Principles of Economics 1

If real GDP was $189 billion and potential GDP was $188 billion, then what is the approximate output gap? 0.5% 1% -2.2% -1.6%

0.5%

The neutral interest rate is the rate at which the output gap is equal to zero the zero bound has been reached real interest rates equal nominal interest rates macroeconomic equilibrium has been reached

the output gap is equal to zero

In March, California reported a civilian labor force of 18,304,098. The number of unemployed people was 2,242,732. What was the unemployment rate? 12.3% 19.6% 10.2% 87.7%

12.3%

GDP is defined as the market value of all goods and services produced within a country in a given period of time. the amount of all goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time. the amount of all final goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time. the market value of all final goods and services produced within a country in a given period of time.

the market value of all final goods and services produced within a country in a given period of time.

Why are demand curves downward sloping? the costs of producing each additional good tends to increase the more of a good you buy, the total benefits of all the goods you buy decreases the more of a good you buy, the additional benefits of each additional good decreases the more of a good you buy, the less money you have left over to buy more goods

the more of a good you buy, the additional benefits of each additional good decreases

How are the benefits of any good measured? the price minus the cost the most someone is willing to pay the price the most someone is willing to pay minus the price that must be paid

the most someone is willing to pay

High unemployment occurs when inflation rises above inflation expectations the output gap is equal to zero there is excess demand the output gap is negative

the output gap is negative

Suppose that the Federal Reserve has a 2% target on inflation. If actual inflation is 3%, then the Fed will want the new real interest rate to be equal to the neutral interest rate lower than the neutral interest rate higher than the neutral interest rate equal to the inflation rate

higher than the neutral interest rate

We identified four types of interdependencies. When making a decision, your best choice might depend on: the other choices you make, the choices others make, developments in other markets, and expectations about the future. Which is most relevant for the following decision? "time spent studying for this class could be used to study for another class" choices other people make expectations about the future developments in other markets other choices you make

other choices you make

What is the Federal Reserve's mandate? to ensure maximum employment while maintaining stable prices to print as many dollars as possible without causing inflation to ensure that interest rates remain low all the time to encourage inflation and raise unemployment

to ensure maximum employment while maintaining stable prices

Which of the following people can be described as "structurally unemployed"? (i) Mola is trained as a textile worker but is currently unemployed. He wants to work in the textile industry, which is unionized. Wages are high, but firms in this industry cannot offer jobs at lower wages due to the union requirements. Therefore, no jobs are available. (ii) Agnes believes that she can get a better job in Alaska. Therefore, she quits her job in West Virginia and is looking for a job in Alaska. (iii) Pratt has just retired after working for 40 years in a candle-making factory. (iv) The minimum wage has just been raised, and Philomena finds that fewer jobs are available in the fast-food industry. She is unable to find a job. (v) Cary will graduate in two months, after being a full-time student for the past four years. She wants to find a job in the investment banking sector. Mola and Cary Mola and Philomena Agnes and Philomena Agnes and Pratt

Mola and Philomena

In order to be considered unemployed, a person must: (i) be part of the working-age population. (ii) be actively looking for work. (iii) not have been self-employed. (iv) not be institutionalized. (i), (ii), and (iv) (iii) and (iv) (ii) and (iv) (i) and (ii)

(i), (ii), and (iv)

You are an analyst preparing a forecast of the effects of macroeconomic changes in the economy. What happens to prices and GDP when the government offers businesses a tax incentive if they invest? Prices increase, and GDP decreases Both prices and GDP decrease Both prices and GDP increase Prices decrease, and GDP increases

Both prices and GDP increase

Which of the following changes will lead to an increase in the price level but a decrease in the quantity of output in an economy? a rise in aggregate supply a fall in aggregate supply a fall in aggregate demand a rise in aggregate demand

a fall in aggregate supply

Which of following people can be classified as structurally unemployed? Cyrus, who is finding it difficult to get a job in his field because businesses are not hiring due to high unionized wages Delilah, who believes she can secure better employment in Seattle and has thus left her old job to move to Seattle Florrie, who has decided that she wants to start a new career as a train driver and has entered a training program to acquire the necessary skills and certification Regan, who worked as a technician but has been let go from her company, which has failed due to recessionary pressures

Cyrus, who is finding it difficult to get a job in his field because businesses are not hiring due to high unionized wages

