Macroeconomics Exam 2

How large is the economy of Texas compared to other states? The largest; everything is bigger in Texas. Half the size of California The third largest economy Twice as large as Georgia

Half the size of California

What social ails are NOT correlated with greater income inequality? Drug Abuse Education Levels Obesity Trust and Community Life Teen Pregnancies None of the Above

None of the Above

Which statements do the majority of economists NOT agree? The minimum wage causes large unemployment A ceiling on rents reduces the quality of housing Tariffs usually reduce general economic welfare There are some instances when a tariff is appropriate.

The minimum wage causes large unemployment

With trade and a tariff, total surplus is a. $1,704. b. $1,224. c. $1,512. d. $1,416.

a. $1,704.

Celine buys a new MP3 player for $90. She receives consumer surplus of $15 on her purchase if her willingness to pay is a. $105. b. $75. c. $15. d. $90.

a. $105.

Inefficiency exists in a market when a good is a. not being produced by the lowest-cost producers. b. not produced because buyers do not value it very highly. c. not distributed fairly among buyers. d. being consumed by buyers who value it most highly.

a. not being produced by the lowest-cost producers.

Refer to Figure 6-22. Buyers pay how much of the tax per unit? a. $0.50. b. $1.50. c. $5.00. d. $3.00.

b. $1.50.

Refer to Figure 4-22. At a price of $20, there is a a. surplus of 8 units. b. surplus of 4 units. c. shortage of 8 units. d. shortage of 4 units.

b. surplus of 4 units.

Producer surplus directly measures a. the well-being of society as a whole. b. the well-being of sellers. c. sellers' willingness to sell. d. the well-being of buyers and sellers.

b. the well-being of sellers.

Perry Y intersection: (0,12 poems) X intersection: (2 novels, 0) Jordan Y intersection: (0,12 poems) X intersection: (4 novels, 0) The opportunity cost of 1 poem for Perry is a. 2 novels. b. 1/12 novel. c. 1/6 novel. d. 6 novels.

c. 1/6 novel.

Refer to Figure 4-24. All else equal, the approach of Thanksgiving would cause a move from a. x to y. b. y to x. c. DB to DA. d. DA to DB.

c. DB to DA.

Consumer surplus a. is the number of consumers who are excluded from a market because of scarcity. b. is the amount of a good that a consumer can buy at a price below equilibrium price. c. is the amount a consumer is willing to pay minus the amount the consumer actually pays. d. measures how much a seller values a good.

c. is the amount a consumer is willing to pay minus the amount the consumer actually pays.

Refer to Figure 6-25. How much tax revenue does this tax generate for the government? a. $250 b. $180 c. $300 d. $150

d. $150

If a tax is levied on the sellers of a product, then there will be a(n) a. downward shift of the supply curve. b. increase in quantity supplied. c. decrease in quantity supplied. d. upward shift of the supply curve.

d. upward shift of the supply curve.

Given the following graph, what is the opportunity cost of producing one more chicken nugget? 1/8 Designer Jeans 80 Designer Jeans 3/4 Designer Jeans 60 Designer Jeans 1/6 Designer Jeans

3/4 Designer Jeans

What caused the Great Recession of 2009-10? A stock market bubble caused by the growth of the internet companies. A housing bubble A negative oil shock Unsound monetary policy.

A housing bubble

What caused the recent rise in oil prices? A negative supply shock caused by an attack on Saudi oil facilities. A positive supply shock caused by Chinese Trade war. A positive demand shock caused by the summer driving season. A negative demand shock caused by failed Brexit negotiations.

A negative supply shock caused by an attack on Saudi oil facilities.

The 19th century economist, Karl Marx, author of the communist manifesto was in favor of complete I equality. A.True. The core of communism is equality B. True. Marx wanted a revolution to redistribute wealth from the rich to the poor. C. False. Marx understood some people work harder than others. D. False. Communism never achieved equality.

C. False. Marx understood some people work harder than others.

Which economy has the highest growth rate of real GDP? The United States China Great Britain Texas

China

Which statement is a normative economic statement? If we raise the minimum wage, then we cause more unemployment. If the government increases spending, then the economy will grow. If we increase government debt, then we will distort our sense of responsibility. If we increase the supply of labor, the wages will fall.

