Macro Final

150

Suppose a labor market is described by the demand equation, Qd = 1200 - 20w, and the supply equation, Qs = 10w - 300, where Qd is the quantity demanded of labor (in Million), Qs is the quantity supplied of labor (in Million), and w is the wage (in dollars). If the government imposes a minimum wage of $55, the number of workers unemployed is _________ million. (Round to the nearest whole million.)

50

Suppose a labor market is described by the demand equation, Qd = 1200 - 20w, and the supply equation, Qs = 10w - 300, where Qd is the quantity demanded of labor (in Million), Qs is the quantity supplied of labor (in Million), and w is the wage (in dollars). The equilibrium wage in this market is $_______. (Round to the nearest integer.)

-0.2

You open a savings account that pays 0.75% interest a year. Your real rate of return if the actual inflation rate is 0.95% is ____% [round to the nearest hundredth of a percent].

movement down along supply curve

(Figure: Market for New Housing in Dubai) Which graph shows the effect on the supply curve for new housing in Dubai, if economists predict a decrease in demand for new housing?

movement down along supply curve

(Figure: Market for Roses) Which graph shows what will happen to the supply of roses if the price of roses falls?

d) The cost of building the factory, purchasing the robotic assembly lines and industrial freezers.

Amul Food Factory in India makes ice cream and produces processed and condensed milk. In the factory, the firm's employees use raw milk and sugar. The firm runs on electricity and purchases raw milk every day. Large robotic assembly lines fill and package the ice cream containers. Large industrial freezers store the ice cream. Based on this scenario, can you identify the fixed costs for Amul Food Factory? a) The cost of the employees hired and the number of packages purchased. b) The cost of purchasing electricity, raw milk, and sugar. c) The cost of the raw milk purchased from the farmers. d) The cost of building the factory, purchasing the robotic assembly lines and industrial freezers.

d) when the quantity supplied equals the quantity demanded.

An equilibrium in a market occurs: a) at the halfway point on a demand curve. b) when suppliers have sold all the goods and services that they have produced. c) at the halfway point on the price axis. d) when the quantity supplied equals the quantity demanded.

b) working but whose skills are not fully utilized.

An underemployed person is one who is: a) employed in the underground economy. b) working but whose skills are not fully utilized. c) retired or outside of the labor force. d) cyclically unemployed.

b) 99

If the median value of the consumer confidence index is 92, which of the following consumer confidence index values indicates a particularly strong economy? a) 93 b) 99 c) 91 d) 90

a) rise by 1.5%.

Based on Okun's rule of thumb, if you forecast that the output gap will decline from 0% to -3%, the unemployment rate will: a) rise by 1.5%. b) rise by 3%. c) fall by 2%. d) fall by 1.5%.

c) They are not counted.

Dale is a stay-at-home-parent whose typical day consists of getting the kids ready for school, doing the laundry, cooking three meals, and cleaning the house. How are Dale's home activities counted in GDP? a) They are counted at market value. b) They are counted by subtracting Dale's opportunity cost in terms of lost income. c) They are not counted. d) They are counted by assigning a value that is equivalent to what it would have taken to pay a housekeeper to perform the same tasks.

a) a smaller increase in

Diminishing returns to physical capital imply that, with human capital per worker and technology held fixed, each successive increase in physical capital leads to _____ real GDP per worker (or productivity). a) a smaller increase in b) negative​ c) a larger increase in d) a decrease in

d) (A) decreases; (B) increases

Fill in the blanks below using the following choices: (A) If the congestion effect of using a highway increases, then the demand for that highway __________. (B) If the network effect of using a social media platform increases, the demand for advertising by businesses on that platform ________. a) (A) increases; (B) decreases b) (A) decreases; (B) decreases c) (A) increases; (B) increases d) (A) decreases; (B) increases

55,084.21

In 1989, a four-year college degree would set you back $26,902. The consumer price index was 122.51 in January 1989. If the current consumer price index is 250.85, the cost of the four-year degree in current dollars is $ ___________ [round to the nearest cent - i.e., hundredth of a dollar].

d) hyperinflation.

