ECO 110 Test 1

If a tax (paid by consumers) is levied on a good, this would

move its demand curve to the left.

If there is a good that is consumed almost entirely by children, a significant reduction in the birth rate would

move its demand curve to the left.

An increase in the degree a good is liked (the increase in the taste for a good) would

move its demand curve to the right.

If there is a good that is consumed almost entirely by the elderly, an aging of the overall population would

move its demand curve to the right.

If there is an expectation that the price of a good will increase in the next month, this would immediately

move its demand curve to the right.

Deflation occurs only when

the average price level (CPI) falls.

Which of the following results from an increase in the price of a one-week vacation at beach resorts on the coast of Mexico?

An increase in the demand for vacations at resorts on Caribbean islands

Which of the following would not cause market demand for a normal good to decline?

An increase in the price of a substitute

If people consume fewer bottles of orange juice as their income rises, orange juice is

an inferior good.

If the inflation rate turns out to be greater than was is expected to be, the clear winners are

borrowers.

In early 2005, inflation increased unexpectedly due to an increase oil prices. This helped

borrowers.

Economists consider deflation

dangerous, as it can lead to depression

One of the reasons that Real Gross Domestic Product is not synonymous with social welfare is

domestic production (cooking, laundry and such) are not counted.

Which of the following causes the demand for veggie burgers to increase?

An increase in the price of tofu burgers, perceived as a substitute by veggie burger consumers

The expenditures approach to GDP equals

Consumption + Gross Investment + Government Purchases + Net Exports.

An increase in household income for a good that is considered inferior would

move its demand curve to the left.

If a tax (paid by producers) on a good is reduced, this would

move its supply curve to the right.

If there is an expectation that the price of a good will decrease in the next month, this would immediately

move its supply curve to the right.

The period of negative growth in Real GDP is called a

recession.

A depression is different from a recession in that

a depression is much worse.

In measuring gross domestic product, goods produced by foreign firms in the United States are

counted, but goods produced by American firms in foreign countries are not counted.

An increase in the excise tax imposed upon consumers of gasoline

decreases the demand for gasoline.

How does GDP deal with a Ford produced in Mexico?

It is not counted at all.

Which of the following decreases supply in the market for pizza?

Pizza shop employees successfully organize a union and negotiate a pay increase.

In moving from a shortage toward the market equilibrium, which of the following is true?

Price rises.

If farmers expect the government to increase subsidies on corn grown next year for ethanol production, we should not be surprised to observe

a decrease in wheat production.

If the unemployment rate falls because the number of people not working but searching for work falls, economists would attribute this to the

discouraged worker effect.

GDP can be calculated using

either the ways people earn money or the ways people spend money.

If the price is so high that vendors find too many unsold bottles remaining in inventory, they might dispose of their excess inventory by

lowering the price per bottle.

Suppose an apple pie sells at a grocery store for $5. Suppose that the grocery store purchased it from a baking company for $4. Suppose the baking company paid $2 for ingredients, $1 for labor, and made $1 in profit. What is the GDP contribution of the pie?

It is $5.

Of these, economists consider this the worst:

depression

If the price of inputs increases, the

supply curve will shift to the left.

The reason that only final sales are counted in GDP is

to avoid double counting goods that are sold so as to be resold.

If a market basket was defined in 2014 and it cost $10,000 to purchase the items in that basket in 2014, while it cost $11,000 to purchase those identical goods in 2015, then the price index for 2015 is

(11000/10000)*100=110. 100.

Suppose there are only two goods (Good A and Good B) and the average person buys 4 of Good A in a year and 3 of Good B. If, in the base year, the Price of Good A is $5 and the Price of Good B is $10, and in the next year the Price of Good A is $6 and the Price of Good B is $9, the price index in the second of the two years

Base Year CPI: (5*4) + (3*10) = 50 Next Year CPI: (6*4) + (9*3) = 51 Price Index in the Second of the Two years: (51/50)*100 = 102

Which of the following is true in ski towns such as Crested Butte, Colorado, and Whistler, British Columbia during the peak winter ski season as compared to May and June?

Demand for motel rooms is higher.

If a person is laid-off from a job and told that they will be brought back as soon as the economy picks up and demand for their product rises, then economists call this person

cyclically unemployed.

In 2005, General Motors announced a 20 percent reduction in its staffing levels and the closure of many assembly plants. Those laid off as a result would likely be classified as

cyclically unemployed.

With deflation, people will

delay their purchases of goods in hopes prices will fall further.

One problem with using real gross domestic product as a measure of social welfare is that

it fails to count home production.

Suppose there are only two goods (Good A and Good B) and the average person buys 4 of Good A in a year and 3 of Good B. If, in the base year, the Price of Good A is $5 and the Price of Good B is $10, and in the next year the Price of Good A is $6 and the Price of Good B is $9, one problem with the CPI way of calculating inflation is

it fails to recognize that people will substitute (to some degree) Good B for Good A and therefore overstates the degree of inflation.

On a graph of real gross domestic product over time, recessions appear as

relatively short and shallow drops on an otherwise increasing path.

If a person is unemployed because their industry has moved to another country, economists refer to the person as

structurally unemployed.

If a firm has two production alternatives and the price of one decreases, this will cause the other good's

supply curve to shift to the right.

If goods A and B are considered complements, an increase in the price of A would cause

the demand curve for B to shift to the left.

If goods A and B are considered substitutes, an increase in the price of A would cause

the demand curve for B to shift to the right.

Inflation is measured using _________ in a price index.

the percentage year-to-year increase

If a market basket was defined in 2014 and it cost $10,000 to purchase the items in that basket in 2014, while it cost $11,000 to purchase those identical goods in 2015, then the inflation rate from 2014 to 2015 is

(110-100)/100*100%=10%

Which of the following increases the supply of corn?

Farmers who grow soybeans can also grow corn, and the price of soybeans drops by 75 percent.

Orange juice and grapefruit juice are likely to be

substitutes for one another.

If technology increases, then

the supply curve will shift to the right.

Since teachers are an input in the production of education, when teacher salaries increase,

the supply of education decreases.

During flu season, as people try to boost their immune system believing that orange juice might aid in keeping viruses at bay,

the taste for orange juice would rise.

With 125 million people working, 8 million out of work and looking for work, and 147 million neither working nor looking for work, "underemployment" would be illustrated by

part of the 125 million holding part-time jobs when they were qualified for full-time jobs.