If we increase government debt, then we will distort our sense of responsibility.

Which one of the following events were NOT caused by a Malthusian trap? The Mayan collapse. The Anasazi collapse The Rwanda Genocide The Cherokee Trail of Tears

The Cherokee Trail of Tears

Which economy has the highest GDP per capita? The United States India China Great Britain

The United States

Which economy has the highest GDP? The United States India China Great Britain

The United States

Is a free concert a scarce good? No, because there is no cost. Yes, because there are so few of them. No, we don't have to give up anything. Yes, because we have to give up what we would have done with our time.

Yes, because we have to give up what we would have done with our time.

If nominal GDP is $10 trillion and real GDP is $8 trillion, then the GDP deflator is a. 125, and this indicates that the price level has increased by 25 percent since the base year. b. 80, and this indicates that the price level has decreased by 20 percent since the base year. c. 125, and this indicates that the price level has increased by 125 percent since the base year. d. 80, and this indicates that the price level has increased by 80 percent since the base year.

a. 125, and this indicates that the price level has increased by 25 percent since the base year.

A market includes a. both buyers and sellers. b. the place where transactions occur but not the people involved. c. buyers only. d. sellers only.

a. both buyers and sellers.

When a country allows trade and becomes an importer of a good, a. domestic producers become worse off, and domestic consumers become better off. b. domestic producers become better off, and domestic consumers become worse off. c. domestic consumers become better off, but the effect on the well-being of domestic producers is ambiguous. d. domestic producers become worse off, but the effect on the well-being of domestic consumers is ambiguous.

a. domestic producers become worse off, and domestic consumers become better off.

The inflation rate is the a. percentage change in the price level from one period to another. b. percentage change in real GDP from one period to another. c. absolute change in real GDP from one period to another. d. absolute change in the price level from one period to another.

a. percentage change in the price level from one period to another.

The minimum wage is an example of a a. price floor. b. wage subsidy. c. price ceiling. d. tax.

a. price floor.

When each person specializes in producing the good in which he or she has a comparative advantage, total production in the economy a. rises. b. may fall, rise, or stay the same. c. stays the same. d. falls.

a. rises.

Beth, an American citizen, travels to Italy on vacation and buys an espresso machine to bring home. Her purchase increases a. ​Italy's GDP. b. ​Italy's GDP and U.S. GDP, since Beth spent dollars buying the machine. c. ​Neither U.S. nor Italy's GDP, since the product was bought in one country and used in another. d. ​U.S. GDP since she will have the machine with her at home in the U.S.

a. ​Italy's GDP.

​In computing GDP, market prices are used in the calculations because a. ​market prices can be used to combine the variety of goods and services produced in an economy into a single measure. b. ​market prices are constant over time. c. ​market prices do not reflect how prices change over time. d. ​market prices are consistently free of inflation.

a. ​market prices can be used to combine the variety of goods and services produced in an economy into a single measure.

In the economy of Talikastan in 2015, consumption was $3000, exports were $1200, GDP was $8000, government purchases were $1200, and imports were $600. What was Talikastan's investment in 2015? a. $5600 b. $3200 c. $2000 d. $4400

b. $3200

Refer to Figure 4-27. Which of the four panels represents the market for winter coats as we progress from winter to spring? a. Panel (a) b. Panel (b) c. Panel (c) d. Panel (d)

b. Panel (b)

Policymakers use taxes a. only in those markets in which the burden of the tax falls clearly on the sellers. b. both to raise revenue for public purposes and to influence market outcomes. c. to raise revenue for public purposes but not to influence market outcomes. d. when they realize that price controls alone are insufficient to correct market inequities.

b. both to raise revenue for public purposes and to influence market outcomes.

Refer to Figure 6-2. The price ceiling a. is not binding, because it is set above the equilibrium price. b. causes a shortage of 85 units. c. causes a shortage of 40 units. d. causes a shortage of 45 units.

b. causes a shortage of 85 units.

