases of goods and services. c. services purchased by households. d. goods produced domestically but sold to foreigners.

a. leisure time.

Refer to the figure below. (point above the cross) Based on the Keynesian cross diagram, if output equals 5,000, planned aggregate expenditure is ______ output, and firms will ______ production in response. Select one: a. less than; decrease b. greater than; decrease c. equal to; not change d. less than; increase

a. less than; decrease

C + Ip + G + NX equals: Select one: a. planned aggregate expenditure. b. potential GDP. c. the output gap. d. the income-expenditure multiplier.

a. planned aggregate expenditure.

The government purchases component of GDP includes: Select one: a. purchases of final goods and services. b. interest payments on government debt. c. transfer payments. d. payments made to social security recipients.

a. purchases of final goods and services.

Higher future living standards require: Select one: a. reduced rates of current consumption. b. increased rates of population growth. c. increased rates of current consumption. d. reduced rates of current investment.

a. reduced rates of current consumption.

In the basic Keynesian model, a decline in autonomous spending: Select one: a. reduces short-run equilibrium output. b. increases short-run equilibrium output. c. reduces potential output. d. increases potential output.

a. reduces short-run equilibrium output.

As the rate of inflation increases, the increased cost to a consumer of more frequent trips to the bank to make cash withdrawals represents an increase in the: Select one: a. shoe leather costs of inflation. b. erosion of the purchasing power of cash. c. tax distortion generated by inflation. d. "noise" in the price system.

a. shoe leather costs of inflation.

Two types of bias that tend to cause the CPI to overstate the "true" rate of inflation are the ______ bias and the ______ bias. Select one: a. substitution; quality adjustment b. price; quantity c. aggregation; price d. quality adjustment; price adjustment

a. substitution; quality adjustment

a. the factories and machinery used to produce other goods and services.

Moe divides his time between studying Physics and studying Economics. His production possibilities curve for his final grade in each class is shown below. Moe needs to earn at least an 80 in both economics and physics to keep his scholarship. Given his current PPC, an 80 in both classes is ______. Select one: a. unattainable b. attainable c. efficient d. inefficient

a. unattainable

Suppose the following information describes the economy: GDP 2000 Consumption 1500 Government Spending 300 Net taxes 400 Private saving equals ____; public saving equals ______; national saving equals ____. Select one: a. 100; 200; 100 b. 100; 100; 200 c. 200; 100; 300 d. 200; 100; 500

b. 100; 100; 200 Sprivate is Y-T-C . Spublic Saving is T-G . Snational is Sprivate +Spublic

Refer to the table below. According to the Cost-Benefit Principle, how many units of this activity should be carried out? Units of Activity Total Cost Total Benefit 0 $0 $0 1 $30 $100 2 $40 $160 3 $60 $190 4 $100 $210 5 $150 $220 6 $210 $225 Select one: a. 1 b. 3 c. 4 d. 6

b. 3

The data below describe the economy of Econland: Biz & household 58 gov transfers and interest payments 12 gov purchases of goods and services 25 tax collections 42 Public saving in Econland equals: Select one: a. -5 b. 5 c. 16 d. 17

b. 5

The data below describe the economy of Econland: Biz & household saving 58 Govt transfers & interest payment 12 Govt purchases of good & services 25 Tax collections 42 Public saving in Econland equals: Select one: a. -5 b. 5 c. 16 d. 17

b. 5 T-G 42-25-12

Which of the following statements is true? Select one: a. Absolute advantage implies comparative advantage. b. Comparative advantage does not require absolute advantage. c. Absolute advantage requires comparative advantage. d. Comparative advantage requires absolute advantage.

b. Comparative advantage does not require absolute advantage.

