Macroeconomics Problem Set and Quiz Review

Analyst 1 suggested that the demand curve for newspapers in Baltimore might have shifted to the right because people were becoming more literate. Think of two other plausible stories that would result in this demand curve shifting to the right.

- the demand curve for newspapers in baltimore would shift to the right if income levels in the area are rising, since we expect newspapers to be a normal good - fewer substitutes for newspapers would shift the curve to the right- perhaps tv broadcasting is shifting away from news programs and toward reality shows

with increases access to wireless technology and lighter weight, the demand for tablet computers has increased substantially. Tablets have also become easier and cheaper to produce as new technology becomes available. When consumers purchase tablet computer the interaction and exchange occurs in the __________ market, while the resources used to produce the tablets are bought and sold in the __________ market.

1. product 2. factor

if the labor force is 50 million and 48 million are employed, then the unemployment rate is

4%

if the labor force is 400 and employment is 350, then the unemployment rate is

5%

what most likely would cause the demand for Dr.Pepper to shift from D0 to D1? Assuming Dr.Pepper is a normal good

a decrease in income, assuming that Dr.Pepper is a normal good

the price of hard drives used in the manufacturing of laptop computers has risen. This will lead to ________ laptop computers

a decrease in the supply of

which of the following would an economist classify as capital

a guitar used by a musician

suppose that you purchased a ticket to a jazz festival for $100 from an online ticket broker. Once you arrived at the festival, you discovered that parking costs you an additional $15. In this situation, the additional $15 you pay for parking is an example of

a marginal cost

an institution which buyers and sellers interact and engage in exchange is

a market

the amount of education that one has in an important factor in the determination of his/her wage rate. This is best described as

a positive statement

what does not constitude an act of "investment" as economists use the term?

a retiree buys 50 shares of stock at $10 a share and then sells the stock at a profit for $20 a share

the marginal rate of transformation is the

a slope of the ppf

the major lesson of the circular flow diagram is that

a total income in the economy must always equal total spending

what is a topic studied in macroeconomics

aggregate behavior of households and industries

which of the following is a topic studied in macroeconomics?

aggregate behavior of households and industries

according to the theory of comparative advantage, specialization and free trade will benefit

all trading parties, even when some are absolutely more efficient producers than others

in a business cycle, a peak represents the end of ____ and trough represents the end of ____

an expansion, a recession

a capital gain is

an increase in the value of an asset over the price initially paid for it

inflation and unemployment

are a focus of macroeconomics

someone has a comparative advantage of a good if they can produce that good

at a lower oppurtunity cost

unemployment means that

at the going wage rate, there are people who want to work but cannot find work

when operting on the PPF, it is because

both full resource employment and production efficiency

the concept of oppurtunity cost

can be applied to analysis of decision making process

the diagram that shows the income received and payments made by each sector of the economy is the

circular flow diagram

if an economy begins to use its resources more efficiently, it will move

closer to its ppf

according to the classical model, unemployment

could not persist because wages would fall to eliminate the excess supply of labor

the portion of a corporations profits that a firm pays out each period to its shareholders is a

dividend

there is a possibility that a national sales tax will be implemented. Many economists argue that items such as food and clothing should be exempt from such a tax because low-income people spend greater percentage of their income on these goods than do high-income individuals. This argument is motivated by concerns over

equity

factors of production are traded in the product market

false

monetary policy includes changing the level of household taxes

false

the ____ can change the quantity of money in the e conomy

federal reserve

because resources are scarce, the oppurtunity cost of investment in capital is

forgone present consumption

in the circular flow of economic activity, there are two kinds of markets in which firms and households interact. In the product market:

goods or services are exchanged

what is the primary difference between income and wealth?

income is a flow variable, wealth is a stock variable

demand curves are derived while holding constant

income, tastes, and the prices of other goods.

