PRACTICE MIDTERM

Real GDP will increase if nominal output _____. increases by more than prices increases by less than prices decreases by more than prices decreases and prices increase

increases by more than prices

(Figure: Demand for Bananas) Use Figure: Demand for Bananas. If pears are a substitute for bananas, an increase in the price of pears could be represented as a: shift from D1 to D2 movement from point A to point B shift from D1 to D3 movement from point B to point E.

shift from D1 to D2

(Table: Pizza Economy III) Use Table: Pizza Economy III. Using 2018 as the base year, real GDP in 2018 was: $47,000 $69,000 $72,000 $114,000

$114,000

Ralph is offered a free ticket to a Yankees game—a ticket he cannot resell. His opportunity cost of going to the baseball game is zero—the ticket was free the price listed on the ticket whatever Ralph would have done had he not gone to the game the price listed on the ticket and whatever Ralph would have done had he not gone to the game.

whatever Ralph would have done had he not gone to the game

(Figure: Computers and Speedboats II) Use Figure: Computers and Speedboats II. Assume that the economy is operating at point A. The opportunity cost of moving to point C is _____ computers 800 200 2 50

200

Consider the market for Uber rides during special events: Someone who can't afford the surge prices is represented on part __________ of the graph: A B C D

B

(Figure: The Business Cycle) The movement from point B to point C is called a(n): trough expansion depression peak

Expansion

Suppose everyone in a small town decided to save more and spend less. How will this affect an economy? (In macroeconomics, this is called the paradox of thrift.) It will have no impact, since a small town makes up a small portion of an economy. It will decrease the overall level of income, since one person's spending is someone else's income. It will cause the prices of many goods to increase. It will increase the overall level of income, since other groups will spend more.

It will decrease the overall level of income, since one person's spending is someone else's income.

Suppose that refrigerator assemblers accept a pay cut of per hour. Which graph most accurately shows how this would affect the market for refrigerators (equilibrium price and quantity)? Note that the new curve is shown in grey. a b c d

a

(Figure: The Apple TV Rental Market) Use Figure: The Apple TV Rental Market. At a rental price of $3, there will be: equilibrium in the market for Apple TV rentals an increase in demand an excess supply of 40 Apple TV rentals a shortage of 40 Apple TV rentals.

a shortage of 40 Apple TV rentals.

The market for kidney beans is initially in equilibrium, with an upward-sloping supply curve and a downward-sloping demand curve. Because of mad cow disease, producers decide to replace bone meal with kidney beans in cattle feed. The likely effect is that the: equilibrium price and quantity of kidney beans will rise. equilibrium price and quantity of kidney beans will fall. equilibrium quantity of kidney beans will rise, but we can't determine what will happen to the equilibrium price. equilibrium price of kidney beans will rise, but we can't determine what will happen to the equilibrium quantity.

equilibrium price and quantity of kidney beans will rise.

Which influence will shift the supply curve? the rising popularity of a productan increase in population expectations of a future decline in prices an Increase in the incomes of consumers

expectations of a future decline in prices

The supply schedule contains individual supply curves for the only two firms in a hypothetical market for miniature musical daiquiri umbrellas. Use the schedule to answer the questions. A third firm would mean: market supply decreases market supply increases Firm 1 and Firm 2 would lower output to accommodate the new supplier in order to keep market supply constant higher prices of stuffed animals

market supply increases

When Coca Cola consumption recently decreased, the Coca Cola Company hired a survey firm to determine what was going on. The firm interviewed consumers, who said that rising Coke prices were discouraging them from purchasing Coke. This implies a: movement along the demand curve for Coca Cola. movement along the supply curve for Coca Cola. shift of the demand curve for Coca Cola. shift of the supply curve for Coca Cola.

movement along the demand curve for Coca Cola.

(Figure: Production Possibility Frontier for Trains and Planes) Use Figure: Production Possibility Frontier for Trains and Planes. Which rate of production per period is NOT efficient? 18 trains and no planes 8 trains and 18 planes 16 trains and 12 planes no trains and 18 planes

no trains and 18 planes

An increase in the price of strawberries causes strawberry jam producers and consumers to expect that the price of strawberry jam will rise in the future. In the market for strawberry jam, both the equilibrium price and the equilibrium quantity increase. It must be the case that: the supply of strawberry jam decreased by more than the demand for strawberry jam increased. the supply of strawberry jam decreased by more than the demand for strawberry jam decreased. the demand for strawberry jam increased by more than the supply of strawberry jam decreased. the demand for strawberry jam increased by more than the supply of strawberry jam increased.

the demand for strawberry jam increased by more than the supply of strawberry jam decreased.

An example of investment spending is: Zahra purchases a house built in 1995. the purchase of government bonds by a private household. the purchase of a freezer by an ice-cream parlor. purchases of stock by a mutual fund.

the purchase of a freezer by an ice-cream parlor.

Which item is included in GDP? Apple tax payments when it sells a new iPhone Medicaid expenses (an assistance program for low-income patients' medical expenses) Social Security payments from the U.S. government to retired people the purchase of a ticket to a Lady Gaga concert

the purchase of a ticket to a Lady Gaga concert