Assume one investor bought a 10-year inflation-protected bond with a fixed annual real rate of 1.5% and another investor bought a 10-year bond without inflation protection with a nominal annual return of 4.2%. If inflation over the 10-year period averaged 2 %, which investor earned a higher real return? Select one: a. The investor who purchased the inflation protected bond. b. The investor who purchased the bond without inflation protection. c. Both investors earned the same real return. d. Neither investor earned a positive real return.

b. The investor who purchased the bond without inflation protection. 4.2-0 4.2-1.5 v. 2

Where Y is GDP, C is consumption, I is investment, G is government spending, T is net taxes, and there is no international trade, private saving equals: Select one: a. C + I + G - T. b. Y - T - C. c. Y -T - G. d. Y - C - I.

b. Y - T - C.

The price level is: Select one: a. the rate of inflation. b. a measure of overall prices at a particular point in time. c. the percentage change in a price index such as the CPI. d. the price of a specific good in comparison to the prices of other goods and services.

b. a measure of overall prices at a particular point in time.

Slower growth in labor demand in combination with increases in labor supply explains ____________ accompanied by __________. Select one: a. a slowdown in real wage growth; a decline in employment b. a slowdown in real wage growth; rapid employment growth c. a slowdown in real wage growth; increasing wage inequality d. accelerated real wage growth; a decline in employment

b. a slowdown in real wage growth; rapid employment growth

Total spending on final goods and services in an economy must equal total: Select one: a. profits. b. production value. c. revenues from all transactions. d. investment.

b. production value.

Total spending on final goods and services in an economy must equal total: Select one: a. profits. b. production value. c. revenues from all transactions. d. investment.

b. production value.

You are trying to decide whether to purchase the latest Harry Potter book online or borrow it from the library. There is no charge for borrowing a book from the library, but going to the library takes more time than ordering a book online. Regardless of how you get the book, its benefit to you is the same. If the cost of buying the book online is $13, then you should: Select one: a. borrow the book from the library because you can get it from the library for free. b. borrow the book from the library if the cost of doing so (in terms of the extra time it takes) is less than $13. c. borrow the book from the library if the cost of doing so (in terms of the extra time it takes) is greater than $13. d. buy the book online because it takes less time.

b. borrow the book from the library if the cost of doing so (in terms of the extra time it takes) is less than $13.

The bursting of the housing bubble in 2006 caused ______ to cut back on their spending, thereby shifting the PAE line _____. Select one: a. businesses and households; upward b. businesses and households; downward c. government and businesses; downward d. government and businesses; upward

b. businesses and households; downward

Consider a graph of a production possibilities curve. If a producer is operating at an inefficient point, then that producer: Select one: a. cannot produce more of one good without giving up some of the other good. b. can produce more of one good without producing less of the other good. c. must be at an unattainable point on the production possibilities curve. d. must be specializing in activities for which it has a comparative advantage.

b. can produce more of one good without producing less of the other good.

In the Keynesian model, it is assumed that, when demand for a firm's product changes, the firm: Select one: a. changes prices to meet the demand. b. changes production levels to meet the demand. c. changes prices and production levels to meet demand. d. changes prices, but holds production levels constant, to meet the demand.

b. changes production levels to meet the demand.

Suppose that two recent studies conclude that increased fiber in the diet does not reduce the risk of developing colon cancer as was previously thought. The likely result will be that the: Select one: a. quantity demanded of high-fiber foods will fall. b. demand for high-fiber foods will decrease. c. supply of high-fiber foods will increase. d. price of high-fiber foods will rise.

b. demand for high-fiber foods will decrease.

At the household level, higher saving rates lead to ______ and greater economic security. Select one: a. greater current consumption b. greater wealth c. less wealth d. less current income

b. greater wealth

Refer to the figure above. Moving from demand curve D1 to demand curve D2 illustrates a(n): Select one: a. increase in quantity demanded. b. increase in demand. c. decrease in demand. d. decrease in quantity demanded.

b. increase in demand.

A decrease in the price of pizza will cause a(n): Select one: a. increase in demand. b. increase in quantity demanded. c. decrease in quantity demanded. d. decrease in the number of consumers.

b. increase in quantity demanded.

