Macroeconomics Midterm #1

The _______ effect of a price change refers to the impact of a change in the price of a good on a consumer's purchasing power A) income B) substitution C) demographics D) ceteris paribus

A

Refer to 3-2, a decrease in the price of substitutes in production

S1 to S2

Refer to 3-2, technological advancement

S1 to S2

If the price of a product increases, and the demand for another product increases, the products are __________.

Substitutes

Refer to table 8-11, find nominal GDP for 2016

$1140

Use table 8-4 to determine GDP

$1600

D= demand, S= supply, P= equilibrium price, Q= equilibrium quantity. What happens in the market for solar panels if the government were to offer a tax break to encourage manufacturers to produce more solar panels? A) S increases, D no change, P decreases, Q increases B) D no change, S increases, P decreases. Q decreases C) D increases, S no change, P and Q increase D) D and S increase, P and Q decrease

A

In the circular flow model, the value of total production for an economy ___________ the value of total expenditures on final goods and services. A) equals B) is greater than C) is less than D) may be greater or less than

A

Real GDP will increase A) only if the quantity of final goods and services produced rises B) only if price level falls C) if either price level rises or quantity of final goods and services produced rises D) only if the price level rises

A

Refer to table 8-16, what has happened in the economy from 2015 to 2016? A) Price level has increased B) Price level has decreased C) Price level has remained constant D) Not enough information is available

A

Gross domestic product is calculated by summing up... A) the total quantity of goods and services produced in the economy during a period of time. B) the total quantity of goods and services in the economy. C) the total market value of goods and services in the economy. D) the total market value of final goods and services produced in the economy during a period of time.

D

The nominal GDP of the U.S. in 2015 was approximately $17.3 trillion. This means.... A) the value of output in 2015 was around $17.3 trillion B) total spending in 2015 was around $17.3 trillion C) total income in 2015 was $17.3 trillion D) All of the above

D

If a decrease in income leads to an increase in demand for a product, the product is _________.

Inferior

Refer to 3-2, a decrease in the price of inputs

S1 to S2

Refer to table 8-14, find the GDP deflator for 2016

~108.5

Refer to table 8-17, what is the real GDP in 2016?

$6360

Refer to table 8-11, find real GDP for 2016

$690

Use Table 8-1 to determine nominal GDP

$8750

The GDP deflator in year 2 is 105, using year 1 as the base year. This means the costs of goods and services increases on average by.... A) 5% higher in year 1 than year 2 B) 5% higher in year 2 than year 1 C) 105% higher in year 1 than year 2 D) 105% higher in year 2 than year 1

B

The substitution effect of a price change refers to... A) the shift of a demand curve when the price of a substitute changes B) the change in quantity demanded that results from a change in the price of a substitute C)the shift in the demand curve due to a change in the purchasing power brought by a change in price D) the movement along the demand curve due to a change in purchasing power brought by a change in price

B

To calculate GDP one must add... A) consumption spending, invest. spending, gov. spending, and exp. B) consumption spending, invest. spending, gov. spending, and net exp. C) labor, natural resources, entrepreneurship, and capital D) wages, rents, interest, and profits

B

Which of the following is most likely to increase GDP? A) A greater number of women decide to stay home and provide day care for their children. B) Marijuana becomes legal to grow and sell C) Tax rates increase and more people attempt to underreport their income for tax purposes D) More people decide to do their own lawn maintenance

B

What will happen to the market for eggs if there is a decrease in demand due to consumer tastes and preferences, as well as a decrease in the supply of eggs due to the Avian flu?

Both supply and demand will shift left, there will be a definite decrease in the equilibrium quantity, the effect on equilibrium price is indeterminable.

During a business cycle expansion, total production _________ and total employment ____________. A) decreases, increases B) increases, decreases C) increases, increases D) decreases, decreases

C

GDP understates the total production of final goods and services because of the omission of... A) intermediate goods B) inflation C) household production D) exports

C

In an underground economy, the production of goods and services... A) is not measured, but included in GDP B) is usually to insignificant to be included in GDP C) is not measured, nor included in GDP D) is measured, and included in GDP

C

Which of the following is a true statement about real and nominal GDP? A) Nominal GDP is a better measure than real GDP in comparing changes in the production of goods and services B) Increases in average prices do not affect the calculation of nominal GDP C) If real GDP increases from one year to the next, we know that production of goods and services has risen D) If nominal GDP increases from one year to the next, we know that the production of goods and services has risen

C

If the price of a product increases, and the demand for another product decreases, the products are __________.

Complements

An inflation rate of 5% between 2015 and 2016 would be implied by a change in the GDP deflator from ________ in 2015 to _________ in 2016 A) 105; 115 B) 200; 205 C) 375; 390 D) 400; 420

D

What would cause a decrease in the supply of peanut butter? A) a decrease in the price of jelly (assuming jelly is a complement) B) an increase in technology used to produce peanut butter C) a decrease in the price of peanut butter D) an increase in the price of peanuts

D

Which of the following goods is directly counted in GDP? A) the lettuce that Subway purchases for its sandwiches B) the plastic bags that Subway purchases to wrap its sandwiches C) the bread that Subway purchases for its sandwiches D) a 12-inch Subway sandwich purchases by a consumer

D

Refer to 3-1, a decrease in population

D2 to D1

Refer to 3-1, a decrease in the expected future price of a product

D2 to D1

Refer to 3-1, an increase in the price of a complement would be represented by what?

D2 to D1

If the GDP deflator is 142, by how much have prices changed since the base year?

Prices have increased by 42%

What is the best way to determine whether or no the total production of an economy has changed over time?

Real GDP

In recent years the cost of producing wines in the U.S. has increased largely due to rising rent. At the same time the American demand for wine is constantly increasing. What will definitely happen in the U.S. wine market?

The supply has shifted left, demand has shifted right. There will be a definite increase in equilibrium price, but the effect on equilibrium quantity is indeterminable.

Refer to 3-6, if the market price was $21, what would be true?

There is a shortage that will lead to an increase in price, quantity demanded will decrease, supply will increase until market price equals $25 (equilibrium)

Refer to 3-6, if the market price was $50, what would be true?

There is a surplus of 90 units, this will be eliminated when market price falls to $25 (equilibrium)