Macro Final
Refer to Figure above. What is the opportunity cost of one pound of meat?
4/3 pound of vegetables
Lydia runs a small nail salon in the town of New Hope. She is debating whether she should extend her hours of operation. Lydia figures that her sales revenue will depend on the number of hours the nail salon is open as shown in the table above. She would have to hire a worker for those hours at a wage rate of $10 per hour. Refer to Table above. Using marginal analysis, determine how many hours should Lydia extend her nail salon's hours of operations?
5 hours
The GDP deflator in year 2 is 105, using year 1 as the base year. This means that, on average, the cost of goods and services is
5% higher in year 2 than in year 1.
Refer to Figure above. What area represents the increase in producer surplus when the market price rises from P1 to P2?
A + B
If firms are more optimistic that future profits will rise and remain strong for the next few years, then
investment spending will rise.
Refer to Figure above. At a price of $15, the quantity bought
is 2 units
The Bureau of Labor Statistics would categorize a retiree who is not working as
out of the labor force.
Which of the following is not a factor of production?
$1,000 in cash
Refer to Table above. Consider the data above (in billions of dollars) for an economy: Gross domestic product (in billions of dollars) for this economy equals
$1,200.
Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. As a result of Kristy's deposit, Bank A's reserves immediately increase by
$10,000.
Refer to Figure above. What is the value of the deadweight loss at a price of $18?
$100
Refer to Figure above. Suppose that investment spending increases by $10 million, shifting up the aggregate expenditure line and GDP increases from GDP1 to GDP2. If the MPC is 0.9, then what is the change in GDP?
$100 Millon
Refer to Figure above. How much of the tax is paid by producers?
$2
DeShawn's Detailing is a service that details cars at the customers' homes or places of work. DeShawn's cost for a basic detailing package is $40, and he charges $75 for this service. For a total price of $90, DeShawn will also detail the car's engine, a service that adds an additional $20 to the total cost of the package. What is the marginal cost of adding the engine detailing to the basic detailing package?
$20
Refer to Figure above. What is the value of consumer surplus after the imposition of the ceiling?
$230,000
Refer to Figure above. What is Lydia's marginal benefit if she decides to stay open for two hours instead of one hour?
$25
If real GDP per capita doubles between 2005 and 2020, what is the average annual growth rate of real GDP per capita?
4.7%
Refer to Table above. Consider the following data on nominal GDP and real GDP (values are in billions of dollars): The base year used in calculating real GDP is
2009
If spending increase by $1 and that leads to increase in GDP by $3, then the value of the multiplier is _____.
3
If the nominal rate of interest is 6.5% and the inflation rate is 3.0%, what is the real rate of interest?
3.5%
Consider the following data for a closed economy: Y = $12 trillion C = $8 trillion I= $2 trillion G = $2 trillion TR = $2 trillion T = $3 trillion Refer to Scenario above. Based on the information above, what is the level of private saving in the economy?
$3 trillion
Lucinda buys a new GPS system for $250. She receives consumer surplus of $75 from the purchase. How much does Lucinda value her GPS system?
$325
Refer to Figure above. If the market price is $1.00, what is Arnold's consumer surplus?
$4.00
Refer to Figure above. How much of the tax is paid by buyers?
$5
Refer to Figure above. How much of the taxi is paid by buyers?
$5
Suppose you withdraw $500 from your checking account deposit and bury it in a jar in your back yard. If the required reserve ratio is 10 percent, checking account deposits in the banking system as a whole could drop up to a maximum of
$5,000
Refer to Table above. Real GDP for Vicuna for 2009 using 2011 as the base year equals
$5,650.
Refer to Table above. Suppose that a simple economy produces only four goods and services: shoes, DVDs, tomatoes, and ketchup. Assume one half of the tomatoes are used in making the ketchup and the other half of the tomatoes are purchased by households. Using the information in the above table, nominal GDP for this simple economy equals
$6,400
Refer to Table above. Suppose a transaction changes a bank's balance sheet as indicated in the following T-account, and the required reserve ratio is 10 percent. As a result of the transaction, the bank can make a maximum loan of
$7,200
Given the equations for C, I, G, and NX below, what is the equilibrium level of GDP? C = 2,000 + 0.9Y I = 2,500 G = 3,000 NX = 400
$79,000
Refer to Figure above. What is the value of the Producer Surplus transferred to the consumer at a price of $13?
