Econ 203 Test 1

Refer to Figure 4-1 . The movement from point A to point B on the graph shows (R)

a. an increase in quantity demanded.

Refer to Figure 23-1. Which of the following correctly identifies the flow of dollars? (R)

d. A, L, N, and B

For the purpose of calculating GDP, investment is spending on (R)

a. capital equipment, inventories, and structures, including household purchases of new housing.

Countries with low GDP per person tend to have (R)

b. higher rates of infant mortality.

A Texas household receives a Social Security check for $1500, which it uses to purchase a $40 pair of shoes made in Thailand by a Thai firm, a $1240 television made by a Korean firm in Korea, and $220 on groceries from a local store. As a result, U.S. GDP (R)

b. increases by $220.

The residents of Ireland earn $200 million of income from abroad. Residents of other countries earn $300 million in Ireland. Therefore, Ireland's net factor payments from abroad are

b. negative, and its GDP is larger than its GNP.

Unemployment compensation is

b. not part of GDP because it is a transfer payment.

If the price of Italian shoes imported into the United States increases, then

b. the consumer price index will increase, but the GDP deflator will not increase.

Nate collected Social Security payments of $220 a month in Year 1. If the price index rose from 90 to 108 between Year 1 and Year 2, then his Social Security payments for Year 2 should have been (R)

c. $264.

Which of the following is not held constant in a supply schedule?

c. The price of the good

Refer to Figure 4-3 . The shift from Da to Db is called

d. an increase in demand.

Refer to Table 23-1. Disposable personal income for Chereaux in 2019 is

d. $130.

In a simple circular-flow diagram, total income and total expenditure are (R)

a. always equal because every transaction has a buyer and a seller.

If the CPI was 90 in 1975 and is 225 today, then $100 today purchases the same amount of goods and services as (R)

a. $40.00 purchased in 1975.

Refer to Figure 3-3. If Dina must work 0.25 hour to produce each taco, then her production possibilities frontier is based on how many hours of work? (R)

a. 100 hours

For any given year, the CPI is the price of the basket of goods and services in the (R)

a. given year divided by the price of the basket in the base year, then multiplied by 100.

The following table pertains to Wrexington, an economy in which the typical consumer's basket consists of 20 pounds of meat and 10 toys. Refer to Table 24-2. The cost of the basket (R)

a. increased from Year 1 to Year 2 and increased from Year 2 to Year 3.

Refer to Table 4-4. If these are the only four sellers in the market, then when the price increases from $6 to $8, the market quantity supplied (R)

a. increases by 12 units.

Refer to Table 24-4. Will's Year 1 food expenditures in Year 2 dollars amount to

b. $5,250.

Refer to Figure 3-3. If the production possibilities frontier shown for Arturo is for 100 hours of production, then how long does it take Arturo to make one burrito? (R)

b. 1/3 hour

Suppose a basket of goods and services has been selected to calculate the CPI and Year 1 has been selected as the base year. In Year 1, the basket's cost was $50; in Year 2, the basket's cost was $52; and in Year 3, the basket's cost was $55. The value of the CPI in Year 3 was (R)

b. 110.0

Refer to Table 4-4. If these are the only four sellers in the market, then the market quantity supplied at a price of $4 is (R)

b. 28 units.

Refer to Table 3-8. If the production possibilities frontier is bowed outward, then which of the following could represent the number of coats produced when 12 blankets are produced? (R)

b. 500

Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time. Which of the following explanations would be most consistent with this observation? (R)

b. New medical evidence has been released that indicates a negative correlation between a person's beef consumption and life expectancy.

Refer to Figure 4-10. Which of the following movements would illustrate the effect in the market for chocolate chip cookies of an improved high-speed mixer that allows bakers to produce cookies in less time?

b. Point A to Point B

Refer to Figure 4-1 . The movement from point A to point B on the graph is caused by (R)

b. a decrease in price.

A statistical discrepancy (R)

b. exists because data sources are not perfect, so measures of expenditures and income are not equal.

A production possibilities frontier is bowed outward when

b. the rate of trade-off between the two goods being produced depends on how much of each good is being produced.

Which of the following is the correct formula for calculating the consumer price index? (R)

c. [(price of basket of goods and services in current year/price of basket in base year)] × 100

The producer price index measures the cost of a basket of goods and services

c. bought by firms.

An increase in the price of a good will

c. decrease quantity demanded.

Suppose that demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good? (R)

d. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.

If Korea is capable of producing either shoes or soccer balls or some combination of the two, then

d. Korea's opportunity cost of shoes is the inverse of its opportunity cost of soccer balls.

If Shawn can produce more donuts in one day than Sue can produce in one day, then (R)

d. Shawn has an absolute advantage in the production of donuts.

Suppose OPEC succeeds in raising world oil prices by 300 percent. This price increase causes inventors to look at alternative sources of fuel for internal-combustion engines. A hydrogen-powered engine is developed which is cheaper to operate than gasoline engines. Which problems in the construction of the CPI does this situation represent?

d. Substitution bias and introduction of new goods

When constructing the consumer price index, the Bureau of Labor Statistics does not do which of the following?

d. Survey sellers to determine what the typical consumer buys.

Refer to Table 3-1. Assume that John and Jane each work 24 hours. What happens to total production if instead of each person spending 12 hours producing each good, Jane spends 21 hours producing wine and 3 hours producing bread and John spends 3 hours producing wine and 21 hours producing bread? (R)

d. The total production of bread and wine each rise.

Because every transaction has a buyer and a seller, (R)

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

Refer to Figure 3-4. Both Alice and Betty (R)

d. face a constant trade-off between producing pitchers of lemonade and pizzas.

If net exports is a negative number for a particular year, then (R)

d. the value of foreign goods purchased exceeded the value of goods sold to foreigners during the year.