Econ Exam #1

Which of the following illustrates consumption expenditure? A. Stephanie buys a laptop for her brother. B. Jane purchases 200 shares of Google stock. C. Herman Smith spends $1,500 to buy a used car for his daughter. D. Samantha buys an oven for her cooking show on Food Network.

A. Stephanie buys a laptop for her brother.

Free trade between countries: A. allows for greater consumption than without trade. B. always involves wealthy countries exploiting less developed nations. C. should be based on absolute advantage. D. shifts a country's domestic production from a point below the production possibility frontier to a point on the production possibility frontier.

A. allows for greater consumption than without trade.

The consumer price index reflects: A. changes in the prices of goods and services typically purchased by consumers. B. the level of prices of raw materials. C. the prices of all goods and services computed from the ratio of nominal GDP to real GDP. D. the level of prices of intermediate goods and services purchased by businesses.

A. changes in the prices of goods and services typically purchased by consumers.

Norway has a comparative advantage in producing: Table: Comparative Advantage Japan and Norway produce only two goods, tuna and computers, and this table shows the maximum amount that each nation can produce of the two goods. JapanNorwayTuna100,000 boxes50,000 boxesComputers10,00010,000 A. computers only. B. neither computers nor tuna. C. tuna only. D. both computers and tuna.

A. computers only

Intermediate goods are NOT counted in GDP because: A. doing so would result in double counting. B. these goods are produced in the underground economy. C. these goods involve financial transactions. D. these goods are not produced for the market.

A. doing so would result in double counting.

The primary tools of economic policy at the macro level are _____ policy and _____ policy. A. fiscal; monetary B. tax; antitrust C. monetary; exchange rate D. capital; labor

A. fiscal; monetary

The total value of all final goods and services produced in a given year, calculated using prices for the year in which output is produced, is: A. nominal GDP. B. net exports. C. consumer spending. D. real GDP.

A. nominal GDP.

Investment spending is spending on: A. productive physical capital. B. corporate bonds. C. mutual funds. D. stocks.

A. productive physical capital.

Real per capita GDP is: A. real GDP divided by the population. B. real GDP divided by the amount of capital available in the economy. C. rarely used as a tool to compare countries' possible resources. D. not a useful measure of human welfare.

A. real GDP divided by the population.

In one hour, the United States can produce 25 tons of platinum or 250 electric cars. In one hour, Canada can produce 30 tons of platinum or 275 electric cars. This information implies that: A. the United States has a comparative advantage in the production of electric cars. B. Canada has a comparative advantage in the production of both goods. C. the United States has an absolute advantage in the production of platinum. D. Canada has a comparative advantage in the production of electric cars.

A. the United States has a comparative advantage in the production of electric cars.

Private saving by households is: A. the portion of disposable income not spent on goods and services. B. often larger than consumer spending. C. the portion of income coming from transfer payments. D. not related to consumer spending.

A. the portion of disposable income not spent on goods and services.

If the price in the market is such that the quantity supplied exceeds the quantity demanded, then: A. the price is above the equilibrium price. B. the market is in equilibrium. C. the market will not adjust to equilibrium. D. the price is below the equilibrium price.

A. the price is above the equilibrium price.

An increase in the supply of coffee beans means: A. a shift to the right of the entire supply curve for coffee beans. B. that fewer coffee beans will be demanded at every price. C. that fewer coffee beans will be supplied at every price. D. a movement up the supply curve as the price of coffee beans rises.

A. a shift to the right of the entire supply curve for coffee beans.

All points outside the production possibility frontier are: A. infeasible. B. efficient. C. inefficient. D. regions of economic growth

A. infeasible.

What is the difference between a shortage and scarcity? A. Scarcity will always exist, but a shortage will exist only if the price of a good is above the equilibrium level. B. Scarcity will always exist, but a shortage will exist only if the price of a good is below the equilibrium level. C. Scarcity is a result demand exceeding supply and causing a shortage. D. A shortage will exist when a good is scarce.

B. Scarcity will always exist, but a shortage will exist only if the price of a good is below the equilibrium level.

An economy is said to have a _____ in the production of a good if it can produce that good _____. A. absolute advantage; outside its production possibility frontier B. comparative advantage; at a lower opportunity cost than another economy C. comparative advantage; with more resources than another economy D. absolute advantage; at a higher opportunity cost than another economy

B. comparative advantage; at a lower opportunity cost than another economy

Goods produced domestically and sold abroad are: A. imports. B. exports. C. part of domestic consumption. D. investment.