Automatic stabilizers are provisions in the law which create automatic ______ in government spending or ______ in taxes when real output declines. Select one: a. increases; increases b. increases; decreases c. no change; no change d. decreases; decreases

b. increases; decreases

An economic expansion in the United States ______ the demand for exports from Mexico resulting in an increase in Mexican autonomous expenditures and a(n) ______ output gap in Mexico. Select one: a. reduces; expansionary b. increases; expansionary c. reduces; recessionary d. increases; recessionary

b. increases; expansionary

If firms sell less output than expected, planned investment: Select one: a. is greater than actual investment. b. is less than actual investment. c. equals actual investment. d. equals zero.

b. is less than actual investment.

Wages and salaries are examples of: Select one: a. consumption. b. labor income. c. capital income. d. profits.

b. labor income.

The figure below shows Becky's daily production possibilities curve for dresses and skirts. Relative to point X, at point Y: Select one: a. more dresses and more skirts are produced. b. more skirts and fewer dresses are produced. c. more dresses and fewer skirts are produced. d. fewer skirts and fewer dresses are produced.

b. more skirts and fewer dresses are produced.

A measure of GDP in which quantities produced are valued at current-year prices is called: Select one: a. real GDP. b. nominal GDP. c. base GDP. d. physical GDP.

b. nominal GDP.

The real rate of interest measures the ______ of capital investment. Select one: a. value of the marginal product b. opportunity cost c. marginal benefit d. relative price

b. opportunity cost

Small differences in annual growth rates of real GDP generate large differences in real GDP over time because of the: Select one: a. importance of average labor productivity. b. power of compound interest. c. diminishing returns to capital. d. limits of economic growth.

b. power of compound interest.

If government spending increases by $1 million while net taxes are unchanged, then: Select one: a. public saving increases. b. public saving decreases. c. public saving does not change. d. private saving increases.

b. public saving decreases.

Inflation is a measure of the ______ of prices; the CPI is a measure of the ______ of prices. Select one: a. current level; rate of change in the level b. rate of change in the level; current level c. index; base year's level d. base year's level; index

b. rate of change in the level; current level

Average labor productivity times the proportion of the population employed equals: Select one: a. real GDP. b. real GDP per person. c. real GDP per worker. d. output per worker.

b. real GDP per person.

You are the Minister of Trade for a small island country with the following annual PPC: You are negotiating a trade agreement with a neighboring island with the following annual PPC: If the other island's delegate offers to give you 2 fish for every 1 coconut you give them, you will: Select one: a. accept their offer because you do not have the comparative advantage in fish. b. refuse their offer because the opportunity cost to you of a coconut is more than 2 fish. c. accept their offer because you do not have an absolute advantage in fish. d. refuse their offer because the opportunity cost to you of a coconut is less than 2 fish.

b. refuse their offer because the opportunity cost to you of a coconut is more than 2 fish.

An increase in an economy's productive resources will lead the production possibilities curve to: Select one: a. shift inward. b. shift outward. c. become flatter. d. stay the same.

b. shift outward.

A long-term mismatch between the skills of some workers and the jobs available is a principal cause of ______ unemployment. Select one: a. cyclical b. structural c. global d. frictional

b. structural

Suppose that the price of doughnuts decreases and that doughnut-holes are a by-product of producing doughnuts. One would expect: Select one: a. the supply of doughnuts to decrease. b. the quantity supplied of doughnuts to decrease. c. the supply of doughnut-holes to increase. d. the quantity supplied of doughnut-holes to increase.

b. the quantity supplied of doughnuts to decrease.

A seller's reservation price is generally equal to: Select one: a. the buyer's reservation price. b. the seller's opportunity cost. c. the seller's marginal benefit. d. the market price.

b. the seller's opportunity cost.

Public saving is negative when: Select one: a. there is a government budget surplus. b. there is a government budget deficit. c. the government's budget is balanced. d. after-tax income of households and businesses is greater than consumption expenditures.

b. there is a government budget deficit.

Last summer, real estate prices in your town soared. You started noticing more "For Sale" signs in your neighbors' yards. You conclude that: Select one: a. people don't like to live in your neighborhood anymore. b. when housing prices rose, they started to exceed some of your neighbors' reservation prices. c. the demand curve for housing in your town has shifted to the left while supply remained constant. d. the supply curve for housing in your town has shifted to the right while demand has remained constant.

b. when housing prices rose, they started to exceed some of your neighbors' reservation prices.

