SS 141 - MIDTERM

Refer to the above table. For this economy to produce a total output of 3 units of capital goods and 13 units of consumer goods it must:

Achieve economic growth

Which of the following best illustrates the circular flow model in action?

All of these answers illustrate the workings of the circular flow model

The assertion that "There is no free lunch" means that:

All production involves the use of scarce resources and thus the sacrifice of alternative goods

Which of the following is associated with macroeconomics?

An empirical investigation of the general price level and unemployment rates since 1990

Inflation is defined as:

An increase in the overall level of prices

A person should consume more of something when its marginal:

Benefit exceeds its marginal cost

A nation's gross domestic product (GDP):

Can be found by summing C + Ig + G + Xn

The study of economics is primarily concerned with:

Choices that are made in seeking the best use of resources

Refer to the above diagram. Points A, B, C, D, and E show:

Combinations of bicycles and computers that society can produce by using its resources efficiently

Refer to the above diagram. Flow (4) represents:

Consumer expenditures.

GDP can be calculated by summing:

Consumption, investment, government purchases, and net exports

Refer to the above diagram. This economy will experience unemployment if it produces at point:

D

If Z is an inferior good, an increase in money income will shift the:

Demand curve for Z to the left

If products A and B are complements and the price of B decreases the:

Demand for A will increase and the quantity of B demanded will increase.

The income and substitution effects account for:

Downward sloping demand curve

Refer to the above tables. Suppose that Duckistan and Herbania are each producing 14 units of civilian goods and 2 units of military goods. Then:

Duckistan is fully employing its resources but Herbania is not

The National Income and Product Accounts (NIPA) help economists and policymakers to:

Follow the long-run course of the economy to determine whether it has grown or stagnated

A normal good is one:

For which the consumption varies directly with income.

Refer to the above diagram. Flow (3) represents:

Goods & Services

Final goods and services refer to:

Goods and services purchased by ultimate users, rather than for resale or further processing

Refer to the above diagram. Flow (3) represents:

Goods and services.

The term laissez-faire suggests that:

Government should not interfere with the operation of the economy

Refer to the above tables. Suppose that technology and the quality of resources are the same in both countries. We can conclude that:

Herbania has more resources than Duckistan

Refer to the above tables. Suppose that the amount and quality of resources are the same in both countries. We can conclude that:

Herbania is technologically superior to Duckistan in producing civilian goods

The simple circular flow model shows that:

Households are on the selling side of the resource market and on the buying side of the product market

The production possibilities curve illustrates the basic principle that:

If all the resources of an economy are in use, more of one good can be produced only if less of another good is produced

Refer to the above diagram. Arrows (3) and (4) represent:

Incomes and consumer expenditures respectively

Suppose nominal GDP was $360 billion in 1990 and $450 billion in 2000. The appropriate price index (1985 = 100) was 120 in 1990 and 125 in 2000. Between 1990 and 2000 real GDP:

Increased by $60 billion

Refer to the above tables. Opportunity costs are:

Increasing in both Duckistan and Herbania

According to economists, economic self-interest:

Is a reality that underlies economic behavior

A market:

Is an institution that brings together buyers and sellers

Refer to the above diagram. The combination of computers and bicycles shown by point F:

Is attainable, but implies that the economy is not using all its resources

A nation's gross domestic product (GDP):

Is the dollar value of all final output produced within the borders of the nation during a specific period of time

Refer to the above diagram. Other things equal, this economy will achieve the most rapid rate of growth if:

It chooses point A

The four factors of production are:

Land, labor, capital, and entrepreneurial ability

Refer to the above diagram. Flow (2) represents:

Land, labor, capital, and entrepreneurial ability.

Refer to the above table. For these data the law of increasing opportunity costs is reflected in the fact that:

Larger and larger amounts of capital goods must be sacrificed to get additional units of consumer goods

One reason that the quantity demanded of a good increases when its price falls is that the:

Lower price increases the real incomes of buyers, enabling them to buy more

GDP is the:

Monetary value of all final goods and services produced within the borders of a nation in a particular year

Refer to the diagram. An increase in quantity supplied is depicted by a:

Move from Y to X

Refer to the diagram. A decrease in quantity demanded is depicted by a:

Move from point Y to Point X

The total amount of income earned by U.S. resource suppliers in a year, plus taxes on production and imports, is measured by:

National Income

Real GDP is preferred to nominal GDP as a measure of economic performance because:

Nominal GDP uses current prices and thus may over or understate the true changes in output