You have four friends. Which of your friends can be described as "cyclically unemployed"? Keele, who lost her job after her company lost a lot of customers during an economic downturn Regan, who lives in a nursing home Arthur, who quit his job to look for a better job Martha, who is a full-time stay-at-home parent

Keele, who lost her job after her company lost a lot of customers during an economic downturn

What is a "textbook definition" of economics? The science of abstract numbers, quantity, and space The science of how society chooses among scarce resources to satisfy unlimited wants The science of how society could best make choices of resources were not scarce The study of human societies and cultures and their development

The science of how society chooses among scarce resources to satisfy unlimited wants

Suppose buyers of computers and printers regard those two goods as complements. Then an increase in the price of computers will cause a decrease in the supply of printers and a decrease in the quantity demanded of printers. an increase in the equilibrium price of printers and a decrease in the equilibrium quantity of printers. a decrease in the demand for printers and a decrease in the quantity supplied of printers. a decrease in the equilibrium price of printers and an increase in the equilibrium quantity of printers.

a decrease in the demand for printers and a decrease in the quantity supplied of printers.

A U.S. publisher purchases new computers that were manufactured in the U.S.A. This purchase by itself makes a positive contribution both to consumption and to GDP. a positive contribution to GDP, but it does not affect investment or consumption. a positive contribution both to investment and to GDP. a positive contribution to investment, but it does not affect GDP.

a positive contribution both to investment and to GDP.

Consider the labor market Phillips curve. A negative supply shock will cause _____ the labor market Phillips curve. a left shift of a right shift of a movement to the left along a movement to the right along

a right shift of

At your grocery store, the price of chocolate chip cookies falls. As a result, you would expect to see a rise in the quantity demanded of chocolate chip cookies. an increase in the demand for chocolate chip cookies. a drop in the quantity demanded of chocolate chip cookies. a decrease in the demand for chocolate chip cookies.

a rise in the quantity demanded of chocolate chip cookies.

If an economy has an output gap of 0%, this means unemployment is 0%. the neutral rate of interest is at 0%. inflation is 0%. actual GDP is at potential GDP.

actual GDP is at potential GDP.

Monetary policy is defined as the adjustment of interest rates to influence economic conditions change of the tax code to achieve economic changes implementation of ceilings on the federal funds rate in the economy change in government spending to change economic conditions

adjustment of interest rates to influence economic conditions

Which of the following would lead to a rise in economic growth? a decrease in the labor force participation rate in an economy a decrease in human capital a return to traditional production methods, which rely less on computers an increase in female employment in an economy

an increase in female employment in an economy

Rising marginal costs imply falling variable costs. an upward-sloping supply curve. a downward-sloping demand curve. rising fixed costs.

an upward-sloping supply curve.

The stock market drops significantly. In the AD-AS framework, what happens to the price level and output? both decrease prices increase and output decreases prices decrease and output increases both increase

both decrease

The federal government gets most of its revenue from payroll taxes Medicare payments corporate taxes individual income taxes

individual income taxes

Bowing to political pressures, a central bank decides to print money. What can this scenario lead to? deflation high economic growth inflation higher credit ratings for the country's bonds

inflation

Unemployment will rise when the output gap is equal to zero inflation falls below inflation expectations there is excess demand the output gap is positive

inflation falls below inflation expectations

The real interest rate is the interest rate after taxes are deducted. interest rate in terms of changes in purchasing power. stated interest rate without a correction for inflation. stated interest rate without a correction for deflation.

interest rate in terms of changes in purchasing power.

If unemployment is above its sustainable level, then the economy is operating above capacity, and inflation will likely rise operating below capacity, and inflation will likely fall at potential GDP, and inflation is at its target level experiencing above normal growth rates

operating below capacity, and inflation will likely fall

The four stages of the business cycle are full employment, potential GDP, recessionary gap, and inflationary gap. expansion, growth, contraction, and depression. consumption, investment, government expenditure, and net exports. peak, recession, trough, and expansion.

peak, recession, trough, and expansion.

The equilibrium unemployment rate is the: rate of unemployment that exists when demand equals supply in a given market. rate of unemployment that exists even when cyclical unemployment has gone to zero. frictional unemployment rate plus the cyclical unemployment rate. short-run unemployment rate when the economy is in a recession.

rate of unemployment that exists even when cyclical unemployment has gone to zero.