Peg's Manicure Manor did 4,000 sets of nails in 2010 and 4,500 sets of nails in 2011. The price of a set of nails was $20 in 2010 and $22 in 2011. If 2010 is the base year, Peg's contribution to nominal GDP in 2010 was ______ and in 2011 was _______. Select one: a. $80,000; $88,000 b. $80,000; $90,000 c. $80,000; $99,000 d. $88,000; $90,000

c. $80,000; $99,000

Marge is lending Martin $1,000 for one year. The CPI is 1.60 at the time the loan is made. They expect it to be 1.76 in one year. If Marge and Martin agree that Marge should earn a 3% real return for the year, the nominal interest rate on this loan should be ______ percent. Select one: a. 3 b. 7 c. 13 d. 16

c. 13

In a small town of 100 people, there are 10 children under 16, 10 retired people, 60 people with full-time jobs, 3 people with part-time jobs, 3 full-time students over 16, and 4 full-time homemakers. The remaining people did not have jobs, but wanted jobs. What is the unemployment rate in this town? Select one: a. 10.0% b. 11.0% c. 13.7 % d. 14.5%

c. 13.7 %

c. 3

Refer to the table below. Julia's opportunity cost of making a cake is: Time to Make a Pie Time to Make a Cake: Martha 60 min 80 min Julia50 min 60 min Select one: a. 60 cakes b. 6 cakes c. 6/5 of a cake d. 5/6 of a cake

c. 6/5 of a cake

The last time gas prices increased drastically, sales of large Sport Utility Vehicles (SUVs) fell. Why? a. Higher gas prices lowered the benefit of driving an SUV. b. Higher gas prices increased the benefit of driving an SUV. c. Higher gas prices increased the cost of driving a SUV. d. Higher gas prices lowered the cost of driving a SUV.

c. Higher gas prices increased the cost of driving a SUV.

According to the textbook, NAFTA was expected to help which country exploit its comparative advantage in the production of goods made by unskilled labor? Select one: a. Canada b. Cuba c. Mexico d. The U.S.A.

c. Mexico

Suppose it takes Paul 3 hours to bake a cake and 2 hours to move the lawn, and suppose it takes Tom 2 hours to bake a cake and 1 hour to mow the lawn. Which of the following statements is correct? Select one: a. Paul has the absolute advantage in baking cakes b. Paul has the comparative in mowing the lawn c. Paul has the comparative in baking cakes d. Paul has the absolute advantage in mowing the lawn.

c. Paul has the comparative in baking cakes

An economic naturalist is someone who: Select one: a. uses economic arguments to protect the environment. b. has an innate talent for using economic concepts. c. applies economic insights to understand everyday life. d. studies the process of natural selection in a cost-benefit framework.

c. applies economic insights to understand everyday life.

Efficiency is an important goal in economics because it: Select one: a. assures a fair outcome. b. assures a normative outcome. c. assures a higher level of output. d. takes into consideration the distribution of income.

c. assures a higher level of output.

As the price of flour (an input into the cookie production process) increases, firms that produce cookies will: Select one: a. increase the supply of cookies. b. increase the quantity of cookies supplied. c. decrease the supply of cookies. d. decrease the quantity of cookies supplied.

c. decrease the supply of cookies.

Initially, workers in the shoe industry and the computer industry earn the same wage. Reductions in trade barriers give domestic consumers access to cheaper shoes produced abroad, so domestic shoe prices fall. At the same time, foreign consumers purchase more computers, raising the relative price of computers. As a result of these changes, wages in the shoe industry ______ and wages in the computer industry ______. Select one: a. increase; increase b. increase; decrease c. decrease; increase d. decrease; decrease

c. decrease; increase

To correct a nominal quantity for changes in the price level, one should: Select one: a. add a price index to it. b. subtract a price index from it. c. divide it by a price index. d. multiply it by a price index.

c. divide it by a price index.

