Macro Midterm

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.

public saving decreases

Hyperinflation is: Select one: a. frequently experienced in the United States. b. very erratic inflation. c. an extremely high rate of inflation. d. an extremely low rate of inflation.

an extremely high rate of inflation.

When a U.S. firm engages in outsourcing, it benefits ______ and harms ______. Select one: a. the firm; the U.S. consumers of the firm's products b. the U.S. consumers of the firm's products; the firm c. the U.S. consumers of the firm's products; the firm's U.S. employees d. the U.S. consumers of the firm's products; the firm's foreign employees

the U.S. consumers of the firm's products; the firm's U.S. employees

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.

applies economic insights to understand everyday life.

Product improvements make it difficult for the statisticians who construct the CPI to distinguish between ______ changes and ______ changes. Select one: a. price; quality b. quantity; price c. quantity; quality d. income; price

price; quality

Refer to the figure below. If this restaurant goes from producing 20 to 25 pizzas per hour, then which of the following statements is true? Select one: a. It has to give up exactly 25 salads. b. It has to give up more than 12.5 salads. c. It has to give up exactly 12.5 salads. d. It has to give up fewer than 12.5 salads.

It has to give up fewer than 12.5 salads.

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

Replacing the income tax with a consumption tax

A decrease in the capital gains tax on income made from new capital investment will: Select one: a. shift the demand for investment curve to the left. b. shift the demand for investment curve to the right. c. shift the supply of saving curve to the left. d. shift the supply of saving curve to the right.

shift the demand for investment curve to the right.

Suppose one could either rent a car or take a train to travel to Chicago from Washington, D.C. If the price of train tickets increases: Select one: a. the demand for train tickets will increase. b. the demand for rental cars will increase. c. the demand for rental cars will stay the same. d. the demand for rental cars will decrease.

the demand for rental cars will increase.

A measure of the average price of a given class of goods or services relative to the price of the same goods and services in a base year is called a: Select one: a. real price. b. real quantity. c. rate of inflation. d. price index.

price index

The figure below shows Becky's daily production possibilities curve for dresses and skirts. Point U is: Select one: a. attainable. b. efficient. c. unattainable. d. inefficient.

unattainable.

If workers and employers agree to a three-year wage contract under the expectation of 3% inflation, and inflation turns out to be 5%, then: Select one: a. workers gain and employers gain. b. workers gain and employers lose. c. workers lose and employers gain. d. workers lose and employers lose.

workers lose and employers gain.

In which of the following situations would GDP not change? Select one: a. As domestic consumers buy fewer tobacco products, tobacco manufacturers instead sell their products, at the same price, to foreign buyers. b. Domestic consumers begin to buy less imported wine, and instead spend just as much money on domestically produced wine. c. Without reducing the number of automobiles sold, domestic automobile producers decide to reduce the number of automobiles they produce, rather than producing cars that would end up as unsold inventory. d. More and more domestic consumers opt to build a new home, rather than spending the same money on an already existing home.

As domestic consumers buy fewer tobacco products, tobacco manufacturers instead sell their products, at the same price, to foreign buyers.

Nominal GDP measures the ______ of production. Select one: a. change in the volume b. physical volume c. current dollar value d. base year value

current dollar value

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

$105 Billion

Bob's Barber Shop cut 3,000 heads of hair in 2014 and 3,100 in 2015. The price of a haircut was $7 in 2014 and $8 in 2015. If 2014 is the base year, what was Bob's contribution to nominal GDP in 2015? Select one: a. $21,000 b. $21,700 c. $24,000 d. $24,800

$24,800

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?