B. exports.

Altering government spending and/or taxes in an effort to affect overall spending is a use of: A. the stock market. B. fiscal policy. C. monetary policy. D. investment.

B. fiscal policy.

Which of the following causes an outflow of funds from a domestic economy? A. government transfer payments B. imports C. household savings D. government tax collections

B. imports

An economic expansion in the United States is typically associated with a(n): A. decrease in corporate profits. B. increase in output. C. falling inflation rate. D. increase in the poverty rate.

B. increase in output.

An increase in the value of nominal GDP over time: A. is always due to an increase in the production of goods and services. B. may be due to an increase in prices, in the production of goods and services, or both. C. is always due to an increase in prices. D. may be due to a decrease in prices, in the production of goods and services, or both.

B. may be due to an increase in prices, in the production of goods and services, or both.

If all of the households and businesses start saving more during economic hard times, then aggregate income will fall, hurting everyone in the economy. This is known as the: A. quantity theory. B. paradox of thrift. C. crowding-out effect. D. permanent income hypothesis.

B. paradox of thrift.

Long-run growth is a sustained upward trend in: A. the unemployment rate over time. B. total output per person over several decades. C. total output per person over the business cycle. D. interest rates over time.

B. total output per person over several decades.

Which factor would shift the demand curve for new computers to the right? A. a decrease in the price of tablets (such as an iPad) B. an increase in student enrollment in college C. a fall in the price of new computers D. a fall in the price of used computers

B. an increase in student enrollment in college

If goods A and Z are complements, a decrease in the price of good Z will cause: A. the demand for good A to decrease. B. the demand for good A to increase. C. the demand for both good A and good Z to decrease. D. the demand for good Z to decrease.

B. the demand for good A to increase.

In a situation in which there are technological improvements, we generally see: A. a shift in the production possibility frontier inward. B. a transition to increased unemployment. C. a shift in the production possibility frontier outward. D. the production possibility frontier unchanged.

C. a shift in the production possibility frontier outward.

Which factor would NOT cause a supply curve to shift? A. expectations that the price of a good will change B. an improvement in the technology used to produce a good C. an increase in the price of a good D. an increase in the wages of employees

C. an increase in the price of a good

Goods produced in a particular period but NOT sold in that period: A. go into inventories and are called consumption. B. are classified as intermediate goods. C. go into inventories and are included in investment. D. are counted as part of depreciation when they are sold.

C. go into inventories and are included in investment.

Use of monetary policy entails changes in: A. government spending. B. tax rates. C. the quantity of money. D. tax receipts.

C. the quantity of money.

GDP is the: A. dollar amount of all sales made in the economy in one year. B. volume of all dollar transactions made in an economy in one year. C. total market value of all final goods and services produced in an economy in one year. D. total accumulated wealth of an economy.

C. total market value of all final goods and services produced in an economy in one year.

If a farmer in Indiana can produce 200 pounds of beets and no corn or no beets and 100 pounds of corn, and he faces a linear production possibility frontier, the opportunity cost of producing an additional pound of corn is _____ pound(s) of beets. A. 0.5 B. 200 C. 2 D. 100

C. 2

All points inside the production possibility frontier represent: A. efficient production points that economies strive to reach. B. infeasible production points that can, however, be attained through economic growth. C. inefficient production points that are attainable without added opportunity costs. D. production points that the economy will eventually reach through economic growth.

C. inefficient production points that are attainable without added opportunity costs.

In moving along a production possibility frontier, the opportunity cost to society of getting more of one good: A. is measured by the price of the good. B. is always constant when there are only two goods. C. is measured by the amount of the other good that must be given up. D. usually decreases, but we are not sure; it depends on where we are on the production possibility frontier.

C. is measured by the amount of the other good that must be given up.

The opportunity cost of producing a good: A. is the price of a good in the market. B. is the amount of the good that you gain in production. C. is what you give up to produce the good. D. increases as production decreases.