Expansionary monetary policy causes a right shift of the aggregate demand curve right shift of the aggregate supply curve left shift of the aggregate demand curve movement along the same aggregate demand curve

right shift of the aggregate demand curve

Suppose a high-income person, a middle-income person, and a low-income person purchase identical houses that are financed by similar mortgages. Who gets the lowest tax benefit? the middle-income person They all get the same tax benefit the high-income person the low-income person

the low-income person

The aggregate demand curve shows the relationship between the price level and the equilibrium GDP in the economy potential GDP in the economy total quantity of output that buyers collectively plan to purchase total quantity of output that suppliers collectively produce

total quantity of output that buyers collectively plan to purchase

What is measured on the vertical axis on the Phillips curve diagram? the price level the output gap real GDP unexpected inflation

unexpected inflation

What is the basic idea of "the law of demand"? once people develop a habit of buying a certain good, they tend to demand more of it in the future consumers tend to demand goods that are easily accessible to them when income increases, people tend to buy more goods and services when the price of a good increases, the amount people buy tends to decrease

when the price of a good increases, the amount people buy tends to decrease

Human capital refers to: money earned by workers in businesses. machines that have artificial intelligence. work done by machinery. worker skills and knowledge.

worker skills and knowledge.

Suppose the economy is in an equilibrium. If the only change was a decrease in exports, that would lead to a left shift of the aggregate demand curve movement up and to the left along the same aggregate demand curve right shift of the aggregate demand curve movement down and to the right along the same aggregate demand curve

left shift of the aggregate demand curve

Which of the following lists only factors that would cause an increase in the supply of an item? A rise in the price of a substitute-in-production; an increase in the price of a complement-in-production; an expectation that the price of the item will increase in the future. An increase in input prices; a decrease in the number of sellers in the market; an increase in the price of a substitute-in-production. A decrease in the number of sellers in the market; a fall in the price of a complement-in-production; a technological setback. A decrease in input prices; a technological innovation; a fall in the price of a substitute-in-production.

A decrease in input prices; a technological innovation; a fall in the price of a substitute-in-production.

Which of the following scenarios describes a business that is NOT following the law of supply? When the price of car detailing rises, Ermo's Auto Garage hires more workers to do car detailing. Delilah is less willing to chauffeur people to the airport when the price of airport rides falls. The higher the price of custom-made cakes in the market, the more Manfred is willing to bake and sell cakes. Automobiles fall in price, and Maria's Autorama Ltd. is now willing to sell more vehicles.

Automobiles fall in price, and Maria's Autorama Ltd. is now willing to sell more vehicles.

Which of the following correctly shows the steps needed to calculate the inflation rate? Tally up the cost of the basket of goods and services, subtract the value of goods and services that are no longer counted in the basket, and then calculate the inflation rate. Find the total value of the basket of goods and services, assess quality changes from one period to the next, and measure the inflation rate. Collect prices from the stores where people shop, assess the substitution that people make from low inflation to high inflation products, and calculate the difference in the prices that people pay. Find out what people typically buy, collect the prices from the stores where people shop, tally up the cost of the basket of goods and services, and calculate the inflation rate.

Find out what people typically buy, collect the prices from the stores where people shop, tally up the cost of the basket of goods and services, and calculate the inflation rate.

If an economy has a positive output gap of 2.75%, this means unemployment is 2.75% above the natural rate of unemployment. GDP is 2.75% above potential GDP. inflation is 2.75% above the long-run rate of inflation. GDP is 2.75% below potential GDP

GDP is 2.75% above potential GDP.

If the government begins taxing savings in banks, which input in the production function changes, and what is the effect on economic growth in the country? The capital stock decreases, and economic growth is negatively affected. Technological advance occurs, and economic growth occurs. Human capital is enhanced, and economic growth is positively affected. The capital stock increases, and economic growth is positively affected.

The capital stock decreases, and economic growth is negatively affected.

The government passes a new initiative to provide a tax credit on research and innovation by firms. What is the impact on the production function, and what is the effect on economic growth in the country? Human capital is enhanced, and economic growth is positively affected. the tax cut means the government collects less in taxes so actually invests less in research and development; economic growth is negatively affected. The capital stock decreases, and economic growth is negatively affected. The capital stock increases, and economic growth is positively affected.