$80
Suppose your grandfather earned a salary of $12,000 in 1964. If the CPI is 31 in 1964 and 219 in 2010, then the value of your grandfather's salary in 2010 dollars is approximately
$84,775
Refer to Table above. The labor force participation rate for this simple economy equals
(1,100/15,000) × 100.
Refer to Table above. Given the consumption schedule in the table above, the marginal propensity to save is
0.1
Given the equations for C, I, G, and NX below, what is the marginal propensity to consume? C = 2,000 + 0.9Y I = 2,500 G = 3,000 NX = 400
0.9
If disposable income increases by $100 million, and consumption increases by $90 million, then the marginal propensity to consume is
0.9
Figure above shows the production possibilities frontier for Mendonca, an agrarian nation that produces two goods, meat and vegetables. Refer to the figure above. What is the opportunity cost of one pound of meat
1.3 pounds of vegetables
Refer to Table above. Consider the following data on nominal GDP and real GDP (values are in billions of dollars): The GDP deflator for 2011 equals
108.5
Refer to Table above. Assume the market basket for the consumer price index has three products — Cokes, hamburgers, and CDs — with the following values in 2006 and 2011 for price and quantity: The Consumer Price Index for 2011 equals
121
Refer to Table above. Using the table above, what is the approximate average annual growth rate from 2008 to 2011?
2%
Refer to Table above. Consider the following values of the consumer price index for 1996, 1997, and 1998: The inflation rate for 1997 was equal to
2.5 percent
Refer to Figure above. At a price of $10, how many units will be sold?
200
Refer to Figure above. At point L in the figure above, which of the following is true?
Actual inventories are greater than planned inventories
"An inquiry in to the Nature and Causes of the Wealth of Nations" Published in 1776 was written by
Adam Smith
What is the difference between an "increase in demand" and an "increase in quantity demanded"?
An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve
Which of the following correctly describes how an increase in the price level affects consumption spending?
An increase in the price level lowers real wealth, which causes consumption to decrease
Which of the following best describes how banks create money?
Banks create checking account deposits when making loans from excess reserves.
Increasing opportunity cost is represented by a ________ production possibilities frontier.
Bowled Out
Refer to Figure above. One segment of the circular flow diagram in the figure shows the flow of goods and services from market C to economic agents A. What is market C and who are economic agents A?
C = product markets; A = households
Multiplier equals to ______.
Change in Y/ Change in AE
The basic of trade is _______ advantage.
Comparative
Refer to Figure above. If the U.S. economy is currently at point K, which of the following could cause it to move to point N?
Congress passes investment tax incentives
If the PPF is linear, then the opportunity cost of producing a good or service is _______.
Constant
The AE model is based on the assumption that the price level is ______.
Constant
T/F An increase in the price level in the United States will shift the aggregate expenditure line upward.
F
Suppose a price floor on sparkling wine is proposed by the Health Minister of the country of Vinyardia. What will be the likely effect on the market for sparkling wine in Vinyardia?
Deadweight loss will increase.
If more insurance companies decide to cover part of the price of voluntary laser eye surgery and more doctors decide to enter the field of laser eye surgery, what will happen in the market for laser eye surgery as a result of these two factors?
Demand and supply will both increase
Which of the following statements is true about the U.S. economy?
Each year, many new jobs are created and many existing jobs are destroyed
________ is maximized in a competitive market when marginal benefit equals marginal cost.
Economic surplus
At the 45 degree line, all points represent macroeconomic ________ points.
Equilibrium
An increase in aggregate expenditure has what result on equilibrium GDP?
Equilibrium GDP rises.
Every society faces a trade-off between ______.
Equity and Efficiency
T/F Accumulating a greater number of inputs will ensure that an economy will experience economic growth.
F
T/F Aggregate expenditure includes consumption spending, unplanned investment spending, government purchases, and net exports.
F
T/F An increase in the number of firms in a market will cause the quantity of a good supplied to increase.