In 2014, Venezuela experienced inflation of about 69%. In 2015, the inflation rate rose to around 181%, and by 2017, the inflation rate was over 4,000%. This scenario describes: a) money illusion. b) deflation. c) economic growth. d) hyperinflation.

a) households sell resources.

In the market for inputs: a) households sell resources. b) firms sell goods and services. c) households sell goods and services. d) firms buy goods and services.

c) follow the business cycle with a delay.

Lagging indicators are variables that: a) predict monetary policy. b) tend to predict the future state of the economy. c) follow the business cycle with a delay. d) predict fiscal policy.

d) the additional benefit from buying one more unit of that item.

The marginal benefit of consuming an item is a) the total benefit from buying several units of the item. b) the additional number of consumers who buy a unit of an item. c) the difference between what the consumer is willing to pay and the actual market price of the item. d) the additional benefit from buying one more unit of that item.

c) capital accumulation alone cannot lead to sustainable economic growth.

The moral of the story of the Solow growth model is that: a) human capital growth does not lead to economic growth. b) capital accumulation is the key to sustained economic growth. c) capital accumulation alone cannot lead to sustainable economic growth. d) technological advance cannot sustain continuous economic growth.

a) next best alternative you have to give up to get it.

The opportunity cost principle states that the true cost of something is the a) next best alternative you have to give up to get it. b) economic surplus you give up to get it. c) economic surplus you receive from getting it. d) least desired alternative you have to give up to get it.

b) Two

The price of smoothies at a local smoothie shop is $3. Cheryl is willing to pay $6 for her first smoothie each day. The marginal benefit to her of each additional smoothie falls by $2. How many smoothies should Cheryl purchase? a) One b) Two c) Three d) Four

a) interdependence

The principle that your best choice depends on your other choices, the choices others make, developments in other markets, and expectations about the future is known as the _____ principle. a) interdependence b) cost-benefit c) opportunity cost d) marginal

c) marginal; equals; marginal

The rational rule suggests you should continue with an activity until your _____ benefit _____ your _____ cost. a) marginal; is less than; marginal b) total; equals; total c) marginal; equals; marginal d) total; exceeds; total

b) decreases; shoe-leather

The use of online banking _____ the _____ costs of high inflation. a) increases: shoe-leather b) decreases; shoe-leather c) increases; unit-of-account d) decreases; unit-of-account

c) learn to use a printing press.

To acquire human capital, a person would: a) save to buy a printing press. b) purchase a printing press rather than a very large television. c) learn to use a printing press. d) sell books produced using a printing press.

c) current conditions typically continue in the near future.

To say that business cycles are persistent means that: a) they typically have short and sharp recessions, followed by long and gradual expansions. b) they usually last over 20 years. c) current conditions typically continue in the near future. d) growth rates in a cycle will always be higher than growth rates in the previous cycle.

b) C + I + G + (X - M)

Total spending in the economy is calculated as: a) C + I + G + (M - X) b) C + I + G + (X - M) c) Y - I - G - NX d) Y - C - I

c) Business confidence

Which of the following indicators might be a good predictor of investment? a) Initial unemployment claims b) Consumer confidence c) Business confidence d) Nonfarm payrolls

a) medium of exchange, store of value, and unit of account

Which of the following lists the functions of money? a) medium of exchange, store of value, and unit of account b) carrier of exchange, unit of account, and measure of inflation c) store of value, store of interest, and buffer against inflation d) medium of exchange, measure of inflation, and benchmark of quality

b) multiply the individual supply of one of the suppliers by ten.