The capital stock increases, and economic growth is positively affected.

Southeast Asian countries experience high temperatures and high humidity during the monsoon seasons. This makes working conditions difficult. Because air conditioners are expensive and consume a lot of electricity, an alternative air cooler called an Eco-cooler was invented. This device does not use electricity, is made from readily available soda bottles, and works by funneling air into a room. This scenario is an example of: the development of human capital. a decrease in the labor force participation rate in Southeast Asian countries. a technological innovation that can increase labor productivity and thus increase economic growth. a rise in productivity causing an increase in technology.

a technological innovation that can increase labor productivity and thus increase economic growth.

The menu costs of inflation are the overall costs of purchasing more inputs at higher prices. additional costs of adjusting prices. lost interest earnings when holding cash. costs of information search with regards to new inflation rates.

additional costs of adjusting prices.

The consumer price index is an index that tracks the average cost that consumers pay over time for representative basket of goods and services. highest prices consumers pay over time for imported goods and services. price of all goods and services produced domestically. price that businesses pay over time for the inputs used in the production process.

average cost that consumers pay over time for representative basket of goods and services.

A popular movie franchise released a new movie. The most Mya is willing to pay to see the movie is $5. Because movie tickets cost $9, she decided to not see the movie. In making this decision, Mya used the the opportunity cost principle the marginal principle cost-benefit principle the interdependence principle

cost-benefit principle

When the output gap becomes more positive negative supply shocks come about demand-pull inflation rises unemployment rises prices fall due to surpluses

demand-pull inflation rises

Which of the following items is included in U.S. GDP? final goods and services that are purchased by the U.S. federal government All of the above are included in U.S. GDP goods and services produced by foreign citizens then shipped and sold in the U.S. intermediate goods that are produced in the U.S. but that are unsold at the end of the GDP accounting period

final goods and services that are purchased by the U.S. federal government

Social insurance is government borrowing to ensure that expansionary fiscal policy plans are met government provided insurance against bad outcomes, such as unemployment and disability privately purchased car and home insurance government military spending

government provided insurance against bad outcomes, such as unemployment and disability

Government spending adds directly to GDP through _____ and indirectly through _____. higher interest rates; crowding out government purchases; transfer payments government purchases; military spending transfer payments; government purchases

government purchases; transfer payments

Suppose that the Indian manufacturing sector begins to adopt new and efficient production technologies. Which of the following is the correct effect on the AD-AS framework in India? prices decrease; output decreases prices increase; output increases prices decrease; output increases prices increase; output decreases

prices decrease; output increases

If business managers have an expectation of ongoing inflation, then it is likely that prices will fall prices will rise prices will not change unemployment will rise

prices will rise

If there is inflation of 4% and a firm wants to reduce real wages by 1%, it will need to raise nominal wages by 5% lower nominal wages by 1% lower real wages by 5% raise nominal wages by 1%

raise nominal wages by 1%

Based on Okun's rule of thumb, if you forecast that the output gap will decline from 0% to -3%, the unemployment rate will fall by 1.5%. fall by 2%. rise by 3%. rise by 1.5%.

rise by 1.5%

Inflation is a: fall in the quality of a product. rise in the overall level of prices. rise in the economic growth rate. decrease in the overall level of prices.

rise in the overall level of prices.

Suppose pizza is a normal good, and consumer income increases. How do we represent this change with a demand curve? the demand curve shifts to the right by moving to a point on that same demand curve with a higher quantity demanded and a higher price the demand curve shifts to the left by moving to a point on that same demand curve with a higher quantity demanded and a lower price

the demand curve shifts right

You open a savings account that pays 2% interest a year. What is your real rate of return if the inflation rate is 3%? -6% 1% -1% 5%

-1%

If an economy has real GDP equal to $100 billion and potential GDP is $107 billion, then what is the approximate GDP gap? 3.3% -2.1% -6.5% 6.6%

-6.5%

Suppose the marginal tax brackets are as follows: Income Range Marginal Tax Rate 0 - $25,000 5% $25,000 - $75,000 10% $75,000 - $150,000 15% Over $150,000 20% If someone earned $100,000, how much would they pay in taxes, and what percent of their income do they pay in taxes? $15,000; 15% $10,000; 10% $12,000; 12% $15,000; 20%