$450

On January 1, 2008, Anna invested $5,000 at 5% interest for one year. The CPI on January 1, 2008 stood at 1.60. On January 1, 2009, the CPI was 1.68. The real rate of interest earned by Anna was ______ percent. Select one: a. -5 b. 0 c. 5 d. 8

0

The towns of Jekyll and Hyde each have a labor force of 2,000 people. In Jekyll, 500 people were unemployed for the entire year, while the rest of the labor force was employed continuously. In Hyde, every member of the labor force was unemployed for three months and was employed for nine months. The average duration of unemployment spells over the year was ______ months in Jekyll and ______ months in Hyde. Select one: a. 3; 3 b. 3; 9 c. 12; 3 Correct d. 12; 9

12;3

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

2

The data below describe the economy of Econland: Public saving in Econland equals: Select one: a. -5 b. 5 c. 16 d. 17

5

You expect a share of EconNews.Com to sell for $65 a year from now. If you are willing to pay $61.06 for one share of the stock today, you expect a dividend payment of $4, and the rate of return on safe assets is 5%, how much is your risk premium? Select one: a. 1.5% b. 6.5% c. 8.0% d. 13.0%

8.0%

What might cause a supply function to shift to the left today? Select one: a. An increase in the product's own price. b. An expectation that the product's price will fall in the future. c. An expectation that the product's price will rise in the future. d. A decrease in the price of one of the inputs to making the product.

An expectation that the product's price will rise in the future.

Suppose that the equilibrium price of DVD players increases and the equilibrium quantity increases. Which of the following best fits the observed data? Select one: a. An increase in demand with supply constant. b. An increase in demand coupled with a decrease in supply. c. An increase in demand coupled with an increase in supply. d. A decrease in demand with supply constant.

An increase in demand with supply constant.

Which of the following would be included in the GDP of the United States? Select one: a. Boeing builds a plane in Seattle that is sold to Air Canada. b. Chrysler produces a car in Germany that is sold in Michigan. c. Nestle produces a candy bar in Switzerland that is sold in San Francisco. d. Planet Hollywood serves customers in a restaurant in Hong Kong.

Boeing builds a plane in Seattle that is sold to Air Canada

An increase in the demand for workers producing computers for export versus producing agricultural products that can be imported more cheaply from abroad is an example of how increasing wage inequality can result from: Select one: a. the diminishing marginal product of labor. b. the diminishing marginal product of capital. c. increasing reservation prices. d. globalization.

Globalization

To obtain a given real rate of return, lenders must charge a ______ nominal interest rate in the face of increasing inflation. Select one: a. deflated b. higher c. lower d. constant

Higher

Refer to the table below. ______ has the comparative advantage in making pies and ______ the comparative advantage in making cakes. Select one: a. Martha; Martha b. Julia; Julia c. Martha; Julia Correct d. Julia; Martha

Martha; Julia

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.

Other people are trying to choose the shortest line too.

Suppose that a disease that affects people who consume beef has been discovered in the United States. One likely result is: Select one: a. an increase in buyers' reservation prices for beef. b. a decrease in demand for chicken. c. a decrease in demand for beef. d. a decrease in the quantity demanded of beef.

a decrease in demand for beef.

At the time it collapsed in 1991, the Soviet Union possessed all of the factors that promote increases in economic growth except: Select one: a. a highly educated worker force. b. a large stock of capital. c. abundant natural resources. d. a political and legal environment that promoted economic productivity.

a political and legal environment that promoted economic productivity.

Saving done for the purpose of leaving an inheritance is called ______ saving. Select one: a. public b. bequest c. precautionary d. life-cycle

bequest

If the price of computers increases and the demand for monitors decreases as a result, then: Select one: a. computers and monitors are complements. b. computers are a normal good and monitors are inferior. c. computers and monitors are substitutes. d. computers are an inferior good and monitors are normal.

computers and monitors are complements.

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

consumers primarily.

If the price of TVs produced by XYZ-TV Company falls from $1,000 to $750 per TV set, then the: Select one: a. supply of labor to the XYZ-TV Company increases. b. supply of labor to the XYZ-TV Company decreases. c. demand for labor by the XYZ-TV Company increases. d. demand for labor by the XYZ-TV Company decreases.

demand for labor by the XYZ-TV Company decreases.

The figure below shows Avery's weekly production possibilities curve for scarves. Avery's PPC would shift outward if she: Select one: a. knits more red scarves and fewer blue scarves each week. b. devotes less time to knitting each week. c. devotes more time to knitting each week. d. knits fewer red scarves and more blue scarves each week.

devotes more time to knitting each week.

