Econ Midterm 1
What is a business cycle?
It is the economy's pattern of fluctuations in economic activity: expansion followed by contraction and then by another expansion.
Trade can be beneficial to an economy because:
More goods and services can be obtained at a lower opportunity cost.
GDP Deflator
Nominal/Real * 100
You have been attending college for the last four years, and are focused solely on your studies. You would be classified...
Not in the workforce
The point on a business cycle where real GDP stops rising and begins falling is called a(n):
Peak
Disposable personal income equals
Personal income - personal taxes
Structural unemployment
By sector
What is the largest category of expenditure in the US
Consumption
A negative relationship between the quantity demanded and price is called the law of
Demand
Which of the following is correct about the economic decisions consumers, firms, and the government have to make?
Each faces the problem of scarcity which necessitates trade-offs in making economic decisions.
Cyclical unemployment
Economy as a whole, not good
What will shift the Production possibilities curve outward?
Enhancement in technology
Based off of location, like a factory
GDP
What is the GPD Formula (expenditure approach)
GDP = C+I+G+NX
Based off of ownership
GNP
An economy is said to have a comparative advantage in producing a particular good if it:
Has a lower opportunity cost
Frictional unemployment
Involves the individual
Consider the following scenario: In January, 8 million people were seeking jobs but did not succeed. In February, 2 million of these people gave up and stopped looking for work. Holding all else constant, what happened to the unemployment rate in February?
It decreased
What does the downward slope of the production possibilities curve represent?
Scarcity
What is the difference between a shortage and scarcity?
Scarcity will always exist because choices must be made, but a shortage will only exist if the price is kept below the equilibrium level.
What transformed international trade
Shipping Containers
A positive relationship between the quantity demanded and price is called the law of
Supply
For each watch that Switzerland produces, it gives up the opportunity to make 50 pounds of chocolate. Germany can produce 1 watch for every 100 pounds of chocolate it produces. Which of the following is true about the comparative advantage between the two countries?
Switzerland has the comparative advantage in watches.
Macro-economics
The study of the economy as a whole
Real GDP
The sum of the base year quantity * real years price
Nominal GDP
The sum of the years quantity * price
What are the fundamental questions?
What, How and For Whom
When Tesla, a U.S. company, purchases Italian-made Pirelli tires for its automobiles, the purchase is
a U.S. import and an Italian export.
The primary difference between a change in demand and a change in the quantity demanded is:
a change in quantity demanded is a movement along the demand curve, and a change in demand is a shift in the demand curve.
The term "market" in economics refers to
a group of buyers and sellers of a product and the arrangement by which they come together to trade.
An unemployed person is:
a person without a job who is actively seeking and available for work.
Which of the following will not shift the demand curve for a good?
an increase in the price of the good
Positive statement
based on facts
normative statement
based on opinions
For computing GDP, the official measure of the value of all goods produced during a period for use in the production of other goods is called:
gross private domestic investment.
The natural rate of unemployment:
includes frictional and structural unemployment.
GDP Deflator Formula:
nominal GDP divided by real GDP, multiplied by 100.
In the calculation of GDP, the value of a new house constructed by a firm is included in:
private investment
If the quantity demanded for a product exceeds the quantity supplied, the market price will rise until
quantity demanded equals quantity supplied. The market price will then equal the equilibrium price.
Supply is best defined as the:
relationship between the quantity of a good or service sellers are willing to offer for sale and various prices, all other things unchanged.
A critical function of the government in facilitating the operation of a market economy is
setting up and enforcing private property rights.
Increasing opportunity cost along a bowed out production possibilities frontier occurs because
some factors of production are not equally suited to producing both goods or services.
What is counted in GDP
the cost of a speed boat purchased by drug smugglers
The terms of trade refers to
the ratio at which a country can trade its exports for imports from other countries.
The gross domestic product of an economy is defined as the:
total value of all final goods and services produced during a given period.
Social Security payments to U.S. citizens are considered:
transfer payments and are not included in GDP.
Unemployment rate formula:
unemployed/(employed + unemployed)
A shift in the demand curve to the left, all other things unchanged:
will cause a movement downward along the supply curve and a lower equilibrium quantity.
If Norwegian workers are more productive than Albanian workers, then trade between Norway and Albania
will take place so long as each country has a comparative advantage in a good or service that buyers in the other country want.
Countries will benefit from trade if they specialize based on...
Comparative advantage
Which of the following is counted as consumption expenditure?
A person buying a new car
The three fundamental questions of what, how, and for whom:
Are a thing because of scarcity
A factor of production that is produced in order to produce something else is called:
Capital
In recent years the cost of producing wines in the U.S. has increased largely due to rising rents for vineyards. At the same time, more and more Americans prefer wine over beer. Which of the following best explains the effect of these events in the wine market?
The supply curve has shifted to the left and the demand curve has shifted to the right. As a result, there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.
If the United States lifted the embargo on Cuban products, what would happen in the U.S. market for Cuban cigars?
The supply curve would shift to the right.
In the market for coffee, what will happen if a fungus damages the crop?
The supply will shift left, which causes an increase in price
Gross national product is defined as
The value of final goods and services produced by residents of the United States even if the production takes place outside of the United States.
Which of the following best describes an assumption economists make about human behavior?
They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time.
If the opportunity costs of production of two goods is different between two countries, then:
They can both benefit from trade
Examples of comparative advantage show how trade between two countries can make each better off. Compared to their pre-trade positions, trade makes both countries better off because in each country
Total consumption increases