F
T/F Any output combination outside a production possibility frontier is associated with unused or underutilized resources.
F
T/F Counting part-time workers who are looking for full-time work as employed overstates the degree of joblessness in the economy.
F
T/F Economies cannot function without money.
F
T/F Efficiency wage is another name for the minimum wage
F
T/F Higher interest rates increase both consumption and investment spending
F
T/F If Sanjaya can shuck more oysters in one hour than Tatiana, then Sanjaya has a comparative advantage in shucking oysters
F
T/F If Sanjaya can shuck more oysters in one hour than Tatiana, then Sanjaya has a comparative advantage in shucking oysters.
F
T/F If a country produces only two goods, it is possible to have a comparative advantage in the production of both those goods.
F
T/F If the demand for a product increases and the supply of the same product increases, the equilibrium price will increase.
F
T/F In the market for factors of production, firms earn income by selling goods and services to households.
F
T/F Market equilibrium occurs when supply equals demand
F
T/F Market equilibrium occurs where supply equals demand.
F
T/F Nominal income is equal to real income if the CPI is less than 100.
F
T/F On a diagram of a production possibilities frontier, opportunity cost is represented by the production possibility shifting outward.
F
T/F One desirable outcome of a market economy is that it leads to a more equitable distribution of income.
F
T/F Potential GDP is the maximum output a firm is capable of producing.
F
T/F Residential investment includes spending by firms on office buildings.
F
T/F Shortage means the same thing as scarcity.
F
T/F The GDP deflator is the best measure that reflects the prices of goods and services purchased by the typical household.
F
T/F The amount of national income in an economy equals the money supply in an economy.
F
T/F The division of the burden of a tax between buyers and sellers in a market is called tax allocation
F
T/F The formula for the multiplier is (1 - MPC).
F
T/F The government makes all economic decisions in a mixed economy
F
T/F The minimum wage is an example of a price ceiling.
F
T/F The total amount of consumer surplus in a market is equal to the area below the demand curve
F
T/F Transfer payments are subtracted from national income to get to personal income.
F
Autonomous spending is the spending that is not related to the value of _______.
GDP
Table above shows the output per week of two jewelers, Serena and Haley. They can either devote their time to making bracelets or making necklaces. Refer to Table above. Which of the following statements is true?
Haley has an absolute advantage in making bracelets and Serena in making necklaces
________ is defined as the value of a household's assets minus the value of its liabilities.
Household wealth
Which of the following is a positive economic statement
If the price of iPhone falls, a larger quantity of iPhones will be purchased
Figure above shows the production possibilities frontiers for Pakistan and Indonesia. Each country produces two goods, cotton and cashews. Refer to Figure above. Which country has a comparative advantage in the production of cotton?
Indonesia
Refer to FIgure above. Which country has a comparative advantage in the production of cotton?
Indonesia
The percent increase in the CPI from one year to the next is a measure of the
Inflation Rate
If aggregate expenditure is less than GDP, how will the economy reach macroeconomic equilibrium?
Inventories will rise, and GDP and employment will decline.
Economic decline happens when the PPF shifts ______.
Inward
How does a decrease in government spending affect the aggregate expenditure line?
It shifts the aggregate expenditure line downward
Refer to figure above. One segment of the circular flow diagram in the figure shows the flow of labor services from market K to economic agents J. What is market K and who are economic agents J?
K=factor markets; J=firms
The planned investment is _____ sensitive for changes in the business cycle.
Less
The M2 measure of the money supply equals
M1 plus savings account balances plus small-denomination time deposits plus noninstitutional money market fund shares
Marginal Analysis is involving comparing _______.
MB and MC
We need to privatize the social security program in the State of Kansas is a _____ statement.
Negative
If inflation in the United States is higher than inflation in other countries, what will be the effect on net exports for the United States?
Net exports will decrease as U.S. exports decrease.
The highest valued alternative that must be given up to engage in an activity is the definition of
Opportunity Cost
We like to see the macro equilibrium point at the ______ value of the GDP
Potential
The mechanism of the market is
Price.
The assumption that people are _____ is one of the basic assumptions in economic studies.
Rational
If AE is below Real GDP then we are at the ______ phase of the business cycle.
