ECON Midterm Review (Ch. 1-7) Svalestad Quiz Questions

Select the term that best fits the scenario. Betty purchases raw (unpasteurized) milk even though the sale of raw milk is illegal. 1. quota 2. black market 3. price ceiling 4. price floor 5. license

black market

In the circular-flow diagram, the value of household income (the sum of wages, dividends, interest, rental income, and transfer payments) equals the sum of: 1. consumer spending, private saving, and household tax payments. 2. household tax payments. 3. transfer payments and household tax payments. 4. the money supply.

consumer spending, private saving, and household tax payments.

The consumer price index measures the cost of the _____ of a family of ____ living in a typical U.S. city. production; four consumption; four production; two consumption; two

consumption; four

If a demand curve is downward sloping, a decrease in supply with no change in demand will lead to a(n) _____ in the equilibrium quantity and a(n) _____ in the equilibrium price. 1. increase; increase 2. decrease; decrease 3. decrease; increase 4. increase; decrease

decrease; decrease

Trade policy and the relationships between trading partners are characterized by several trend. The use of tariffs as a form of protectionism has ___________ between 1946 and 2016. There are ___________ trade agreements in existence in 2016 than there were in 1946. Overall, trade today can be described as ___________ free in 2016 than it was in 1946.

decreased; more; more

The central mission of modern macroeconomics is to prevent: 1. surpluses. 2. high gas prices. 3. deep recessions, like the Great Depression. 4. shortages.

deep recessions, like the Great Depression

Intermediate goods are NOT counted in GDP because: 1. these goods are produced in the underground economy. 2. doing so would result in double counting. 3. these goods are not produced for the market. 4. these goods involve financial transactions.

doing so would result in double counting.

If real GDP rises while nominal GDP falls, then prices on average have: 1. risen. 2. stayed the same. 3. decreased and then been offset by an equal increase. 4. fallen.

fallen

The paradox of thrift implies that: 1. microeconomic decisions have no impact on the macroeconomy. 2. saving by businesses always benefits the economy. 3. saving by families always benefits the economy. 4. families may end up worse off by saving than if they had acted more "irresponsibly" by consuming.

families may end up worse off by saving than if they had acted more "irresponsibly" by consuming.

International trade has many tradeoffs for each country. Overall, what has been the global trend in trade policies from 1950 to 2000? 1. no change in openness to foreign trade 2. from openness to closedness 3. from closedness to openness 4. more closed than ever before 5. the change is indeterminate, as low income countries are less able to produce reliable national accounts than high income countries

from closedness to openness

Suppose one parent picks up their child from day care, while the other parent stays home to make dinner. This is an example of the principle that: 1. markets usually lead to efficiency. 2. there are gains from trade. 3. markets move toward equilibrium. 4. government policies can change spending.

there are gains from trade

Which transaction is included in the nation's gross domestic product? 1. A college student buys a used textbook from his roommate. 2. A group of college students volunteer to rake leaves at an assisted living facility for senior citizens. 3. A construction company purchases lumber to build a new house. 4. A college student buys a pizza and has it delivered to her dorm room.

A college student buys a pizza and has it delivered to her dorm room.

If a market is in equilibrium: 1. no individual will be better off doing something different. 2. the equilibrium will persist unless the government intervenes. 3. there are opportunities for some people to make themselves better off. 4. it must be because the government has intervened in the market.

No individual will be better off doing something different.

Sabrina has gone out to lunch three times this week. She has some extra money, so she decides to go out to lunch a fourth time. Which economic principle does this statement BEST represent? 1. The true cost of something is its opportunity cost. 2. "How much" is a decision at the margin. 3. There are gains from trade. 4. Choices are necessary because resources are scarce.

"How much" is a decision at the margin

You decide whether to eat one more slice of cheesecake based on how hungry you feel. Which economic principle does this statement BEST represent? 1. Choices are necessary because resources are scarce. 2. The true cost of something is its opportunity cost. 3. "How much" is a decision at the margin. 4. People respond to incentives, exploiting opportunities to make themselves better off.