A market consists of ten similar suppliers that are making the same supply decisions. To find the market supply of these ten suppliers, you: a) take the individual supply of one supplier. b) multiply the individual supply of one of the suppliers by ten. c) find the average quantity produced by the ten suppliers. d) take one-tenth of the individual supply of each supplier and add it up.

a) a good for which higher income causes an increase in demand.

A normal good is: a) a good for which higher income causes an increase in demand. b) a good for which higher income causes a decrease in demand. c) a good which is normally purchased by many consumers. d) a good which is only purchased by high-income consumers.

b) an increase in the quantity and an unpredictable change in the price

A recent news story reported that the Organization of Petroleum Exporting Countries is expected to increase the supply of oil next summer. Summer is traditionally a time of increased demand for oil because of vacation travel. What would be the combined effect of these two events on the market for gasoline? a) an increase in the quantity and the price b) an increase in the quantity and an unpredictable change in the price c) an unpredictable change in both the price and the quantity d) an unpredictable change in the price and a decrease in the quantity

a) boosts real GDP but not necessarily real GDP per person.

A rise in population in a country: a) boosts real GDP but not necessarily real GDP per person. b) always raises the standard of living in a country. c) leads to an increase in the level of technology in an economy. d) leads to a downward shift of the aggregate production function.

d) a graph with quantities of a product that a seller is willing to supply at different price points.

An individual supply curve is a) the quantity a seller is willing to supply at one particular price. b) a graph that plots how much a seller produces at different points in time. c) a graph that plots the quantities of an item that a buyer plans to buy at different prices. d) a graph with quantities of a product that a seller is willing to supply at different price points.

d) skills she may gain from her final year of economics courses.

Carolyn Bates is a junior in college studying economics. She has created a new software application that applies the four principles of economic decision making to any potential decision that a user faces. She is considering leaving school after this academic year to pursue further development of her app. Carolyn should ignore all of the following costs when calculating the opportunity costs of leaving college EXCEPT the a) tuition costs she has already paid to her college. b) time she will spend working on the app instead of studying. c) 90 credit hours she has already completed for her degree. d) skills she may gain from her final year of economics courses.

c) Four

Charles McCoy is a manager at a Chipotle restaurant, and he has to decide how many workers to hire. One worker can make 20 burritos that sell for $7 on average in one hour. A second worker can make another 16 burritos in one hour. The marginal product of each additional worker decreases by four burritos, with each additional hire. The cost of ingredients is $2 per burrito no matter what the total quantity produced is. Given that workers are paid $21 per hour and have eight-hour shifts, how many employees should Charles hire for each hour? a) Seven b) Five c) Four d) Three e) Six

c) hysteresis.

Following a significant recessionary period in which there were periodic wage freezes, workers negotiate higher wages. However, the higher wages lead to a decrease in the number of new workers getting hired, so unemployment persists in the region. The scenario described here is an example of: a) efficiency wages. b) frictional unemployment. c) hysteresis. d) a government mandated minimum wage.

600

Gary Parker is willing to pay $820 for a new iPad. Apple (the producer of iPads) is selling a new iPad for $620. It costs Apple $220 to produce this iPad. How much total economic surplus is generated if Gary purchases this iPad? $__________. Hint: Total Surplus is Buyer's Surplus plus Seller's Surplus.

130

Gary Parker is willing to pay $820 for a new iPad. Apple (the producer of iPads) is selling a new iPad for $690. It costs Apple $230 to produce this iPad. How much economic surplus does Gary receive if he purchases this iPad? $__________.

b) final goods and services

Gross domestic product is the value of all _____ produced in an economy over a given period. a) goods and services b) final goods and services c) intermediate goods and services d) consumer goods and services

c) at its highest sustainable rate of production.

If an economy has an output gap of 0%, this means the economy is: a) experiencing cyclical unemployment. b) unsustainable in the long run. c) at its highest sustainable rate of production. d) suffering from hyperinflation.

c) workers can produce more with fixed amounts of physical and human capital.