Recession
The basic principle in economic studies is _____.
Scarcity
Which of the following is a positive economic statement?
Scarcity necessitates that people make trade-offs
The opportunity cost of the good on the x-axis is the ______ on the PPF.
Slope
Which of the following functions of money would be violated if inflation were high?
Store of value
T/F An economic model is a simplified version of reality used to analyze real-world economic situations
T
T/F An economic model is a simplified version of reality used to analyze real-world economic situations.
T
T/F An increase in the price level in the United States will reduce exports and increase imports.
T
T/F An increase in the quantity of a product supplied is caused by an increase in the price of the product
T
T/F An increase in the real interest rate will decrease consumption and investment.
T
T/F Chips and salsa are compliments. If the price of salsa decreases, the demand for chips will increase
T
T/F Deadweight loss refers to the reduction in economic surplus resulting from a market not being in competitive equilibrium.
T
T/F If banks receive a greater amount of reserves and do not hold all of these reserves as excess reserves, the money supply expands.
T
T/F If income is unequally distributed in an economy, increases in GDP may not raise well-being in an economy.
T
T/F If inflationary expectations are increasing, we would expect that the nominal interest rate would also be increasing, holding all else constant.
T
T/F If the demand curve for a product is vertical, any tax increase on the product is paid for entirely by the consumer
T
T/F If the demand curve for a product is vertical, any tax increase on the product is paid for entirely by the consumer.
T
T/F If the multiplier is 5, the marginal propensity to consume must be 0.8.
T
T/F In a free market there are virtually no restrictions, or at best few restrictions on how factors of production can be employed.
T
T/F Macroeconomic equilibrium can occur at any point on the 45-degree line.
T
T/F The natural rate of unemployment consists of frictional unemployment plus structural unemployment.
T
All of the following are one of the four main categories of spending identified by John Maynard Keynes except
Taxes
Refer to Figure above. Which of the following is consistent with the graph depicted above?
Technological change increases the profitability of new investment.
You earned $30,000 in 1990, and your salary rose to $80,000 in 2011. If the CPI rose from 82 to 202 between 1990 and 2011, which of the following is true?
The purchasing power of your salary increased between 1900 and 2011
In June, buyers of titanium expect that the price of titanium will fall in July. What happens in the titanium market in June, holding everything else constant?
The demand curve shifts to the left
Refer to Figure above. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S1 (point A). If the price of oranges, a substitute for apples, decreases and the wages of apple workers increase, how will the equilibrium point change?
The equilibrium point will move from A to E
Which of the following is a true statement about the multiplier?
The multiplier rises as the MPC rises
The average price of goods and services in the economy is also known as
The price level
In October 2005, the U.S. Fish and Wildlife Service banned the importation of beluga caviar, the most prized of caviars, from the Caspian Sea. What happened in the market for caviar in the U.S.?
The supply curve shifted to the left
Consumption is $5 million, planned investment spending is $8 million, government purchases are $10 million, and net exports are equal to $2 million. If GDP during that same time period is equal to $27 million, what unplanned changes in inventories occurred?
There was an unplanned increase in inventories equal to $2 million.
The debate about whether increase in saving or consumption better for economic growth in the long run is referred to as The Paradox of _____.
Thrift
Which of the following is a macroeconomics question?
What determines the inflation rate?
In a closed economy, which of the following equations reflects investment? (Y = GDP, C = Consumption, G = Government purchases, T = Taxes, and TR = Transfers)
Y - C - G
Which of the following transactions represents the purchase of a final good?
Your father buys a new John Deere riding lawn mower.
Which of the following will decrease aggregate expenditure in the United States?
a decrease in government purchases
Which of the following leads to an increase real GDP?
a decrease in interest rates
Last year, the Pottery Palace supplied 8,000 ceramic pots at $40 each. This year, the company supplied the same quantity of ceramic pots at $55 each. Based on this evidence, the Pottery Palace has experienced
a decrease in supply
An inward shift of a nation's production possibilities frontier can occur due to
a natural disaster like a hurricane or bad earthquake
Which of the following describes a situation in which the person is hurt by inflation?
a person paid a fixed income during an inflationary period
Rent control is an example of
a price ceiling
Refer to figure above. If the current market price is $10 the market will achieve equilibrium by
a price increase, increasing the quantity supplied and decreasing the quantity demanded
An example of business fixed investment spending is
a purchase of a computer by an accounting firm
If consumers decide to be more frugal and save more out of their income, then this will cause
a shift in the supply curve for loanable funds to the right.