The principle of comparative advantage asserts that a. not all countries can benefit from trade with other countries. b. countries can become better off by specializing in what they do best. c. countries can become better off by exporting goods, but they cannot become better off by importing goods. d. the world price of a good will prevail in all countries, regardless of whether those countries allow international trade in that good.

b. countries can become better off by specializing in what they do best.

For two individuals who engage in the same two productive activities, it is impossible for one of the two individuals to a. gain from trade with each other. b. have a comparative advantage in both activities. c. be more productive per unit of time in both activities. d. have an absolute advantage in both activities.

b. have a comparative advantage in both activities.

A country has a comparative advantage in a product if the world price is a. not subject to manipulation by organizations that govern international trade. b. higher than that country's domestic price without trade. c. lower than that country's domestic price without trade. d. equal to that country's domestic price without trade.

b. higher than that country's domestic price without trade.

Grapes are considered intermediate goods a. whether the purchaser uses them to make wine to sell or eats them. b. if the purchaser uses them to make wine to sell others but not if the purchaser eats them. c. if the purchaser eats them, but not if the purchaser uses to them to make wine to sell. d. None of the above is correct.

b. if the purchaser uses them to make wine to sell others but not if the purchaser eats them.

Refer to Figure 9-6. When the tariff is imposed, domestic consumers a. gain by $200. b. lose by $450. c. lose by $200. d. gain by $450.

b. lose by $450.

Each of the following is a determinant of demand except a. expectations. b. production technology. c. tastes. d. the prices of related goods.

b. production technology.

If a nonbinding price floor is imposed on a market, then the a. quantity sold in the market will decrease. b. quantity sold in the market will stay the same. c. price in the market will increase. d. price in the market will decrease

b. quantity sold in the market will stay the same.

A tariff is a a. limit on how much of a good can be imported. b. tax on an imported good. c. limit on how much of a good can be exported. d. tax on an exported good.

b. tax on an imported good.

If a price ceiling is not binding, then a. the equilibrium price is above the price ceiling. b. the equilibrium price is below the price ceiling. c. it has no legal enforcement mechanism. d. None of the above is correct because all price ceilings must be binding.

b. the equilibrium price is below the price ceiling.

Efficiency in a market is achieved when a. all firms are producing the good at the same low cost per unit. b. the sum of producer surplus and consumer surplus is maximized. c. a social planner intervenes and sets the quantity of output after evaluating buyers' willingness to pay and sellers' costs. d. no buyer is willing to pay more than the equilibrium price for any unit of the good.

b. the sum of producer surplus and consumer surplus is maximized.

A market supply curve shows a. the average quantity supplied by producers at all possible prices. b. the total quantity supplied at all possible prices. c. suppliers' responses, in terms of the amounts they will supply, to the demands of buyers. d. how quantity supplied changes when consumer income changes.

b. the total quantity supplied at all possible prices.

Suppose Raymond and Victoria attend a charity benefit and participate in a silent auction. Each has in mind a maximum amount that he or she will bid for an oil painting by a locally famous artist. This maximum is called a. producer surplus. b. willingness to pay. c. deadweight loss. d. consumer surplus.

b. willingness to pay.

Figure 3-13 ​ Peru's Production Possibilities Frontier Y intersection: (0,240 rubies) X intersection: (8 emeralds,0) Refer to Figure 3-13. Suppose Peru decides to increase its production of emeralds by 2. What is the opportunity cost of this decision? a. 120 rubies b. 40 rubies c. 60 rubies d. 30 rubies

c. 60 rubies

Trade between countries a. must benefit both countries equally; otherwise, trade is not mutually beneficial. b. limits a country's ability to produce goods and services on its own. c. allows each country to consume at a point outside its production possibilities frontier. d. can best be understood by examining the countries' absolute advantages.

c. allows each country to consume at a point outside its production possibilities frontier.

If a seller in a competitive market chooses to charge more than the going price, then a. the owners of the raw materials used in production would raise the prices for the raw materials. b. the sellers' profits must increase. c. buyers will make purchases from other sellers. d. other sellers would also raise their prices.

c. buyers will make purchases from other sellers.

By definition, exports are a. limits placed on the quantity of goods brought into a country. b. goods in which a country has an absolute advantage. c. goods produced domestically and sold abroad. d. people who work in foreign countries

c. goods produced domestically and sold abroad.