If technology advances: a) GDP per capita declines. b) physical capital becomes less productive. c) workers can produce more with fixed amounts of physical and human capital. d) human capital becomes less useful.

a) economy is experiencing an economic downturn.

If the frictional rate of unemployment is 1.45%, the structural rate of unemployment is 2.3%, and the total unemployment rate is 6%, then we can conclude that the: a) economy is experiencing an economic downturn. b) labor force participation rate has fallen significantly. c) economic growth rate has decreased by 2.25%. d) equilibrium rate of unemployment is 2.25%.

b) 2.6%

In 1945, the United States recorded real GDP growth of -1% and nominal GDP growth of 1.6%. What was the inflation rate in 1945? a) -0.6% b) 2.6% c) -2.6% d) 0.6%

d) 61.53%

In 2018, there were 111.01 million people aged 16 years and older in Japan. There were also 68.3 million people in the labor force. What was the labor force participation rate? a) 38.47% b) 68.3% c) 50% d) 61.53%

b) scarcity

In California, there has been a drought, and rural communities are fighting with urban areas over water. Which economic concept does this statement BEST represent? a) incentives b) scarcity c) equilibrium d) specialization

a) actively searching for work. b) available to work. c) over the age of 16.

In order to be considered unemployed, the person must be [check all that apply]: a) actively searching for work. b) available to work. c) over the age of 16. d) skilled.

c) percentage change in the consumer price index.

Inflation can be measured by the: a) absolute change in the consumer price index. b) absolute change in the GDP deflator. c) percentage change in the consumer price index. d) percentage change in GDP.

d) does not occur; only Ivan receives

Ivan has inherited his grandmother's 1963 Chevrolet Corvette, which he values at $60,000. Samantha is interested in buying such a car and is willing to pay up to $55,000. Ivan hears Samantha is looking for this particular car and offers to sell it to her for $70,000. A voluntary economic exchange _____ between Ivan and Samantha because _____ positive economic surplus from the transaction. a) occurs; both Ivan and Samantha receive b) does not occur; neither Ivan nor Samantha receives c) occurs; only Samantha receives d) does not occur; only Ivan receives

$0.50

Kevin Williamson goes to a local coffee shop and orders a medium-sized latte. His willingness to pay for that latte is $6.0. The price of the latte is $5.5. The cost to the coffee shop to produce the latte is $2.5. How much economic surplus does Kevin gain when he purchases the latte? $_________.

c) tendency to focus on nominal values instead of inflation-adjusted values.

Money illusion is the: a) increase in the amount of money that it takes to purchase goods and services when prices rise. b) inability to understand that prices always rise. c) tendency to focus on nominal values instead of inflation-adjusted values. d) illusion that one's earnings this year are higher than they were last year.

d) $3,800

Nerida Kyle is thinking of buying a car to avoid taking Lyft to work. She is using the cost-benefit principle to evaluate this decision and is calculating the costs and benefits to owning the car over the next year. She's gathered the following information to help her make her decision: - The car costs $15,000 to purchase, but she can resell it after a year of use for $13,500. - She thinks gas will cost her about $1,200 for the year. - The annual insurance premium for her car is $800. - Maintenance and repairs will cost about $300 for the year. - Using Lyft to get to work would cost her $4,000 for the year. The cost of the car for the year is: a) $1,500. b) $7,800. c) $4,000. d) $3,800.

b) the demand for paintbrushes to decrease.

Paint and paintbrushes are complements. If the price of paint rises, we can expect: a) the quantity demanded of paintbrushes to remain unchanged. b) the demand for paintbrushes to decrease. c) the demand for paintbrushes to increase. d) the quantity demanded of paint to increase.

d) supply of peanut oil will increase.

Peanut butter and peanut oil are complements-in-production. When the price of peanut butter rises, the a) quantity supplied of peanut butter will remain unchanged. b) quantity supplied of peanut butter will fall. c) supply of peanut oil will fall. d) supply of peanut oil will increase.

c) there is deflation.