Cyclical unemployment is the result of
a slowdown in the economy.
The statement, "My iPhone is worth $300" represents money's function as
a unit of account
Minimum wage laws cause unemployment because the legal minimum wage is set
above the market wage, causing labor demand to be less than labor supply
An unplanned increase in inventories results from
actual investment that is greater than planned investment.
Banks can continue to make loans until their
actual reserves equal their required reserves
When the government taxes a good or service, it
affects the market equilibrium for that good or service.
Which of the following would encourage economic growth through increases in the capital stock?
all of the above
The nominal GDP of the U.S. in 2010 was approximately $14.6 trillion. This means that
all of the above are true.
The revenue received from the sale of ________ of a product is a marginal benefit to the firm.
an additional unit
What would cause both the equilibrium price and equilibrium quantity of cotton (assume that cotton is a normal good) to increase?
an increase in consumer income
Which of the following will cause a direct increase in consumption spending?
an increase in disposable income
Which of the following will increase investment spending in the economy, holding everything else constant?
an increase in the federal government surplus
Which of the following would increase the unemployment rate?
an increase in unemployment insurance payments
If the economy is currently in equilibrium at a level of GDP that is below potential GDP, which of the following would move the economy back to potential GDP?
an increase in wealth
If an increase in income leads to a decrease in the demand for popcorn, then popcorn is
an inferior good
The law of demand implies, holding everything else constant, that
as the price of bagels increases, the demand for bagels will decrease.
Arlene quits her $125,000-a-year job to take care of her ailing parents. What is the opportunity cost of her decision?
at least $125,000
The consumer price index is the
average of the prices of the goods and services purchased by a typical urban family of four.
Financial securities that represent promises to repay a fixed amount of funds are known as
bonds.
When actual inflation is less than expected inflation,
borrowers lose and lenders gain.
Assume that both the demand curve and the supply curve for MP3 players shift to the right but the demand curve for shifts more than the supply curve. As a result
both the equilibrium price and quantity of MP3 players will increase
Which of the following policies would reduce frictional unemployment?
building an on-line job database that helps workers find jobs
Net cash flow equals to _____.
cash revenue-cash spending
The multiplier is calculated as the
change in real GDP/ change in autonomous expenditure
The substitution bias in the consumer price index refers to the idea that consumers ________ the quantity of products they buy in response to price, and the CPI does not reflect this and ________ the cost of the market basket.
change; over-estimates
The largest liability on the balance sheet of most banks is its
checking account and savings account deposits of its customers.
The ______ demonstrates the roles played by households and firms in the market system.
circular flow model
The ________ demonstrates the roles played by households and firms in the market system.
circular flow model
Which of the following generates productive efficiency
competition among sellers
The decision about what goods and services will be produced made in a market economy is made by
consumers and firms choosing which goods and services to buy or produce
In the aggregate expenditure model, ________ has both an autonomous component and an induced component.
consumption spending
The response of investment spending to an increase in the government budget deficit is called
crowding out.
The M1 measure of the money supply equals
currency plus checking account balances plus traveler's checks.
If the BLS counted persons that are on active military service in the totals for employment, the labor force, or the working-age population, this would
decrease the measured unemployment rate
Since 1948, the labor force participation rate for adult men has ________ and for adult women has ________.
decreased; increased
The required reserves of a bank equal its ________ the required reserve ratio.
deposits multiplied by
Economists first began studying the relationship between changes in aggregate expenditures and changes in GDP
during the Great Depression.
_____ is maximized in a competitive market when marginal benefit equals marginal costs.
economic surplus
Productive efficiency is achieved when
firms produce goods and services at the lowest cost
A student who just graduated from college but has not found a job would most likely be
frictionally unemployed.