The law of supply states that, other things equal, when the price of a good : a. falls, the quantity supplied of the good rises. b. falls, the supply of the good rises. c. rises, the quantity supplied of the good rises. d. rises, the supply of the good falls.

c. rises, the quantity supplied of the good rises.

Rent control a. is regarded by most economists as an efficient way of helping the poor. b. serves as an example of how a social problem can be alleviated or even solved by government policies. c. serves as an example of a price ceiling. d. is the most efficient way to allocate scarce housing resources.

c. serves as an example of a price ceiling.

A surplus exists in a market if a. there is an excess demand for the good. b. quantity demanded exceeds quantity supplied. c. the current price is above its equilibrium price. d. All of the above are correct.

c. the current price is above its equilibrium price.

Congressman Smith cites the "jobs argument" when he argues in favor of restrictions on trade; he argues that everything can be produced at lower cost in other countries. The likely flaw in Congressman Smith's reasoning is that he ignores the fact that a. there is no evidence that any worker ever lost his or her job because of free trade. b. the gains from trade are based on absolute advantage. c. the gains from trade are based on comparative advantage. d. unemployment of labor is not a serious problem relative to other economic problems.

c. the gains from trade are based on comparative advantage.

A production possibilities frontier is a straight line when a. the more resources the economy uses to produce one good, the fewer resources it has available to produce the other good. b. an economy is interdependent and engaged in trade instead of self-sufficient. c. the rate of tradeoff between the two goods being produced is constant. d. the rate of tradeoff between the two goods being produced depends on how much of each good is being produced.

c. the rate of tradeoff between the two goods being produced is constant.

The opportunity cost of an item is a. the number of hours that one must work in order to buy one unit of the item. b. always greater than the cost of producing the item. c. what you give up to get that item. d. always less than the dollar value of the item.

c. what you give up to get that item.

Bill created a new software program he is willing to sell for $200. He sells his first copy and enjoys a producer surplus of $150. What is the price paid for the software? a. $200. b. $150. c. $50. d. $350.

d. $350.

In the economy of Talikastan in 2015, consumption was $200, exports were $150, GDP was $475, government purchases were $100, imports were $75, and investment was $100. What were Talikastan's net exports in 2015? a. $225 b. -$225 c. -$75 d. $75

d. $75

Refer to Figure 7-26. At the equilibrium price, producer surplus is a. $1,800. b. $600. c. $1,200. d. $900.

d. $900.

Suppose a gardener produces both tomatoes and squash in his garden. If he must give up 8 bushels of squash to get 5 bushels of tomatoes, then his opportunity cost of 1 bushel of tomatoes is a. 0.63 bushels of squash. b. 5 bushels of squash. c. 3 bushels of squash. d. 1.6 bushels of squash.

d. 1.6 bushels of squash.

If total spending rises from one year to the next, then a. goods and services must be selling at higher prices. b. the economy must be producing a larger output of goods and services. c. employment or productivity must be rising. d. either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or both.

d. either the economy must be producing a larger output of goods and services, or goods and services must be selling at higher prices, or both.

Refer to Figure 9-13. With trade, the country a. exports 400 units of the good. b. imports 400 units of the good. c. exports 200 units of the good. d. imports 600 units of the good.

d. imports 600 units of the good.

The GDP deflator for years subsequent to the base year measures the change in a. nominal GDP from the base year that cannot be attributable to a change in prices. b. real GDP from the base year that cannot be attributable to a change in prices. c. real GDP from the base year that cannot be attributable to a change in nominal GDP. d. nominal GDP from the base year that cannot be attributable to a change in real GDP.

d. nominal GDP from the base year that cannot be attributable to a change in real GDP.

An import quota a. reduces the welfare of domestic producers. b. is a tax on imported goods. c. is preferable to a tariff since an import quota does not create a deadweight loss. d. reduces the welfare of domestic consumers.

d. reduces the welfare of domestic consumers.

A seller's opportunity cost measures the a. out of pocket expenses to produce a good but not the value of her time. b. amount she is paid for a good minus her cost of providing it. c. consumer surplus. d. value of everything she must give up to produce a good.

d. value of everything she must give up to produce a good.