Macroeconomics Final Part 1

The study of economics arises due to

scarcity

Which of the following is a result of a market economy?

Voluntary exchange

Figure 2-4 shows various points on three different production possibilities frontiers for a nation. A movement from __ could occur because of an influx of immigrant labor.

X to Y

Which of the following goods is directly counted in GDP?

a 12-inch Subway sandwich purchased by a student

If, in response to an increase in the price of pineapples, the amount of pineapples that consumers are willing and able to buy decreases, economists would describe this as

a decrease in quantity demanded.

What is the largest component of spending in the United States?

consumption spending

If smartwatches are considered substitutes for smartphones, the decline in the price of smartphones would, all else equal,

decrease the demand for smartwatches

Since 1948, the labor force participation rate for adult men has ________ and for adult women has ________.

decreased; increased

Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to understate the true extent of joblessness?

discouraged workers

There is often a trade-off between

economic efficiency and economic equity.

Today, most economists advocate market-based economies because these economies tend to be more __________ than others.

efficient.

When determining the unemployment rate for the U.S., we would categorize a person as _____ if they were temporarily away from their job because they were ill.

employed

If your nominal wage rises more slowly than the price level, we can say your real wage has ________ and the purchasing power of a dollar has ________.

fallen; fallen

A student who just graduated from college but has not found a job would most likely be

frictionally unemployed

The output of U.S. citizens who work in Canada would be included in the

gross domestic product of Canada

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

An advantage of the household survey over the establishment survey of the labor market is that the household survey

includes the number of self-employed persons.

Suppose consumer preference for beef starts to rise while the cost of raising beef continues to rise. In the market for beef, this would be represented by the equilibrium price ________ and the equilibrium quantity ________.

increasing; increasing or decreasing

Refer to Figure 3-5. At a price of $5, the quantity sold

is 2 units.

If the quantity of goods and services produced in the economy decreases,

it may be possible for nominal GDP to increase.

Which of the following would be directly counted in GDP in 2016?

kitchen cabinets purchased from Home Depot in 2016 to be installed in a house built in 1997

If the unemployment rate is 5%, that means that 5% of the __ is unemployed.

labor force

If inflation increases unexpectedly, then

lenders receive a lower real interest rate than they expected.

When an individual decides on the companies in which he or she will invest, a(n) ________ issue is being addressed.

microeconomic

Real GDP will increase

only if the quantity of final goods and services produced rises.

The Bureau of Labor Statistics would categorize a retiree who is not working as

out of the labor force

When you purchase a new pair of jeans you do so in the

product market

At market equilibrium,

quantity demanded equals quantity supplied.

Which of the following would cause a decrease in the equilibrium price and an increase in the equilibrium quantity of salmon?

an increase in supply

Which of the following would cause an increase in the supply of cheese?

an increase in the number of firms that produce cheese

Which of the following would cause the equilibrium price of ketchup to increase and the equilibrium quantity of ketchup to decrease?

an increase in the price of tomatoes

At a product's equilibrium price

any buyer who is willing and able to pay the price will find a seller for the product.

Suppose that in 2016, all prices in the economy double and that all wages and salaries also double. In 2016 you

are no better off or worse off than you were in 2015 as the purchasing power of your salary has remained the same.

If the marginal cost of producing a television is constant at $200, then a firm should produce this item

as long as the marginal benefit it receives is just equal to or greater than $200.

Refer to Figure 2-4. Consider the following events: a.a decrease in the unemployment rate b.an increase in technology with respect to both food and plastic production c.a war that kills a significant portion of a nation's population Which of the events listed above could cause a movement from W to Y?

b only

Suppose that at the beginning of a loan contract, the real interest rate is 4% and expected inflation is currently 6%. If actual inflation turns out to be 7% over the loan contract period, then

borrowers gain 1% of the loan value.

When actual inflation is less than expected inflation,

borrowers lose and lenders gain

Individuals who have never been the best at doing anything

can still have a comparative advantage in producing some product

Individuals (or individual countries) who have never been the best at doing anything

can still have a comparative advantage in producing some product.

Economics is the study of __ people make to attain their goals, given their __ resources

choices; scarce

A critical function of the government in facilitating the operation of a market economy is

setting up and enforcing private property rights.

The advice to "retrain" would be most appropriate for which of the following types of unemployment?

structural unemployment

Hurricane Katrina damaged a large portion of oil refining and pipeline capacity in the Gulf coast states. In the market for gasoline,

the supply curve shifted to the left resulting in an increase in the equilibrium price.