$10,000; 10%

If men earned a median income of $6,903 per year in 1970 when the price index was 40.5, and the consumer price index is now 270, then how much is $6,903 worth today? $37,504.60 $46,020 $52,304 $39,153.40

$46,020

When government expenditure rises by $250 million and the multiplier is 2, then ceteris paribus, GDP will eventually rise by $500 million $250 million $125 million $750 million

$500 million

You own a small plot of land that you use to grow goji berries. You sell the berries in 4 ounce bags. You can increase the amount of berries you grow by using more fertilizer, but each additional dose of fertilizer increases yield by smaller and smaller amounts. Your cost of making different amounts are: Number of bags Total cost to produce 251 $115 252 $118 253 $123 254 $130 255 $138 What is the marginal cost of making the 255th bag of goji berries? 255 x $138 = $35,190 $138/255 = $0.54 $138 $8

$8

Use the following information to answer questions 7 and 8. You own a small plot of land that you use to grow goji berries. You sell the berries in 4 ounce bags. You can increase the amount of berries you grow by using more fertilizer, but each additional dose of fertilizer increases yield by smaller and smaller amounts. Your cost of making different amounts are: Number of bags Total cost to produce 251 $115 252 $118 253 $123 254 $130 255 $138 If you can sell bags of goji berries for $6, what number of bags would you sell to maximize your profit? 254 255 253 252

253

The state of New York reported a civilian labor force of 9,603,801. The number of unemployed people was 378,371. What was the unemployment rate? 96.1% 5.3% 3.9% 18.2%

3.9%

GDP is not a perfect measure of well-being; for example, GDP excludes the value of volunteer work. GDP does not address the distribution of income. All of the above are correct. GDP does not address environmental quality.

All of the above are correct.

Why does the aggregate supply curve change from horizontal to vertical over the course of the very short run to the long run? Monetary policy works to shift aggregate supply to potential GDP As prices begin to adjust, businesses adjust production and the economy recovers to potential GDP Fiscal policy works to shift aggregate supply to potential GDP The level of production in the economy reduces until a certain fixed level

As prices begin to adjust, businesses adjust production and the economy recovers to potential GDP

Aggregate expenditure is made up of the following four components consumption, investment, government expenditure, and net exports consumption, investment, government expenditure, and taxation healthcare, infrastructure spending, defense spending, and social security spending stocks, bonds, mutual funds, and certificates of deposit

consumption, investment, government expenditure, and net exports

Suppose aluminum prices rise in international markets. U.S. firms that import aluminum face higher marginal costs and raise prices. This scenario describes demand-pull inflation cost-push inflation a positive supply shock a decrease in potential output

cost-push inflation

Kia Motors announces a plan to produce Kia automobiles in Pakistan. How does this change economic growth in Pakistan? Economic growth increases due to capital accumulation. Economic growth is negatively affected because profits do not stay in Pakistan. Economic growth increases due to an investment in education. Economic growth increases due to an increase in labor.

Economic growth increases due to capital accumulation.

Which of the following is a reason to worry about government debt? Future generations can help repay the debt. Most of the debt is domestic debt. The government never really needs to repay the debt. High and rising debt might slow economic growth.

High and rising debt might slow economic growth.

In many parts of the world, mobile health clinics travel to villages to treat patients, teach about good nutrition and hygiene, and carry out immunizations. How does this contribute to economic growth? It helps maintain a healthy population, which leads to development of the labor resource. It leads to a convergence in real GDP per person. It encourages capital accumulation in these villages. It creates technological advancement in these villages.

It helps maintain a healthy population, which leads to development of the labor resource.

How did John Maynard Keynes define economics? a way of thinking The study of human societies and cultures and their development The science of how society could best make choices of resources were not scarce The science of how society chooses among scarce resources to satisfy unlimited wants

a way of thinking

In a market economy, supply and demand determine neither the quantity of each good produced nor the price at which it is sold. both the quantity of each good produced and the price at which it is sold. the quantity of each good produced, but not the price at which it is sold. the price at which each good is sold, but not the quantity of each good produced.

both the quantity of each good produced and the price at which it is sold.

New ideas can generate unlimited economic growth because they: are similar to physical capital. cannot be replicated or copied. are exclusive to the inventor and can be patented. can be freely shared, do not depreciate, and can generate further ideas.

can be freely shared, do not depreciate, and can generate further ideas.