"How much" is a decision at the margin

Which of the following closely represents the acceptable levels of annual inflation and unemployment as viewed by policy makers? 1. 0% for inflation and 4% to 5% for unemployment 2. 2% for inflation and 0% for unemployment 3. 2% for inflation and 4% to 5% for unemployment 4. 0% for inflation and 0% for unemployment

2% for inflation and 4% to 5% for unemployment

John Maynard Keynes believed that the government should: 1. avoid using fiscal and monetary policies, as they have adverse long-term effects. 2. not intervene in the economy when there is a recession but let it self-correct. 3. actively try to mitigate the effects of recessions through fiscal and monetary policies. 4. intervene when there is a boom but let a recession run its course.

Actively try to mitigate the effects of recessions through fiscal and monetary policies.

A price index: 1. always includes a base year. 2. is used to measure the cost of a market basket across different years. 3. All of these 3 other possible answers listed here are true 4. is normalized so that it equals 100 in the base year.

All of these 3 other possible answers listed here are true.

As our economy goes through a business cycle, what is the normal relationship between Inflation and unemployment? 1. During a recession we see both inflation and unemployment increasing. 2. During a recession we see both inflation and unemployment decreasing. 3. All of these 3 possible answers listed here are not true or correct. 4. During a recession we see inflation increasing and unemployment decreasing.

All of these 3 possible answers listed here are not true or correct.

Which price index is used to measure changes in the prices that firms pay for goods and services? 1. the consumer price index 2. All of these 3 possible answers listed here are not true or correct. 3. the cost of living index 4. the GDP deflator

All of these 3 possible answers listed here are not true or correct.

If an economy is efficient: 1. all goods are produced at their maximum price and quality. 2. all opportunities to make people better off without making other people worse off have been exploited. 3. resources are still available to produce specific consumer goods that are more desirable. 4. prices are the lowest they can possibly be.

All opportunities to make people better off without making other people worse off have been exploited

During the Obama administration, the development of low‑cost batteries for electric cars received large amounts of federal funding via subsidies. Meanwhile, American households gave a higher priority towards minimizing their environmental impact. Consider the market for zero‑emissions electric vehicles, where there is an upward‑sloping supply curve and a downward‑sloping demand curve. In which direction will demand and supply shift? 1. Both curves will shift right. 2. Both curves will shift left. 3. Demand will shift right, and supply will shift left. 4. Demand will shift left, and supply will shift right. What will happen to the equilibrium price? 1. The price will remain constant. 2. The price will decrease. 3. The price will increase. 4. The price will change ambiguously.

Both curves will shift right and the price will change ambiguously.

Match each statement with the change it describes.

Change in quantity supplied: The price of lamps increases, so lamp producers increase the number of lamps they produce. Change in supply: Lamps become much more profitable to make, so furniture makers make fewer tables and more lamps. Change in quantity demanded: The price of lamps increases, and lamp sales in Urtown drop. Change in demand: Many people are buying bigger houses, and lamps sales increase.

A trade-off involves weighing 1. social costs. 2. external costs. 3. opportunity costs. 4. costs and benefits.

Cost and benefits

An economy has achieved _____ if it has not passed up any opportunities to make some people better off without making others worse off. 1. a global maximum 2. utility 3. equity 4. efficiency

Efficiency

Which of the following statements describes efficiency? I. A situation in which producers make the highest profits possible. II. A situation in which we cannot produce more of one good without producing less of another good. III. A situation in which we produce the goods and services that people value most highly. 1. I only 2. I and II 3. I, II, and III 4. II and III

II and III

In most cases, which of the following correctly explains the movement of inflation and unemployment during a recession? 1. Inflation increases and unemployment increases 2. There is no way to tell 3. Inflation decreases and unemployment decreases 4. Inflation decreases and unemployment increases

Inflation decreases and unemployment increases

Which scenario describes the operation of a tariff? 1. Consumers in Turkey, who pay $4 per cup of tea, demand that the government open up trade with the world market because they know the world price is $2 per cup. 2. Ireland taxes the import of potatoes in order to keep domestic farmers in business. 3. Norway becomes an exporter of fireworks after it opens up trade with the world market and realizes its market price is lower than the world price. 4. Angola opens up trade with the world corn market and decides to maintain its previous market price. Which is NOT an effect of a tariff? 1. a domestic market price above world market price 2. decreased imports 3. increased demand 4. deadweight loss

Ireland taxes the import of potatoes in order to keep domestic farmers in business and increased demand.