C. is what you give up to produce the good.

Comparative Advantage I. Norway has an absolute advantage in the production of: Table: Comparative Advantage Japan and Norway produce only two goods, tuna and computers, and this table shows the maximum amount that each nation can produce of the two goods. JapanTuna100,000 boxes Norway 50,000 boxesComputers10,00010,000 A. tuna only. B. computers only. C. neither computers nor tuna. D. both computers and tuna.

C. neither computers nor tuna.

In general, when incomes rise, individuals are more likely to travel by air than by car when they take vacations. Which statement provides one possible explanation for this phenomenon? A. Air travel and travel by car are complementary goods. B. Air travel and travel by car are both normal goods. C. Air travel is an inferior good, and travel by car is a normal good. D. Air travel is a normal good, and travel by car is an inferior good.

D. Air travel is a normal good, and travel by car is an inferior good.

Which statement about GDP is FALSE? A. GDP can be calculated by summing the total market value of all final goods and services produced in a country in a given year. B. GDP can be calculated by summing all factor payments within a country's borders in a given year. C. GDP can be calculated by summing the value added of all goods and services. D. GDP can be calculated by summing government spending and tax revenues.

D. GDP can be calculated by summing government spending and tax revenues.

If they spend all night writing poems, Leticia can write 10 poems, and Isabella can write 5. If they spend all night making necklaces, Leticia can make 6, and Isabella can make 4. We know that: A. Leticia's opportunity costs of writing poems and of making necklaces are less than Isabella's. B. Isabella's opportunity cost of writing poems is less than Leticia's. C. Isabella's opportunity costs of writing poems and of making necklaces are less than Leticia's. D. Leticia's opportunity cost of writing poems is less than Isabella's.

D. Leticia's opportunity cost of writing poems is less than Isabella's.

An independent panel of economic experts at the _____ analyzes a variety of macroeconomic indicators and determines when a recession begins and ends. A. Federal Reserve B. Treasury Department C. President's Council of Economic Advisers D. National Bureau of Economic Research

D. National Bureau of Economic Research

The simple circular-flow diagram ignores a number of real-world complications in the interest of simplicity. Which of the following is NOT one of the factors ignored? A. That many sales that firms make are not to households but to other firms. B. That the distinction between firms and households isn't always clear-cut. C. The role of government (taxation and spending) in the circular flow. D. The role of the market for goods and services in the circular flow.

D. The role of the market for goods and services in the circular flow.

Which factor would cause a DECREASE in the supply of a good? A. expectations of a future price decline B. a fall in the price of the good C. an increase in the number of sellers D. a rise in input prices

D. a rise in input prices

Which factor will lower the price of bacon? A. a shift to the right of the demand curve for bacon B. a decrease in the number of bacon buyers C. a decrease in the number of bacon suppliers D. a shift to the right of the supply curve for bacon

D. a shift to the right of the supply curve for bacon

If the supply and demand curves intersect at a price of $25, then any price below that price would result in: A. equilibrium at a price of $60. B. an excess supply. C. an increase in demand. D. an excess demand.

D. an excess demand.

An individual with an absolute advantage in the production of all goods will: A. not face increasing opportunity costs. B. not be able to gain from specialization. C. have a comparative advantage in the production of all goods. D. have a comparative advantage in the production of some goods but not others.

D. have a comparative advantage in the production of some goods but not others.

Inflation: A. is a movement of the economy toward economic growth. B. can be thought of as an increase in a nation's standard of living. C. is a sustained fall in the overall level of prices. D. is an increase in the overall level of prices.

D. is an increase in the overall level of prices.

The total value of all final goods and services produced in a given year, calculated using the prices of a selected base year, is: A. nominal GDP. B. consumer spending. C. net exports. D. real GDP.

D. real GDP.

When an economy is contracting, unemployment tends to _____, and the overall price level tends to _____. A. fall; fall B. rise; rise C. fall; rise D. rise; fall

D. rise; fall

A movement along the demand curve for a good generally results from: A. both a change in the price of the good and a change in the population. B. a change in the population. C. changes in the prices of related goods. D. a change in the price of the good.

D. a change in the price of the good.

All points on the production possibility frontier are: A. inefficient. B. infeasible. C. regions of economic growth. D. efficient.

D. efficient.

As long as people have different _____, everyone has a comparative advantage in something. A. direct costs B. levels of utility C. benefits D. opportunity costs

D. opportunity costs