The "moral of the story" of the Solow growth model is that: human capital growth does not lead to economic growth. capital accumulation is the key to sustained economic growth. technological advance cannot sustain continuous economic growth. capital accumulation alone cannot lead to sustainable economic growth.

capital accumulation alone cannot lead to sustainable economic growth.

Real GDP is the yearly production of final goods and services valued at the ratio of current prices to constant prices. constant prices. current prices. expected future prices.

constant prices

To say that business cycles are persistent means that growth rates in a cycle will always be higher than growth rates in the previous cycle. current conditions typically continue in the near future. they usually last over 20 years. they typically have short and sharp recessions, followed by long and gradual expansions.

current conditions typically continue in the near future.

Devina lost her job a while ago when the economy entered a recession. She no longer believes she can get a job and has lost hope of employment. She has several friends in the same scenario. They have all stopped looking for work. This scenario describes: frictional unemployment. structural unemployment underemployment. discouraged workers

discouraged workers

The unemployment rate is computed as the number of unemployed divided by the adult population, all times 100. divided by the labor force, all times 100. times the labor-force participation rate, all times 100. divided by the number of employed, all times 100.

divided by the labor force, all times 100.

Mya (our friend from question 4) wants to see another movie tonight, but doing so means she will have less time to study for her History quiz tomorrow morning. What is the opportunity cost for Mya to see the movie. the dollar cost of the movie ticket, plus the cost of gas, plus any other dollar costs associated with seeing the movie the cost of the movie ticket the most she is willing to pay to see the movie having less time to study for her History quiz

having less time to study for her History quiz

The government of Ontario, Canada, has implemented a frontier college program that is designed to improve literacy and math skills among students who live in remote parts of Canada and in First Nations communities that are underserved by educational facilities. This is an example of a government program designed to build: human capital. physical capital. additional regulations on citizens. the capital stock.

human capital

What kind of data adjustment removes the effect of sales spikes due to the holiday season? nominal data annual data seasonally adjusted data real (inflation adjusted) data

seasonally adjusted data

Tax expenditures are purchases made from disposable income payroll taxes special deductions, credits, or exemptions that lower your tax obligations consumer expenditures on taxes

special deductions, credits, or exemptions that lower your tax obligations

If a government is using fiscal policy, this means that it is using _____ and _____ to attempt to stabilize the economy. spending; tax policies interest rates; tax policies spending; interbank loans bonds; stock markets

spending; tax policies

An economy's potential output level is the output that is possible when all resources are fully employed. equivalent of the GDP at current market value. the output when unemployment is zero. the level at which no resources are available in the economy.

the output that is possible when all resources are fully employed.

Which of the following would *not* cause the demand curve to shift? consumer income changes the price changes consumers expect a different price in the future the price of a related good changes

the price changes

Paper producers can manufacture both printing and drawing paper. What effect would rising prices for printing paper have on the market for drawing paper? The quantity supplied of drawing paper will increase. The supply of drawing paper will increase. The supply of drawing paper will decrease. The supply of drawing paper will double as compared to before.

the supply of drawing paper will decrease.

You are sitting at your desk in your new job as the Chair of the Federal Reserve Bank of the United States. The interest rate where potential GDP meets real GDP is 2%, the inflation rate is 1%, and the output gap is -1%. What is the appropriate real interest rate that you should set for the economy? 1% 1.5% 0.5% 2.5%

0.5%

If expected inflation is 3% and actual inflation is 4.2%, then unexpected inflation is 7.2% 4.2% 1.2% 3.0%

1.2%

You are sitting at your desk in your new job as the Chair of the Federal Reserve Bank of the United States. The interest rate where potential GDP meets real GDP is 2%, the inflation rate is 1%, and the output gap is -1%. (same situation as question 5, but question 5 asked about the real rate) What is the appropriate new nominal federal funds rate that you should set for the economy? 2.5% 1% 0.5% 1.5%

1.5%

Consider the following basket of goods: 50 bottles of milk, 100 avocadoes, 50 apples, and eight pineapples. Suppose that last year, each bottle of milk was $2.50, each avocado was $1.50, each apple was $0.75, and each pineapple was $4. This year, each bottle of milk is $2.50, each avocado is $1.80, each apple is $0.80, and each pineapple is $4.30. Using last year as the base year, what is the inflation rate between last year and this year? -9.09% 10.13% -10% 8.99%

10.13%

If expected future profits in an industry fall, supply will shift right. supply is not affected. the number of sellers in the market does not change. supply will shift left.

supply will shift left.