Suppose everyone in a small town decided to save more and spend less. How will this affect an economy? (In macroeconomics, this is called the paradox of thrift.) 1. It will increase the overall level of income, since other groups will spend more. 2. It will cause the prices of many goods to increase. 3. It will have no impact, since a small town makes up a small portion of an economy. 4. It will decrease the overall level of income, since one person's spending is someone else's income.

It will decrease the overall level of income, since one person's spending is someone else's income.

Please identify the appropriate term for the following scenarios. Ivan, a Russian fishermen, needs a permit so that he can participate in commercial ice fishing for yellow perch and legally sell the perch he catches. Garet is an undergraduate student who has to work at McDonald's part-time to help pay his tuition loans. Always looking on the bright side of things, he is thankful that he cannot make less than what he is earning, $7.25$7.25/hour. D'Artagnan, a poor French noblemen, discovers a large cache of truffles in his backyard. However, the government caps the sale of truffles at $100$100/pound, which frustrates D'Artagnan because he knows they are worth more than that. Athos is an avid collector of swords, but as they are illegal to purchase, he obtains them through illicit means. To help out farmers, the government sets the minimum price of potatoes at $26 per bushel. In order to support domestic sales of textiles, the country of Germany puts a cap on the amount of foreign textiles it imports.

Ivan's permit: License Garet's wage: Price floor The truffles price cap: Price Ceiling Buying swords illegally: Black market Minimum Potato Price:Price floor Cap on imports: Quota

Suppose the city council in a large city decides to pass a law which forces landlords to charge a maximum rent of $750/month for a one-bedroom apartment. Prior to the rent control, the average rent for a one-bedroom apartment was $1,750/month. Which is likely to occur as a result of the price ceiling? 1. Some landlords and renters will agree on a price of less than $750/month and not report it to the government. 2. Landlords will begin decreasing the quality of one-bedroom apartments by not making repairs or paying for upkeep. 3. The rental market will become more efficient. 4. Landlords will supply more apartments to the market than they did before the price ceiling. The answer above is an example of 1. a quota rent. 2. quantity controls. 3. inefficiently low quality. 4. a black market.

Landlords will begin decreasing the quality of one bedroom apartments by not making repairs or paying for upkeep and inefficiently low quality.

Which of the following questions are relevant to the study of macroeconomics, and which are relevant to the study of microeconomics?

Macroeconomics: What will happen to spending by consumers when the economy enters a downturn? What will happen to Canadian exports as the dollar becomes less expensive in terms of other countries? What is the relationship between a nation's unemployment rate and its inflation rate? Microeconomics: How will Ms. Martin's tips change when a large manufacturing plant near the restaurant where she works closes? How will the price of oranges change when a late frost damages Ontario's apple orchards? How will wages at a manufacturing plant change when its workforce is unionized?

A decrease in efficiency means that an economy has: 1. decreased the incentives of its citizens to follow their own self-interest. 2. made more people worse off without making others better off. 3. decreased the equity of its distribution of goods and services. 4. reduced its opportunity costs.

Made more people worse off without making others better off.

Mexico exports clothing to the United States, and the United States exports heavy equipment to Mexico. Proponents of the Heckscher-Ohlin model would explain this pattern of trade by noting that: 1. Mexico's climate is more conducive to producing clothing, while the United States' climate is more conducive to producing heavy equipment. 2. Mexico has a relatively large endowment of factors of production used in making clothing, while the United States has a relatively large endowment of factors of production used in making heavy equipment. 3. Mexico has an advantage in the technology used in clothing production, while the United States has an advantage in the technology used in bulldozer production. 4. Mexico has a factor intensity in capital, and the United States has a factor intensity in labor.

Mexico has a relatively large endowment of factors of production used in making clothing, while the United States has a relatively large endowment of factors of production used in making heavy equipment.