The CPI changes from 100 to 90. This means that: a) 90% of all prices have fallen. b) the base year index has been changed to 90. c) there is deflation. d) consumers now purchased 10% fewer goods due to inflation.

all of the above

Refer to the diagram of the circular flow of income. The key lessons from this diagram are that [select ALL that apply]: a) all flows of resources are matched by flows of money. b) the market value of total output must be equal to total spending. c) total spending must equal total income. d) all inputs are provided by households.

a) shift the supply curve for canola oil rightward.

Researchers have found a new strain of canola (a grain used to produce canola oil) that is resistant to pesticides and drought while yielding more canola oil. Holding all else constant, this research will: a) shift the supply curve for canola oil rightward. b) shift the supply curve for canola oil leftward. c) decrease the quantity supplied of canola oil. d) increase the quantity supplied of canola oil.

d) an upward-sloping supply curve.

Rising marginal costs imply a) falling variable costs. b) rising fixed costs. c) a downward-sloping demand curve. d) an upward-sloping supply curve.

200

Suppose a labor market is described by the demand equation, Qd = 1200 - 20w, and the supply equation, Qs = 10w - 300, where Qd is the quantity demanded of labor (in Million), Qs is the quantity supplied of labor (in Million), and w is the wage (in dollars). The equilibrium number of employed workers in this market is ________ million. (Round to the nearest integer.)

a) fall below the equilibrium unemployment rate (natural rate of unemployment).

Suppose that an economy is overheating. You would expect to see the unemployment rate: a) fall below the equilibrium unemployment rate (natural rate of unemployment). b) be zero. c) rise above the equilibrium unemployment rate (natural rate of unemployment). d) be equal to the equilibrium unemployment rate(natural rate of unemployment).

c) fall; rise or fall

Suppose the New York City housing market is in equilibrium. A recession causes local household incomes to decline. At the same time, construction of a series of new apartment buildings has just been completed. Given these two changes, and assuming that apartment housing is a normal good, we can predict that the price of apartments will _________, and the quantity of apartments bought and sold will __________. a) rise or fall; fall b) rise or fall; rise c) fall; rise or fall d) rise; fall or rise

A) −$100 million

Suppose there are only two countries, country A and country B. Country A imports $200 million worth of goods and services from country B. Country B imports $100 million worth of goods and services from country A. Net exports for country _____ equal _____. A) −$100 million B) −$100 million B) $200 million A) $200 million

d) the salaries of qualified architects to fall.

Suppose there is a surplus of qualified architects in the United States. Over time, we would expect: a) the demand for qualified architects to fall. b) the salaries of qualified architects to rise. c) the supply of qualified architects to fall. d) the salaries of qualified architects to fall.

b) research and development.

Technological progress is advanced through: a) infrastructure. b) research and development. c) consumption. d) government regulation.

d) price of all goods and services produced domestically.

The GDP deflator is an index that tracks the: a) price that businesses pay over time for the inputs used in the production process. b) average price that consumers pay over time for a representative basket of goods and services. c) highest prices consumers pay over time for imported goods and services. d) price of all goods and services produced domestically.

c) real GDP.

The broadest measure of economic activity is: a) the stock market. b) business confidence. c) real GDP. d) nonfarm payrolls.

a) investment equals depreciation.

The capital stock in an economy stops growing when: a) investment equals depreciation. b) capital accumulation begins. c) depreciation reaches zero. d) savings increases in the economy.

a) costs and benefits

The cost-benefit principle states that _____ are the incentives that shape decisions. a) costs and benefits b) opportunity costs c) incomes d) framing effects

a) is a curve that shows the maximum willingness to pay for a product. b) is a curve that shows the marginal benefit gained from a product. d) is a curve that shows the relationship between the price of a product and a consumer's willingness to buy at each price.