If household saving decreases by $4 million, business saving increases by $4 million, and the government budget deficit decreases by $4 million, then private saving ______ and public saving ______. Select one: a. increases; increases b. increases; decreases c. does not change; increases d. does not change; decreases

c. does not change; increases

Suppose Mary is willing to pay up to $15,000 for an used Ford pick-up truck. If she buys one for $12,000, her ______ would be ______. Select one: a. benefit; $12,000 b. cost; $15,000 c. economic surplus; $3,000 d. economic surplus; $12,000

c. economic surplus; $3,000

The figure below shows Becky's daily production possibilities curve for dresses and skirts. Point Y is ______, and point V is ______. Select one: a. efficient; inefficient b. inefficient; efficient c. efficient; efficient d. inefficient; inefficient

c. efficient; efficient

A real interest rate that causes the quantity of saving supplied to be equal to the quantity of saving (or investment) demanded is an example of the: Select one: a. scarcity principle. b. principle of comparative advantage. c. equilibrium principle. d. principle of increasing opportunity cost.

c. equilibrium principle.

The recession of 2007-2009 happened in part because, after the housing bubble burst in 2006, disruptions in the financial market made it difficult: Select one: a. for government to finance deficit spending. b. to fight inflation. c. for businesses and consumers to borrow money. d. to shift the PAE line downward.

c. for businesses and consumers to borrow money.

At the national level, higher saving rates lead to ______ and higher standards of living. Select one: a. greater current consumption b. slower growth c. greater investment d. crowding out

c. greater investment

Economics is best defined as the study of: Select one: a. inflation, interest rates and the stock market. b. supply and demand. c. how people make choices in the face of scarcity and the implications of those choices for society as a whole. d. the financial concerns of businesses and individuals.

c. how people make choices in the face of scarcity and the implications of those choices for society as a whole.

Sharing the results of applied research conducted under government sponsorship with the private sector, such as the development of the Global Positioning System (GPS), is an example of a government policy to promote economic growth by: Select one: a. increasing human capital. b. increasing physical capital. c. improving technology. d. increasing the availability of natural resources.

c. improving technology.

Economic growth can result from a(n): Select one: a. increase in the amount of productive resources. b. increase in number of the minimum wage jobs. c. increase in the amount of consumer goods produced. d. decrease in the number of workers available.

c. increase in the amount of consumer goods produced.

The introduction of a new technology that increases the productivity of labor will: Select one: a. increase the supply of labor. b. decrease the supply of labor. c. increase the demand for labor. d. decrease the demand for labor

c. increase the demand for labor.

In the short-run Keynesian model where the marginal propensity to consume is 0.75, to offset an expansionary gap resulting from a $1 billion increase in autonomous consumption, taxes must be: Select one: a. increased by $1 billion. b. decreased by $1 billion. c. increased by $1.33 billion. d. decreased by $1.33 billion.

c. increased by $1.33 billion.

An increase in the size of the working-age population: Select one: a. increases labor demand. b. decreases labor demand. c. increases labor supply. d. decreases labor supply.

c. increases labor supply.

Refer to the figure below. As the production of pizza increases, the opportunity cost of producing pizza: Select one: a. doesn't change. b. decreases. c. increases. d. become negative.

c. increases.

From a macroeconomic perspective, the problem of low household saving has probably been overstated because: Select one: a. household saving is not related at all to an economy's ability to accumulate new capital. b. household saving has been increasing steadily over the last three decades. c. it is national saving, not household saving, that allows an economy to accumulate new capital. d. household saving represents a smaller share of national saving than does public saving.

c. it is national saving, not household saving, that allows an economy to accumulate new capital.

Frictional unemployment may be economically beneficial if: Select one: a. its psychological costs are borne only by the unemployed worker. b. losses in economic output are small. c. it leads to a better match between worker and job. d. the social costs are limited to smaller tax revenues collected.

c. it leads to a better match between worker and job.