Suppose a state passes a minimum wage law that increases the minimum wage from $5/hour to $20/hour. The equilibrium wage prior to the minimum wage hike was $10/hour. Which is likely to result from increasing the minimum wage? 1. The labor market will become more efficient. 2. Some employers and workers will agree on a wage of less than $20/hour and not report the wages to the government. 3. The state will experience full employment. 4. Employers will demand more labor than workers will supply. This result of increasing the minimum wage is an example of a 1. black market. 2. quota rent. 3. license. 4. quantity control.

Some employers and workers will agree on a wage of less than $20/hour and not report the wages to the government and black market

Although both tariffs and quotas are tools used to restrict or reduce trade, which of the statements best describes their differences? 1. Tariffs are a tax on imported goods, and quotas are limits on the number of imported goods. 2. Quotas are a tax on imported goods, and tariffs are a tax on imported goods. 3. Tariffs are a subsidy for exported goods, and quotas act as a minimum limit of exports. 4. Tariffs are a tax on exported goods, and quotas are limits on the number of exported goods. 5. Tariffs are a tax on imported goods, and quotas are limits on the number of exported goods.

Tariffs are a tax on imported goods, and quotas are limits on the number of imported goods.

The circular-flow diagram ignores a number of real-world complications in the interest of simplicity. Which of the following factors is ignored? 1. The money flows to factors of production. 2. The flows of money between participants. 3. The role of the market for goods and services in the circular flow. 4. That many sales that firms make are not to households but to other firms.

That many sales that firms make are not to households, but to other firms.

Which one of the following statements is the most accurate description of the Federal Reserve's role in our economy? 1. The Fed has very little independance from congress and the President in maintaining it's dual mandate of controlling inflation and unemployment. 2. The Fed has a great deal of independence from congress and the President in maintaining it's dual mandate of controlling inflation and unemployment. 3. The Fed's dual mandate is to make sure that Fiscal Policy is used wisely to keep unemployment low and the value of the stock market high. 4. The Fed's dual mandate is to make sure that Monetary Policy is used wisely to keep unemployment low and the value of the stock market high.

The Fed has a great deal of independence from congress and the President in maintaining it's dual mandate of controlling inflation and unemployment.

The view that the government should take an active role in managing the economy dates from: 1. the Civil War. 2. the Vietnam War. 3. World War I. 4. the Great Depression.

The Great Depression

(Scenario: The United States and Germany) Use Scenario: The United States and Germany. Given this information, the country that has the absolute advantage in barley is _____, and the country that has the absolute advantage in aluminum is _____. Scenario: The United States and Germany Two countries, the United States and Germany, produce two goods, barley (B) and aluminum (A). Each has a linear production possibility frontier in both goods. If the United States spends all of its available resources to produce barley, it can produce 500 tons of barley and no aluminum. If it uses all of its resources to produce aluminum, it can produce 250 tons of aluminum and no barley. If Germany spends all of its available resources producing barley, it can produce 400 tons of barley, and if it spends all of its resources on the production of aluminum, it can produce 400 tons of aluminum. 1. Germany; the United States 2. The United States; the United States 3. the United States; Germany 4. Germany; Germany

The United States; Germany

The Demand Pull inflation that we have recently experienced is likely to have come from which of the following? 1. The recent low interest rate policy that the Fed has followed and the recent stimulus checks that the government sent to the public. 2. The supply chain backup of the past year and the high interest rate policy that the Fed has recently followed 3. The recent stock market growth. 4. The supply chain backup of the past year.

The recent low interest rate policy that the Fed has followed and the recent stimulus checks that the government sent to the public.

A sushi chef prepares a California roll for a customer. Which of the following factors is physical capital? 1. the ingredients used to prepare the dish 2. the skills the sushi chef has acquired that enables him to perform this feat 3. the knife use to cut the sushi 4. the sushi chef

The knife use to cut the sushi

Suppose Pennsylvania produces only steel and barley, with fixed amounts of land, labor, and capital resources. Which scenario BEST sets the stage for economic growth? 1. The unemployment rate in Pennsylvania rises from 5% to 6%. 2. The state experiences a devastating drought. 3. The United States imports more and more low-cost steel from Canada. 4. The percentage of Pennsylvania residents with a university degree rises from 15% to 23%.