a movement from point c to point b on supply curve S2 would be caused by a(n)

increase in the demand for gardenburgers

To bring the economy out of an inflationary period, Keynes argued that the government should .

increase taxes and/or decrease government spending

suppose the economy suffers a high rate of unemployment. according to keynesian economists, the government should increase employment by

increasing government spending

if the demand for sardines increases as income decreases, sardines are a(n)

inferior good

according to the classical economists, the economy

is self correcting

Mike purchased a 1968 Chevy Corvette in 2006 for $30,000 and a year later he sold it for $36,000. Due to these transactions

mike earned a capital gain of $6000

what is not a resource as the term is used by economists

money

the government should extend the duration of unemployment benfits to those workers who lost their jobs due to outsourcing. This statement is best described as

normative statement

in the goods and services market, households

only demand

suppose you are deciding to spend your tax rebate check on a new iPod or a new digital camera. you are dealing with the concept of

oppurtunity costs

better insurance benefits increase the incentive of some individuals to work. This statement is best described as

positive statement

Whenever the Democrats gain control of the Congress, spending on social programs increases; whenever Republicans gain control of the Congress, spending on defense increases. Hence, we know the next party in control will do. This statement is an example of the

post hoc, ergo propter hoc fallacy

the economy was expanding during all the year that I was a student, but as soon as I graduated, the economy contracted. Therefore, the labor market waited until I started looking for a job to contract. This statement is an example of the

post hoc, ergo propter hoc fallacy

the basic coordinating mechanism in a free market system is

price

the mechanism that normally coordinates what goes on in an economy is the

price system

an efficient market is a market in which

profit oppurtunities are eliminated almost instantaneously

capital, as economists use the term

refers to things that have already been produced that are in turn used to produce other goods and services

the reason that oppurtunity costs arise is that

resources are scarce

the cocept of oppurtunity cost is based on the principle of

scarcity

the term business cucle refers to the

short term ups and downs in the level of economic activity

the term business cycle refers to the

short-term ups and downs in the level of economic activity

the damand for corn has increased in May without any change in supply. Eight months later there still has been no change in corn prices. This is an example of a

sticky price

prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded are

sticky prices

suppose the demand for books goes down when the price of video games goes down. We can say that these two goods are

substitues

a decrease in the price of mushrooms (an input for gardenburgers) will cause a movement from point b on supply curve S2 to

supply curve S2

in a laissez-faire economy ______ what gets produced, how it is produced, and who gets it

the behavior of buyers and sellers determines

when operating inside the PPF, it is because

the economys resources are being used inefficiently

according to keynes, the level of employment is determined by

the level of aggregate demand for goods and services

the trend of the economy is

the long run growth path of the economy

what is the best definition of economics?

the study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided

A frozen food manufacturer can produce either pizzas or calzones. As the result of an increase in the price of calzones, the firm produces more calzones and fewer pizzas. An economist would explain this by saying

there has been an increase in the quantity supplied of calzones and a decrease in the supply of pizza

an increase in wage rate of steel workers will reduce the supply of steel

true

comparative advantage refers to the ability to produce at a lower oppurtunity cost than a computer

true

contractionary fiscal policy includes raising taxes

true

it has become conventional to classify an economic downturn as a recession when aggregate output declines for

two consecutive quarters

what is an assumption used by classical economists?

wages adjust both upward and downward

which of the following is an assumption used by Classical economists?

wages adjust both upward and downward - flexible

What is a normative question?

what should be

if your tuitiion is $5000 this semester, your books cost $600, you can only work 20 rather than 40 hours per week during the 15 weeks you are taking classes and you make $15 per hour, and your room and board is $3000 this semester, then your oppurtunity cost of attending college this semester is

$10100

if your tuition is $25k and your books cost $1.5K, you can only work 20 rather than 40 hours per week during the 15 weeks you are taking classes and you make $15 an hour, and your room and board is $7.5K this semester, then your oppurtunity cost of attending college this semester is

$31K