National Income accountants can avoid multiple counting by:

Only counting final goods

The law of demand states that, other things equal:

Price and quantity demanded are inversely related

Refer to the above diagram. Arrows (1) and (2) represent:

Resources and goods respectively

A nation's production possibilities curve is bowed out from the origin because:

Resources are not generally equally efficient in producing every good

A production possibilities curve illustrates:

Scarcity

Refer to the diagram. A decrease in demand is depicted by a:

Shift from D2 to D1

Refer to the diagram. A decrease in supply is depicted by a:

Shift from S2 to S1

If products C and D are close substitutes, an increase in the price of C will:

Shift the demand curve of D to the right

The business cycle depicts:

Short-run fluctuations in output and employment

Refer to the diagram. A price of $20 in this market will result in a:

Shortage of 100 units

Refer to the above tables. Opportunity costs of producing military goods are:

Smaller in Duckistan than Herbania

In 2007, the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are:

Substitute goods and the higher price for oil increased the demand for natural gas

Refer to the above table. As compared to production alternative D, the choice of alternative C would:

Tend to generate a more rapid growth rate

Nominal GDP is adjusted for price changes through the use of:

The GDP price index

Macroeconomics is mostly focused on:

The economy as a whole

Refer to the above diagram. Arrows (1) and (3) are associated with:

The resource market

Nominal GDP is:

The sum of all monetary transactions involving final goods and services that occur in the economy in a year

Which of the following most closely relates to the idea of opportunity costs?

Tradeoffs

Refer to the above diagram. The combination of computers and bicycles shown by point G is:

Unattainable, given currently available resources and technology

The scientific method is:

Used by economists and other social scientists, as well as by physical scientists and life scientists

Real GDP measures the:

Value of final goods and services produced within the borders of a country, corrected for price changes

Refer to the above diagram. Flow (1) represents:

Wage, rent, interest, and profit income.

Refer to the above diagram. If society is currently producing 9 units of bicycles and 4 units of computers and it now decides to increase computer output to 6, the cost:

Will be 4 units of bicycles

Refer to the above diagram. If society is currently producing the combination of bicycles and computers shown by point D, the production of 2 more units of bicycles:

Will cost 1 unit of computers

Refer to the above table. A total output of 3 units of capital goods and 4 units of consumer goods:

Would involve an inefficient use of the economy's scarce resources

The market system's answer to the fundamental question "Who will get the goods and services?" is essentially:

"Those willing and able to pay for them."

Refer to the data. GDP is: A. $116 B. $121 C. $125 D. $150

$121

Refer to the data. DI is: A. $284 B. $329 C. $274 D. $402

$274

Refer to the data. PI is: A. $314 B. $346 C. $408 D. $437

$314

Refer to the data. NDP is: A. $370 B. $402 C. $392 D. $467

$392

Refer to the diagram. If this is a competitive market, price and quantity will move toward:

$40 and 150, respectively

Refer to the data. NI is: A. $362 B. $372 C. $447 D. $402

$402

Refer to the data. GDP is: A. $390 B. $417 C. $422 D. $492

$417

Refer to the diagram. The highest price that buyers will be willing and able to pay for 100 units of this product is:

$60

Refer to the data. Nominal GDP in year 4 is:

$800

Refer to the above table. If the economy is producing at production alternative C, the opportunity cost of the tenth unit of consumer goods will be:

1/3 of a unit of capital goods

Suppose nominal GDP in 2009 was $100 billion and in 2010 it was $260 billion. The general price index in 2009 was 100 and in 2010 it was 180. Between 2009 and 2010 the real GDP rose by approximately:

44%

If year 3 is chosen as the base year, the price index for year 1 is:

60

If the demand curve for product B shifts to the right as the price of product A declines, then:

A and B are complementary goods

A price index is:

A comparison of the current price of a market basket to a fixed point of reference

Assume that the demand curve for product X shifts to the right. This might be caused by:

A decline in income if X is an inferior good

The value added of a firm is the market value of:

A firm's output less the value of the inputs bought from others

Assume that the demand curve for product C is down-sloping. If the price of C falls from $2.00 to $1.75:

A larger quantity of C will be demanded

Net exports are negative when:

A nations imports exceed its exports

Unemployment describes the condition where:

A person cannot get a job but is willing to work and is actively seeking work

Economists use the term "demand" to refer to:

A schedule of various combinations of market prices and amounts/quantities demanded

Refer to the diagram. A price of $60 in this market will result in:

A surplus of 100 units