The percentage of Pennsylvania residents with a university degree rises from 15% to 23%.

The Cost-Push inflation that we have recently experienced is likely to have come from which of the following? 1. The recent stimulus checks that the government sent to the public alone. 2. The recent supply chain backup that we have experienced. 3. The recent low interest rate policy of the Fed alone 4. The recent low interest rate policy of the Fed and the recent stimulus checks that the government sent to the public.

The recent supply chain backup that we have experienced

When the Chicago city manager receives complaints that the municipal courts are not fully accessible to individuals with disabilities, she responds that the $1 million improvement needed to address the problem will not happen because "that money could be spent building lavatory space for people with disabilities." Which economic principle does this statement BEST represent? 1. Markets move toward equilibrium. 2. When markets don't achieve efficiency, government intervention can improve society's welfare. 3. The true cost of something is its opportunity cost. 4. "How much" is a decision at the margin.

The true cost of something is its opportunity cost

When the economy experiences shortfalls or excesses of spending, government policies can be used to address the imbalances. Which statement does NOT address such imbalances, realized during the coronavirus pandemic? 1. Congress passes a $4 trillion relief package for workers and businesses affected by the coronavirus pandemic. 2. The government reduced taxes to help workers. 3. There is fear of recession and uncertainty about the future in a post COVID-19 reality. 4. The federal government provided cash payments to workers unemployed due to pandemic.

There is fear of recession and uncertainty about the future in a post COVID-19 reality.

Betty lives in a state where the minimum legal price for a gallon of milk is $2.50. She convinces a local dairy farmer to sell her milk for $2.00 per gallon instead. Betty and the farmer are participating in a 1. price floor. 2. license. 3. quota. 4. price ceiling. 5. black market.

black market

The price of good X falls and the demand for good Y decreases. We can conclude that: 1. X and Y are complements. 2. X is a normal good. 3. X and Y are substitutes in production. 4. X and Y are substitutes.

X and Y are substitutes.

You can spend $300 on either a pair of new Air Jordan sneakers or a new skateboard. If you choose to buy the Air Jordans, the opportunity cost is: 1. your enjoyment of the new skateboard. 2. both the $300 and your enjoyment of the new skateboard. 3. impossible to determine. 4. $300.

Your enjoyment of the new skateboard

Which of the following illustrates consumption? 1. a new car purchased for personal use 2. a storage facility for a moving company 3. a dump truck purchased by a demolition company 4. a new computer purchased by Federal Express for one of its corporate executives

a new car purchased for personal use.

Saying that an unemployment rate of 8% is too high is: 1. an example of absolute advantage. 2. the circular-flow model. 3. a positive statement. 4. a normative statement.

a normative statement.

In a situation in which there are technological improvements, we generally see: 1. a shift in the production possibility frontier outward. 2. the production possibility frontier unchanged. 3. a transition to increased unemployment. 4. a shift in the production possibility frontier inward.

a shift in the production possibility frontier outward.

If the opportunity cost of producing either of two goods is constant, the production possibility frontier is: 1. upward-sloping. 2. bowed out from the origin. 3. convex to the origin. 4. a straight line.

a straight line.

For each example listed, decide if the good is a normal good or an inferior good. Make sure you answer from the perspective of the individual or individuals doing the buying or consuming. a. Billy's mom increases his weekly allowance by $55. As a result, Billy increases the number of apps he downloads on his smartphone. Smartphone apps are _______ good. b. Susan gets a 1515 percent performance bonus at work. She can finally stop eating so many frozen pizzas and eat something more tasty. Frozen pizzas are _______________ good. c. Mike is an appliance salesman. Refrigerator sales in his store have fallen and so has his commission. Mike decides to switch from name brand cereal to generic cereal. Generic cereal is ______________ good. d. Hair stylist Molly loses a few of her clients. Molly cuts back on the number of smoothies she buys during the week. Smoothies are ___________________ good.

