Macro Exam 1

Suppose Japanese-based Toshiba Corporation builds and operates a new computer factory in the United States. Future production from such an investment will

increase U.S. GDP more than it increases U.S. GNP

Which of the following do economists not generally regard as a legitimate reason for the government to intervene in a market?

To protect an industry from foreign competition

You have driven 850 miles on a vacation and then you notice that you are only 50 miles from an attraction you hadn't known about, but would really like to see. In computing the opportunity cost of visiting this attraction you had not planned to visit, you should include

the cost of driving the next 50 miles, but not the cost of driving the first 850 miles

Suppose that in Peru total annual output is worth $750 million and people work 40 million hours. In Oman, total annual output is worth 650 million and people work 20 million hours. Productivity is higher

in Oman. Most variation in the standard of living across countries is due to difference in productivity

Jackie, a Canadian citizen, works only in the United States. The value of the output she produces is

included in U.S. GDP, but it is not included in U.S. GNP

Gross domestic product means

income and expenditures

Thousands of people develop lung cancer from second-hand exposure to cigarette smoke. This is an example of

a market failure caused by an externality

The term market failure refers to

a situation in which the market on its own fails to allocate resources efficiently

A newspaper article informs you that most businesses reduced production in the last quarter but also sold from their inventories during the last quarter. Based on this information GDP likely

decreased

In the simple circular-flow diagram, the flow of money from the firms to the markets for factors of production is called

revenue

If over a short time there is an increase in the number of people retired and a decrease in the number of people working, then productivity

rises but real GDP per person falls

What is the opportunity cost of increasing the production of rye from 700 bushels to 1200 bushels

500 bushels of corn

Where can an economy not produce?

Outside it production possibilities frontier

Which of the following statements about trade is false?

With trade, one country must win and one country must lose

An organization that tries to encourage the flow of investment from advanced countries to poor countries is the

World Bank

For the purpose of calculating GDP, investment is spending on

capital equipment, inventories, and structures, including household purchases of new housing

In an economy where net exports are zero, if saving rises in some period, then in that period

consumption falls and investment rises

The "invisible hand" refers to

how the decisions of household and firms lead to desirable market outcomes

If an economy's GDP falls, then it must be the case that the economy's

income and expenditure both fall

The value of goods added to a firm's inventory in a certain year is treated as

investment, since GDP aims to measure the value of the economy's production that year

Educational attainment tends to be

low in countries with high population growth

Educated people may generate ideas that increase production. These ideas

produce a return to society from education that is greater than the return to the individual

A steel company sells some steel to a bicycle company for $150. The bicycle company uses the steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute

$250 to GDP

Consider Miray's decision to go to college. If she goes to college, she will spend $24,000 on tuition, $12,000 on room and board and $1,900 on books. If she does not go to college, she will earn $16,000 working in a store and spend $8,000 on room and board. Miray's cost of going to college is

$45,900

In the United States over the past century, real GDP per person has grown by about ______ percent per year

2

Last year real GDP in the imaginary nation of Oceania was 561 billion and the population was 2.2 million. The year before, real GDP was 500 billion and the population was 2 million. What was the growth rate of real GDP per person during the year?

2 percent

Which of these activities will most likely result in an external benefit?

An elderly woman plants a flower garden on the vacant lot next to her house

Which of the following is included in GDP?

Both the market value of rental housing services and the market value of owner-occupied housing services

Efficient prediction is represented by which point(s)?

C,D AKA on the line

Which of the following is correct?

Even though Japan had a higher growth rate of real GDP per person than the United States over the last 120 years, it's level of real GDP per person is less than that of the United States

Which of the following is an important cause of inflation in an economy?

Growth in the quantity of money in the economy

In the simple circular-flow diagram, which of the following is not true?

Households are the only decision makers

Economist Robert Fogel focused on which of the following factors as one determinant of long-run economic growth?

Nutrition

In recent decades, economic growth has been much more rapid in South Korea than in the United States. What is the likely explanation for this fact?

South Korea started with low level of capital

After much consideration, you have chosen Ireland over Spain for you study abroad program next year. However, the deadline for your final decision is still months away and you may reverse this decision. Which of the following events could prompt you to reverse this decision?

The marginal benefit of going to Spain increase

Which of the following is included in the calculation of GDP?

The purchase of tutoring services from a tutor who holds citizenship outside the country but resides within the country

Which of the following is not an example of a group responding to an incentive?

Universities offer fewer online classes when they generate more revenue at the same cost than traditional classes

GDP is defined as the

Value of all final goods and services produced within a country in a given period of time

Productivity is defined as the

amount of goods and services produced from each unit of labor input

The Carters' oldest son attends Big State University. He and his parents pay all his fees and tuition. These payments count in GDP as

consumption of services

For a very long time the country of Tofu has had an inflation rate of 8 percent. Suddenly its inflation rate drops to 3 percent. The drop in the inflation rate

could be due to slower money supply growth. We would expect unemployment to be higher

If your firm's production function has constant returns to scale, then if you double all your inputs, your firm's output will

double but productivity will not change

The terms equality and efficiency are similar in that they both refer to benefits to society. However, they are different in that

equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources

If the price of a dress is three times the price of a pair of shoes, then a pair of shoes contributes

exactly one-third as much to GDP as does a dress

If an American-based firm opens and operates a new clothing factory in Honduras, then it is engaging in

foreign direct investment

A transfer payment is a payment made by

government, but not in exchange for a currently produced good or service

Malthus predicted that the power of population growth was

greater than the power of the earth to produce subsistence. His forecast was off the mark.

Other things the same, a country that increases its savings rate will have

higher future capital and higher future real GDP per person

In order to include many different goods and services in an aggregate measure, GDP is computed using, primarily

market prices

The income that households and noncorporate businesses receive is called

personal income

Market power refers to the

power of a single person or small group to influence market prices

The ability of an individual to own and exercise control over scarce resources is called

property rights

The overriding reason why households and societies face many decisions is that

resources are scarce

Suppose a nation is currently producing at a point inside its PPF. We know that...

the nation is not using all available resources or is using inferior technology or both

Savion's aunt gave him $25 for his birthday with the condition that Savion buys himself something. In deciding how to spend the money, Savion narrows his options down to four choices: Option 1, 2, 3, and 4. Each option costs $25. Finally, he decides on option 2. The opportunity cost of this decision is

the value to Savion of the option he would have chosen has option 2 not been available