Suppose you borrow $1,000 at an interest rate of 12 percent. If the expected real interest rate is 5 percent, then the rate of inflation over the upcoming year that would be most beneficial to you would be a rate of inflation
greater than 7 percent.
The output of Mexican citizens who work in Texas would be included in the
gross national product of Mexico.
Gross domestic product understates the total production of final goods and services because of the omission of
household production.
The production possibilities frontier model shows that
if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good
Where do economic agents such as individuals, firms and nations, interact with each other?
in any arena that brings together buyers and sellers
A sharp increase in the divorce rate increases the number of lawyers hired to determine divorce settlements. This will
increase GDP and decrease well being in the economy.
Suppose that homemakers are included as employed in the labor force statistics, rather than being counted as out of the labor force. This would
increase the measured labor force participation rate.
If a person withdraws $500 from his/her savings account and puts it in his/her checking account, then M1 will ________ and M2 will ________.
increase; not change
Technological advances generally result in
increased life expectancy
In the United States since the mid-1980s, consumption as a percentage of GDP has
increased.
During a business cycle expansion, total production ________ and total employment ________.
increases; increases
If real GDP in a small country in 2010 is $8 billion and real GDP in the same country in 2011 is $8.3 billion, the growth rate of real GDP between 2010 and 2011
is 3.75%.
Which of the following information about fiat money is false? Fiat money
is backed by gold
An advantage of the establishment survey over the household survey of the labor market is that the establishment survey
is based on actual payrolls, rather than on unverified answers.
The cost to firms of changing prices
is called a menu cost
If society decides it wants more of one good and all resources are fully utilized, then
it is unable to do this unless technology advances
The quantity of goods and services that can be produced by one worker or by one hour of work is referred to as
labor productivity
In a city with rent controlled apartments, all of the following are true except
landlords have an incentive to rent more apartments than they would rent without rent control
If the production possibilities frontier is ____, then opportunity cost are constant as more of one good is produced.
linear
The demand for loanable funds is downward sloping because the ________ the interest rate, the ________ the number of profitable investment projects a firm can undertake, and the ________ the quantity demanded of loanable funds.
lower; greater; greater
Economists reason that the optimal decision is to continue any activity up to the point where the
marginal benefit equals marginal cost
The production possibilities frontier shows the ______ combinations of two products that may be produced in a particular time period with available resources
maximum attainable
Since 1900, real GDP in the United States has grown
more rapidly than the population.
To affect the market outcome, a price ceiling
must be set below the equilibrium price
In order to be binding, a price ceiling
must lie below the free market equilibrium price.
The "new product bias" in the consumer price index refers to the idea that
new products' prices often decrease after their initial introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers.
All of the following are part of the economic model except
opinions
Suppose the U.S. government encouraged new medical school graduates to take over existing practices from doctors wishing to retire by paying both the new and retiring doctors $100,000. These doctors would be exemplifying the economic idea that
people respond to economic incentives.
On the 45-degree line diagram, for points that lie below the 45-degree line,
planned aggregate expenditure is less than GDP
If a firm has an incentive to increase supply now and decrease supply in the future, the firm expects that the
price of its product will be lower in the future than it is today
Specializing in the production of a good or service in which one has a comparative advantage enables a country to do all of the following except
produce a combination of goods that lies outside its own production possibilities frontier
Specializing in the production of a good or service in which onehas a comparative advantage enables a country to do all of the following except
produce a combination of goods that lies outside its own production possibilities frontier
If, for a product, the quantity supplied exceeds the quantity demanded, the market price will fall until
quantity demanded equals quantity supplied. The market price will then equal the equilibrium price
Decreases in the price level will
raise consumption because real wealth increases
Suppose the labor force stays constant, and the working-age population stays constant, but a greater number of persons who were unemployed become employed. The labor force participation rate will
remain constant
The major assets on a bank's balance sheet are its
reserves, loans, and holdings of securities.
A consumer price index of 160 in 1996 with a base year of 1982-1984 would mean that the cost of the market basket
rose 60% from the cost of the market basket in the base year.