Which branch of economics is most likely to study differences in countries' growth rates? Select one: a. microeconomics b. normative economics c. macroeconomics d. experimental economics

c. macroeconomics

One thing that distinguishes normative economic principles from positive economic principles is that: a. normative principles are pessimistic and positive principles are optimistic. b. normative principles reflect social norms, and positive principles reflect universal truths. c. normative principles tell us how people should behave, and positive principles tell us how people will behave. d. normative principles tell us how people will behave, and positive principles tell us how people should behave.

c. normative principles tell us how people should behave, and positive principles tell us how people will behave.

Production possibilities curves for large economies are generally bow-shaped because: Select one: a. specialization gives some producers a comparative advantage. b. opportunity costs tend to decrease with increases in production. c. opportunity costs tend to increase with increases in production. d. as more resources are used to produce a good, those resources become less expensive.

c. opportunity costs tend to increase with increases in production.

Unplanned inventory investment equals zero when: Select one: a. planned investment is greater than actual investment. b. planned investment is less than actual investment. c. planned investment equals actual investment. d. expected sales are greater than actual sales.

c. planned investment equals actual investment.

The "true" costs of inflation are: Select one: a. higher relative prices. b. lower relative prices. c. reduced economic growth and efficiency. d. a higher overall price level.

c. reduced economic growth and efficiency.

Bank C promises to pay a compound annual interest rate of 6 percent, while Bank S pays an 8 percent simple annual interest rate on deposits. If you deposit $1,000 in each bank, after 10 years, your deposit in Bank C equals _____, while your deposit in Bank S equals ______. Select one: a. $1,060; $1,800 b. $1,600; $1,800 c. $1,600; $2,159 d. $1,791; $1,800

d. $1,791; $1,800 1.06 x 1000 1.08 x 1000

An economy produces 1,000,000 computers valued at $2,000 each. Households purchase 200,000 computers, of which 100,000 are imported. Businesses purchase 300,000 domestically produced computers, the government purchases 300,000 domestically produced computers, and 100,000 domestically produced computers are sold abroad. At the end of the year, the computer manufacturers hold the unsold computers in inventory.. What is the value of the investment component of GDP? Select one: a. $0.6 billion b. $0.8 billion c. $0.9 billion d. $1.0 billion

d. $1.0 billion 200,000 not accounted for in figures+300,000 biz=500,000x2,000

Suppose when you are 21 years old, you deposit $1,000 into a bank account that pays annual compound interest, and you do not withdraw from the account until your retirement at the age of 65, 44 years later. How much more will be in your account if the interest rate is 6 percent rather than 4 percent? Select one: a. $880 b. $2,390 c. $5,617 d. $7,369

d. $7,369

Peg's Manicure Manor did 4,000 sets of nails in 2010 and 4,500 sets of nails in 2011. The price of a set of nails was $20 in 2010 and $22 in 2011. If 2010 is the base year, Peg's contribution to real GDP in 2011 was ______ and to nominal GDP in 2011 was _____. Select one: a. $80,000; $88,000 b. $80,000; $90,000 c. $80,000; $99,000 d. $90,000; $99,000

d. $90,000; $99,000

Smith and Jones comprise a two-person economy. Their hourly rates of production are shown below. Calc per Hr. Comp per Hr Smith. 100 10 Jones. 120 6 Suppose Smith and Jones begin by producing 0 computers and 220 calculators per hour. If they wish to produce 2 computers and 200 calculators per hour efficiently, then Smith should spend ______, and Jones should spend ______. Select one: a. 30 minutes on each; 30 minutes on each b. 48 minutes on computers and 12 minutes on calculators; 1 hour on calculators c. 1 hour on calculators; 10 minutes on computers and 50 minutes on calculators d. 12 minutes on computers and 48 minutes on calculators; 1 hour on calculators

d. 12 minutes on computers and 48 minutes on calculators; 1 hour on calculators

The table below gives the quantities and prices for 2000 and 2010 for an economy that produces just two goods: sailboats and coconuts. For this economy that produces just sailboats and coconuts, and with 2000 is the base year, nominal GDP was approximately ______ times larger in 2010 than it was in 2000. Select one: a. 1.34 b. 1.65 c. 1.77 d. 2.19

d. 2.19

In Macroland, autonomous consumption equals 100, the marginal propensity to consume equals 0.75, net taxes are fixed at 40, planned investment is fixed at 50, government purchases are fixed at 150, and net exports are fixed at 20. Planned aggregate expenditure equals: Select one: a. 290 + 0.25Y. b. 320 + 0.25Y. c. 320 + 0.75Y. d. 290 + 0.75Y. Feedback

d. 290 + 0.75Y.