Gross domestic product understates the total production of final goods and services because of the omission of

the underground economy.

Mike has been unemployed for over a year. He hasn't looked for a job in the last three months, but he's just started looking for work again. Because Mike started looking for a new job,

the unemployment rate increased.

Refer to figure 3-4. If the price is $25,

there is a surplus of 300 units.

Published in 1776, ________ was written by Adam Smith.

"An Inquiry into the Nature and Causes of the Wealth of Nations"

A car that is produced in 2016 is not sold until 2017. According to the definition of GDP, in which year's GDP should it be counted?

2016

You borrow $10,000 from a bank for one year at a nominal interest rate of 5%. If inflation over the year is 2%, what is the real interest rate you are paying?

3%

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 3-4. At a price of $25, how many units will be sold?

500

Which of the following policies would reduce frictional unemployment?

Building an on-line job database that helps workers find jobs

Which of the following reports data on GDP for the United States?

Bureau of Economic Analysis (BEA)

Which of the following would be a consequence of substitution bias in the CPI?

Businesses would overcompensate employees for inflation when giving cost of living raises.

Which of the following describes the accuracy of the Consumer Price Index?

Changes in the CPI overstate the true rate of inflation.

Specializing in the production of a good or service in which one has a comparative advantage enables a country to do which of the following?

Consume a combination of goods that lies outside its own production possibilities frontier.

Economics promotes which of the following as the way to make the best decision?

Continue an enjoyable activity up to the point where its marginal benefit equals its marginal cost.

Refer to Figure 3-1. An increase in the price of a complement would be represented by a movement from

D 2 to D 1.

Which of the following statements about economic resources is false?

Economic resources include financial capital and money.

Figure 2-9 shoes the production possibilities frontiers for Greenland and Iceland. Each country produces two goods, snow cones and popsicles. Which country has a comparative advantage in the production of popsicles?

Greenland

Figure 2-7 shows the production possibilities frontiers for Pakistan and Indonesia. Each country produces two goods, cotton and cashews.Refer to Figure 2-7. Which country has a comparative advantage in the production of cotton?

Indonesia

In July, market analysts predict that the price of gold will rise in August. What happens in the gold market in July, holding everything else constant?

The supply curve shifts to the left.

When an economy is at its natural rate of unemployment, which of the following will be true?

The unemployment rate will be greater than 0%.

Refer to Table 8-3. Consider the data above (in billions of dollars) for an economy: Gross domestic product (in billions of dollars) for this economy equals

$1,200

ProductQuantityPriceShoes 40$60.00DVDs 100 18.00Tomatoes2,000 1.00Ketchup 300 4.00 Refer to the 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.

Table 9-14YearNominal Average Hourly Earnings CPI (1982-1984 = 100) 1965$2.65 32 2010 22.59219 The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010.Refer to Table 9-14. The real average hourly earnings for 1965 in 1982-1984 dollars equal

$8.28.

Suppose your grandfather earned a salary of $12,000 in 1964. If the CPI is 31 in 1964 and 219 in 2016, then the value of your grandfather's salary in 2016 dollars is approximately

$84,775

If the GDP deflator rises from 185 to 190, what is the rate of inflation between the two years?

2.7%

Figure 2-9 shoes the production possibilities frontiers for Greenland and Iceland. Each country produces two goods, snow cones and popsicles. What is the opportunity cost of producing 1 snow cone in Iceland?

2/3 of a popsicle

Which of the following is a factor of production?

An acre of forested land

Adam Smith's __ refers to the process by which individuals acting in their own self-interest bring about a market outcome that benefits society as a whole.

Invisible hand

Which of the following is likely to increase measured GDP?

Marijuana becomes legal to grow and sell.

Which of the following is a positive economic statement?

The minimum wage law causes unemployment.

Which of the following is a normative economic statement?

The price of milk is too high.

The broadest measure of the price level that includes all final goods and services is

the GDP deflator

The most widely used measure of inflation is based on which of the following price indices?

the consumer price index

The phrase "demand has increased" means that

the demand curve has shifted to the right.

Macroeconomics is the study of

the economy as a whole

If cyclical unemployment is eliminated in the economy, then

the economy is considered to be at full employment.

Nominal GDP is GDP in a given year

valued in the prices of that year