In economics, choices must be made because we live in a world of
scarcity
Actual investment spending does not include
spending on consumer durable goods
The advice to "retrain" would be most appropriate for which of the following types of unemployment?
structural unemployment
The actual division of the burden of a tax between buyers and sellers in a market is called
tax incidence
What two factors are the keys to determining labor productivity?
technology and the quantity of capital per hour worked
The unemployment rate is an important economic statistic that can tell us about the health of the economy. If the unemployment rate turns out to be high or higher than anticipated, we would expect
that stock prices are more likely to fall.
The term "property rights" refers to
the ability to exercise control over one's own resources within the confines of the law
Marginal cost is
the additional cost to a firm of producing one more unit of a good or service
Marginal cost is
the additional cost to a firm of producing one more unit of a good or service.
The total amount of producer surplus in a market is equal to
the area above the market supply curve and below the market price.
Consumer surplus in a market for a product would be equal to ____ if the market price was zero.
the area under a demand curve
The slope of the consumption function is equal to
the change in consumption divided by the change in disposable income
By definition, economics is the study of
the choices people make to attain their goals, given their scarce resources.
If the price of Automobiles was to increase then
the demand for gasoline would decrease
Liquidity refers to
the ease with which a financial security can be traded for cash.
The principle of opportunity cost is that
the economic cost of using a factor of production is the alternative use of that factor that is given up
If cyclical unemployment is eliminated in the economy, then
the economy is considered to be at full employment.
Which of the following is a flow in the circular flow model?
the flow of revenue received by firms and the flow of payments to resource owners
Consumers are willing to purchase a product up to the point where
the marginal benefit of consuming a product is equal to its price.
If an increase in investment spending of $50 million results in a $400 million increase in equilibrium real GDP, then
the multiplier is 8.
Suppose that nominal GDP in 2011 was less than real GDP in 2011. Given this information, we know for certain that
the price level in 2011 was less than the price level in the base year.
The aggregate demand curve illustrates the relationship between ________ and the ________, holding constant all other factors that affect aggregate expenditure.
the price level; quantity of planned aggregate expenditure
The income effect of a price change refers to the impact of a change in
the price of a good on a consumer's purchasing power
One would speak of a change in the quantity of a good supplied, rather than a change in supply, if
the price of the good changes.
A change in all of the following variables will change the market demand for a product except
the price of the product
A change in all the following variables will change the market demand for a product except
the price of the product
If we want to use a measure of inflation that foreshadows price changes before they affect prices at the retail level, we would base our measure of inflation on
the producer price index.
At a product's equilibrium price
the product's demand curve crosses the product's supply curve
If, in the market for oranges, the supply has increased then
the supply curve for oranges has shifted to the right
In 2004, hurricanes destroyed a large portion of Florida's orange and grapefruit crops. In the market for citrus fruit,
the supply curve shifted to the left resulting in an increase in the equilibrium price.
Allocative efficiency is achieved when firms produce goods and services
the the consumer value most
Refer to Figure above. At a price of $15,
there would be a surplus of 4 units
Who receives the most of what is produced in a market economy?
those who are willing and able to buy them
Who receives the most of what is produced in a market economy?
those who are willing to buy them
At macroeconomic equilibrium,
total spending equals total production.
The aggregate expenditure model focuses on the relationship between ________ and ________ in the short run, assuming ________ is constant.
total spending; real GDP; the price level
The points outside the production possibilities frontier are
unattainable
Economists assume that rational people do all of the following except
undertake activities that benefit others and hurt themselves
Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to overstate the true extent of joblessness?
unemployed persons falsely report themselves to be actively looking for a job
To reduce the bias in the consumer price index, the Bureau of Labor Statistics
updates the market basket every two years, rather than every 10 years
Real GDP is GDP in a given year
valued in the prices of the base year.
In calculating gross domestic product, the Bureau of Economic Analysis uses the sum of the market value of final goods and services produced. This means that the BEA
values goods and services at their market prices, multiplies them by the quantity produced, and then adds them up.
Which of the following is a result of a market economy?
voluntary exchange
Society faces a trade-off in all of the following situations except
when some previously unemployed workers find jobs.
Refer to Figure above. If the economy is currently producing at point Y, what is the opportunity cost of moving to point W?
zero
Refer to figure above. If the economy is currently producing at point Y, which is the opportunity cost of moving to point W?
zero