Real GDP per person in Northland is $30,000, while real GDP in Southland is $10,000, However, Northland's real GDP per person is growing at 1 percent per year, and Southland's real GDP per person is growing at 3 percent per year. If these growth rates persist indefinitely, then: Select one: a. Northland's real GDP per person will decline until it equals Southland's. b. Northland's real GDP per person will always be between 1 and 2 percent greater than Southland's. c. Southland's real GDP per person will always be exactly 2 percent less than Northland's. d. Southland's real GDP per person will eventually be greater than Northland's.

d. Southland's real GDP per person will eventually be greater than Northland's.

"As the price of personal computers continues to fall, demand increases." This headline is inaccurate because: Select one: a. a change in the price of personal computers shifts the demand curve. b. a change in the price of personal computers shifts the supply curve. c. the statement is backwards: increased demand leads to lower prices. d. a falling price for personal computers increases quantity demanded, not demand.

d. a falling price for personal computers increases quantity demanded, not demand.

The biggest problem thwarting economic growth in the poorest countries, compared to the richest countries, is: Select one: a. insufficient human capital. b. outdated physical capital. c. no access to technology. d. a legal and/or political environment unfavorable to economic growth.

d. a legal and/or political environment unfavorable to economic growth.

Chris has a one-hour break between classes every Wednesday. Chris can either stay at the library and study or go to the gym and work out. The decision Chris must make is: Select one: a. not an economic problem because neither activity costs money. b. not an economic problem because it's an hour that Chris has no matter what he does. c. an economic problem because the tuition Chris pays covers the cost of both the gym and the library. d. an economic problem because Chris has only one hour, and engaging in one activity means giving up the other.

d. an economic problem because Chris has only one hour, and engaging in one activity means giving up the other.

Sellers tend to offer _______ for sale as price increases, and so the supply curve is ______ sloping. Select one: a. goods; not b. more; downward c. less; upward d. more; upward

d. more; upward

Which of the expenditure components of GDP can be negative? Select one: a. consumption spending on durables. b. government purchases of goods and services. c. consumption spending on services. d. net exports.

d. net exports.

One reason there is political opposition to international trade is that: Select one: a. the potential gains from specialization and trade are small. b. trade does not increase the total value of goods and services produced by a nation. c. the differences in opportunity costs between countries are small. d. not everyone benefits from trade.

d. not everyone benefits from trade.

When statisticians fail to allow for the possibility that consumers switch from products with rising prices to those whose prices are stable or falling, the CPI will tend to ______ the rate of inflation. Select one: a. understate b. precisely measure c. be unrelated to d. overstate

d. overstate

The wage paid to workers measured in terms of real purchasing power is called the: Select one: a. nominal wage. b. cost of living. c. minimum wage. d. real wage.

d. real wage.

In a free market, if the price of a good is above the equilibrium price, then; Select one: a. suppliers, dissatisfied with growing inventories, will raise the price. b. demanders, wanting to ensure they acquire the good, will bid the price lower. c. government needs to set a lower price. d. suppliers, dissatisfied with growing inventories, will lower the price.

d. suppliers, dissatisfied with growing inventories, will lower the price.

National saving is saving by: Select one: a. households for retirement. b. the government. c. households and firms d. the entire economy.

d. the entire economy.

When a nation reduces the barriers to international trade: Select one: a. each individual citizen becomes better off. b. each individual citizen becomes worse off. c. the total value of all goods and services produced by the nation falls. d. the total value of all goods and serviced produced by the nation rises.

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