Capital goods are treated as ______ goods and, therefore, are ______ GDP. Select one: a. final; included in b. final; excluded from c. intermediate; included in d. intermediate; excluded from

final; included in

The emergence of English as the de facto world language has _____ a comparative advantage in the production of books, movies and popular music: Select one: a. given English-speaking countries b. given non-English-speaking countries c. had no effect on which country has d. given all countries

given English-speaking countries

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

greater investment

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.

higher rates of infant mortality.

"Skill-biased technological" has different effects on the marginal products of ______ workers and ______ workers. Select one: a. male; female b. union; nonunion c. government; private-sector d. higher-skilled; lower-skilled

higher-skilled; lower-skilled

Arguing that economic growth will eventually stop because we will run out of natural resources: Select one: a. must be correct because scarcity exists. b. will only be correct if growth takes the form of newer, more efficient goods and services. c. ignores the power of markets to recognize shortages and induce changes in behavior. d. is supported today by the fact that richer countries have fewer natural resources.

ignores the power of markets to recognize shortages and induce changes in behavior.

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.

increases labor supply.

One trend in labor markets is: Select one: a. a decrease in average real wages in the United States and other industrial countries. b. increasing wage inequality in the United States. c. weak rates of job creation in the United States since 1980. d. an increase in the rate of real wage growth since the early 1970s.

increasing wage inequality in the United States.

Labor unions contribute to structural unemployment by: Select one: a. keeping wages above the market-clearing level. b. keeping wages below the market-clearing level. c. allowing unemployed workers to search longer or less intensively for jobs. d. forcing unemployed workers to take the first job offered to them.

keeping wages above the market-clearing level.

Growth of real GDP per person is totally determined by the growth of average: Select one: a. labor productivity and the proportion of the population employed. b. labor productivity and the proportion of the population in the labor force. c. labor force participation and the share of income going to capital. d. labor force participation and the share of the population employed.

labor productivity and the proportion of the population employed

A study that deals with the salaries of university professors would be considered: Select one: a. macroeconomics b. microeconomics c. economic naturalism d. real economics

microeconomics

Total taxes minus transfer payments minus government interest payments is called: Select one: a. a budget surplus. b. net taxes. c. a budget deficit. d. national saving.

net taxes

The Boskin Commission found that the CPI ______ the true inflation rate. Select one: a. is independent of b. understates c. precisely measures d. overstates

overstates

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.

purchases of final goods and services.

Jessica's marginal cost for producing a pitcher of lemonade is $0.25. Therefore, $0.25 can also be called her: Select one: a. marginal revenue. b. equilibrium price. c. reservation price. d. producers surplus.

reservation price.

Normative economic principles are concerned with how people ______ make decisions while positive economic principles are concerned with how people ______ make decisions. Select one: a. do; should b. should; do Correct c. in power; in ordinary life d. in ordinary life; in power

should;do

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.

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

The three broad reasons for saving, as identified by economists, relate to: Select one: a. consumption, investment, and exports. b. national, public, and private production. c. the life-cycle, precaution, and bequests. d. capital gains, capital losses, and deficits.

the life-cycle, precaution, and bequests.

The shoe leather costs of inflation include all of the following except: Select one: a. the lost purchasing power of cash. b. the extra costs incurred to avoid holding cash. c. the cost of more frequent trips to the bank. d. the installation of a new cash management system.

the lost purchasing power of cash.

If average labor productivity in two countries is the same, average living standards will be lower in the country with: Select one: a. the smaller population. b. the larger population. c. the higher share of population employed d. the lower share of population employed.

the lower share of population employed.

GDP would be a better measure of economic well-being if it included: Select one: a. the costs of education. b. the total value of intermediate goods. c. the market value of final goods. d. the value of leisure.

the value of leisure.

If Dylan saves $50 per week, then Dylan's ______ will increase by $50 per week. Select one: a. investment b. consumption c. taxes d. wealth

wealth

Assume that Joe is willing to produce another hamburger that costs $1 to make. Mary is hungry and is willing to buy a hamburger for $3. According to the No Cash on the Table Principle, Joe and Mary: Select one: a. will make a trade. Correct b. will only make a trade if Joe can get Mary to spend more than $3 for the hamburger. c. will only make a trade if Mary can get Joe to charge less than $1 for the hamburger. d. will never trade; they will look for better deals.

will make a trade.