Which of the following correctly describes the business cycle? It is the constant rise in GDP over time. It refers to ups and downs in business revenue during expansions and recessions. It refers to excess unemployment during recessionary periods. It is the fluctuations of GDP around the potential output.

It is the fluctuations of GDP around the potential output.

The consumption component of GDP includes spending on durable goods, nondurable goods, and services. durable goods and services, but not spending on nondurable goods. nondurable goods and services, but not spending on durable goods. durable goods and nondurable goods, but not spending on services.

durable goods, nondurable goods, and services.

Because every transaction has a buyer and a seller, the number of firms must be equal to the number of households in a simple circular-flow diagram. GDP is more closely associated with an economy's income than it is with an economy's expenditure. every transaction contributes equally to an economy's income and to its expenditure. firms' profits are necessarily zero in a simple circular-flow diagram.

every transaction contributes equally to an economy's income and to its expenditure.

Demand-pull inflation is inflation resulting from excess supply excess demand insufficient demand a surplus

excess demand

We identified four types of interdependencies. When making a decision, your best choice might depend on: the other choices you make, the choices others make, developments in other markets, and expectations about the future. Which is most relevant for the following decision? "your decision to work homework exercises in this class will help you learn when you take upper level business classes" choices other people make expectations about the future other choices you make developments in other markets

expectations about the future

Net exports equal GDP minus imports. exports plus imports. exports minus imports. imports minus exports.

exports minus imports

You go to the local coffee house and see that the price of your favorite tall vanilla latte has gone up by 25 cents. All sizes of the vanilla lattes are now more expensive. As a result of this price increase, you would expect to see rise in the demand for vanilla lattes. fall in the quantity demanded of vanilla lattes. rise in the quantity demanded of vanilla lattes. fall in the demand for vanilla lattes.

fall in the quantity demanded of vanilla lattes.

If the CPI was 140.31 last year and is 144.48 this year, then what is the rate of inflation? 2.97% 4.22% 3.04% 2.25%

2.97%

As a result of technological innovation, automated water pumps are being installed on the farms of Kenyan tomato farmers. As a result of the increased use of automated water pumps, the equilibrium price of tomatoes is expected to: rise, due to a fall in supply. fall, due to a rise in supply. fall, due to a fall in demand. rise, due to a rise in demand.

fall, due to a rise in supply.

Following a significant recessionary period in which there were periodic wage freezes, workers negotiate higher wages. However, the higher wages lead to a decrease in the number of new workers getting hired, so unemployment persists in the region. The scenario described here is an example of: efficiency wages. hysteresis. frictional unemployment. a government mandated minimum wage.

hysteresis.

International studies of the relationship between GDP per person and quality of life measures such as life expectancy and literacy rates show that larger GDP per person is associated with very nearly the same life expectancy and a higher percentage of the population that is literate. very nearly the same life expectancy and a lower percentage of the population that is literate. longer life expectancy and a lower percentage of the population that is literate. longer life expectancy and a higher percentage of the population that is literate.

longer life expectancy and a higher percentage of the population that is literate.

If the actual inflation rate is less than the target inflation rate, then relative to the neutral interest rate, the Federal Reserve will _____ the real interest rate to drive _____ consumption and investment. lower; up raise; down lower; down raise; up

lower; up

Which of the following lists the functions of money? medium of exchange, measure of inflation, and benchmark of quality medium of exchange, store of value, and unit of account store of value, store of interest, and buffer against inflation carrier of exchange, unit of account, and measure of inflation

medium of exchange, store of value, and unit of account

How are opportunity costs measured? the most someone is willing to pay minus the price that must be paid the cost measured in terms of what must be given up the cost measured in dollars the price minus the cost

the cost measured in terms of what must be given up

Net government debt is the debt that the government owes to foreigners, both in the United States and abroad the debt that the government owes to American individuals, businesses, and state/local governments, plus what is owed to individuals, businesses and governments abroad the accumulation of all the deficits total public debt, adjusted for inflation

the debt that the government owes to American individuals, businesses, and state/local governments, plus what is owed to individuals, businesses and governments abroad