ECON Exam 1 Practice Exam
if in some year nominal GDP was $20 billion and the GDP deflator was 80, what was real GDP?
$25.0 billion
Refer to the figures above. Suppose Phil and Miss Kay are the only consumers in the market. If the price is $6, then the market quantity demanded is
12 units
Refer to the figures above. Suppose Phil and Miss Kay are the only consumers in the market. If the price is $12, then the market quantity demanded is
2 units
This country's inflation rate from 2016 to 2017 was
23.1%
The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows:
Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index, and compute the inflation rate
Suppose the government passes a law eliminating holidays and, as a result, the production of goodsand services increases because people work more days per year (and thus enjoy less leisure per year).Based on this scenario, which of the following statements is correct?
GDP would definitely increase because GDP excludes leisure.
Michael, a U.S. citizen, travels to Jamaica and buys a newly manufactured motorcycle made there.His purchase is included in
Jamaica's GDP, but it is not included in U.S. GDP
The Internet has created a new category in the book selling market, namely, the "barely used" book.How does the availability of barely used books affect the market for new books?
The demand curve for new books shifts to the left
Which of the following items is the one type of household expenditure that is categorized as investment rather than consumption?
The purchase of a new house.
The Consumer Price Index tries to gauge how much income must rise to maintain
a constant standard of living
Which of the following will shift the demand curve for a good?
a decrease in the price of a complementary good
Holding everything else constant, an increase in the price of MP3 players will result in
a decrease in the quantity of MP3 players demanded.
If an increase in income leads to in an increase in the demand for peanut butter, then peanut butter is
a normal good.
Consider the following statements: a.Car owners purchase more gasoline from a gas station that sells gasoline at a lower price than other rival gas stations in the area b. Banks do not take steps to increase security since they believe it is less costly to allow some bank robberies than to install expensive security monitoring equipment .c. Firms produce more of a particular DVD when its selling price rises. Which of the above statements demonstrates that economic agents respond to incentives?
a, b, and c
The principle that "people face tradeoffs" applies to
all of the above are correct (individuals, families, societies)
In a simple circular-flow diagram, total income and total expenditure are
always equal because every transaction has a buyer and a seller
the basic tools of supply and demand are
central to macroeconomic analysis as well as to macroeconomic analysis
Elvira decreased her consumption of bananas when the price of peanut butter increased. For Elvira,peanut butter and bananas are
complements in consumption
When the price of peaches changes, the demand curve for peaches
does not shift because the price of peaches is measured on the vertical axis of the graph
Social Security payments are
excluded from GDP because they do not reflect the economy's production
Government purchases include spending on goods and services by
federal, state, and local governments
Where do economic agents such as individuals, firms, and nations interact with each other?
in any arena that brings together buyers and sellers
In the simple circular-flow diagram, with households and firms, GDP can be computed as the
income received by households, in the form of wages, rent and profit
a decrease in demand is represented by a
leftward shift of a demand curve
gross domestic product includes
legal final goods and services, but it excludes illegal final goods and services.
A rational decision maker takes an action only if the
marginal benefit is greater than the marginal cost.
A recession has traditionally been defined as a period during which
nominal GDP declines for two consecutive quarters
The GDP deflator is the ratio of
nominal GDP to real GDP multiplied by 100.
The phenomenon of scarcity stems from the fact that
resources are limited
A marginal change is a
small, incremental adjustment.
efficiency means that
society is getting the maximum benefits from its scarce resources.
Tomas increased his consumption of potato chips when the price of pistachios increased. For Tomas, potato chips and pistachios are
substitutes in consumption
The production possibilities frontier illustrates
the combinations of output that an economy can produce.
if the price of automobiles was to increase, then
the demand for gasoline would decrease.
A change in all the following variables will change the market demand for a product except
the price of the product.
An economic model is a simplified version of reality used to analyze real-world economic situations
true
Equality refers to how the pie is divided, and efficiency refers to the size of the economic pie
true
The classic tradeoff between "guns and butter" states that when society spends more on national defense, it has less to spend on consumer goods to raise the standard of living.
true
The points outside the production possibilities frontier are
unattainable
The opportunity cost of an item is
what you have to give up to get that item