The demand curve... [Select all that apply.] a) is a curve that shows the maximum willingness to pay for a product. b) is a curve that shows the marginal benefit gained from a product. c) is a curve that shows the production cost of a product. d) is a curve that shows the relationship between the price of a product and a consumer's willingness to buy at each price.

b) peak, recession, trough, and expansion.

The four stages of the business cycle are: a) expansion, growth, contraction, and depression. b) peak, recession, trough, and expansion. c) consumption, investment, government expenditure, and net exports. d) full employment, potential GDP, recessionary gap, and inflationary gap.

a) the positive relationship between price and quantity supplied.

The law of supply refers to a) the positive relationship between price and quantity supplied. b) the inverse relationship between price and quantity supplied. c) the inverse relationship between price and quantity demanded. d) the positive relationship between price and quantity demanded.

d) longer unemployment durations.

Unemployment insurance can lead to: a) a reduction in the government budget deficit. b) an increase in the number of retirees. c) fewer unemployment benefit claims. d) longer unemployment durations.

c) vary with the quantity of output produced.

Variable costs are the costs that a) stay fixed with the quantity of output produced. b) are incurred to build factories and assembly plants. c) vary with the quantity of output produced. d) are independent of the amount of output produced.

a) seasonally adjusted data

What kind of data adjustment removes the effect of sales spikes due to the holiday season? a) seasonally adjusted data b) nominal data c) annual data d) real data

a) The demand for the luxury good will shift to the left today.

What would you expect to happen to the demand for a luxury good today, if the government announces it will stop taxing that luxury good next year? a) The demand for the luxury good will shift to the left today. b) Consumers will stop their consumption of the luxury good altogether. c) The demand for the luxury good will shift to the right today. d) There will be no impact on the demand for the luxury good.

d) borrowers to lenders.

When inflation is lower than expected, there is redistribution from: a) borrowers to the government. b) lenders to the government. c) lenders to borrowers. d) borrowers to lenders.

a) only variable costs.

When you calculate marginal costs, they should include: a) only variable costs. b) both the variable and fixed costs. c) only fixed costs. d) the market price of the product.

b) S&P 500

Which economic indicator tells you about the future expected profits of businesses? a) Nonfarm payrolls b) S&P 500 c) Consumer price index d) Initial unemployment claims

a) South Korea

Which of the following countries enjoyed significant catch-up economic growth in the second half of the twentieth century? a) South Korea b) Spain c) Argentina d) United States

b) the law of diminishing returns

Which of the following explains the shape of the aggregate production function? a) the development of human capital b) the law of diminishing returns c) the impact of technological change d) the profit maximization rule

b) Consumers buy more iPhones because prices have fallen.

Which statement BEST illustrates the law of demand? a) An increase in food prices encourages more individuals to buy more food as a result of scarcity. b) Consumers buy more iPhones because prices have fallen. c) Tesla produces more cars as prices increase. d) Fewer people visit Disneyland because incomes have fallen.

c) Broad indicators better capture economy-wide effects.

Why are broad indicators better than narrow indicators? a) Narrow indicators are harder to measure than broad indicators. b) Narrow indicators present economy-wide trends. c) Broad indicators better capture economy-wide effects. d) Narrow indicators present more refined forecasts.

d) Marty, who cannot find a job, though he is willing to accept less than the existing wage

You have four friends. Which of your friends can be described as "structurally unemployed"? a) Dolly, a recent graduate who is looking for the job that best suits her qualifications b) Kirstie, who was fired for being inefficient at her job c) Kevin, who does not like the company he works for d) Marty, who cannot find a job, though he is willing to accept less than the existing wage

b) GDP rises by $38,000.

You purchase a new car (produced this year) for $38,000. After six months, you sell the car for $31,500. How much does GDP rise because of these two transactions? a) GDP rises by $6,500. b) GDP rises by $38,000. c) GDP rises by $31,500. d) GDP rises by $69,500.