a. normal b. inferior c. inferior d. normal

a. What three measures of the economy tend to move together during the business cycle? 1. Employment 2. Industrial output 3. Exports 4. Inflation b. Which way do they move during an upturn? 1. They rise. 2. They fall. 3. They should not change. c. During a downturn? 1. They rise. 2. They fall. 3. They should not change.

a.) Employment, Industrial output, Inflation b.) They rise. c.) They fall

Indicate whether each item describes a primary goal of macroeconomic policy. a. Low unemployment 1. primary macroeconomic policy goal 2. not a primary macroeconomic policy goal b. Eliminating political conflict 1. primary macroeconomic policy goal 2. not a primary macroeconomic policy goal c. To set the optimal price for a pound of peaches 1. primary macroeconomic policy goal 2. not a primary macroeconomic policy goal d. Low inflation 1. not a primary macroeconomic policy goal 2. primary macroeconomic policy goal e. To calculate how much urban residents are willing to pay to protect biodiversity 1. primary macroeconomic policy goal 2. not a primary macroeconomic policy goal f. Rising living standards 1. primary macroeconomic policy goal 2. not a primary macroeconomic policy goal

a.) primary macroeconomic policy goal b.) not a primary macroeconomic policy goal c.) not a primary macroeconomic policy goal d.) primary macroeconomic policy goal e.) not a primary macroeconomic policy goal f.) primary macroeconomic policy goal

For the past several months, per capita output has grown more and more slowly, and unemployment has fallen, but both trends appear to have leveled off. Where in the business cycle is the economy? 1. at a trough 2. in an expansion 3. in a recession 4. at a peak

at a peak.

Before the Great Depression, the conventional wisdom among economists and policy makers was that the economy is largely self-regulating. a. Is this view consistent or inconsistent with Keynesian economics? Explain. 1. It is inconsistent with Keynes's proposals to nationalize major industrial sectors and place most of the economy under government control. 2. It is consistent with Keynes's philosophy that a laissez-faire, or hands-off, approach was most appropriate. 3. It is consistent with Keynes's views regarding fiscal and monetary policies. 4. It is inconsistent with Keynes's conclusion that government intervention in the economy was necessary to maintain full employment. b. What effect did the Great Depression have on conventional wisdom? 1. The Great Depression reinforced the conventional wisdom that intervention was unnecessary and would at times exacerbate any economic problems that society faced. 2. Conventional wisdom shifted from reliance on the use of fiscal and monetary policies to address economic problems to a more laissez-faire philosophy. 3. Because the policies of balanced budgets, protectionist trade policies, and tight money successfully reversed the economic decline, policy makers continued to rely on them. 4. The enormity of the Great Depression demonstrated that the economy was not necessarily self-regulating, and that government intervention would at times be necessary. c. Contrast the response of policy makers during the 2007-2009 recession to the actions of policy makers during the Great Depression. What would have been the likely outcome of the 2007-2009 recession if policy makers had responded in the same fashion as policy makers during the Great Depression? 1. Despite the fact that the economy had changed between the 1930s and the 2000s, the success of the policies used to fight the Great Depression suggests they would have been effective in controlling the recession of 2007-2009 as well. 2. The country may have been able to limit unemployment to levels below those of the 1930s. 3. Since the economy is self-correcting, the laissez-faire policies of the 1930s were the appropriate ones to adopt when the recession developed in 2007-2009. 4. The Great Recesssion may have approached the severity of the Great Depression.

a.)It is inconsistent with Keynes's conclusion that government intervention in the economy was necessary to maintain full employment. b.)The enormity of the Great Depression demonstrated that the economy was not necessarily self-regulating, and that government intervention would at times be necessary. c.)The Great Recession may have approached the severity of the Great Depression

Answer the following questions about Keynes and his history. John Maynard Keynes developed some of his main ideas during the Great Depression of the 1930s. The Great Depression was characterized by 1. low unemployment and high inflation. 2. high unemployment and high inflation. 3. low unemployment and low inflation. 4. high unemployment and substantial deflation. To address severe economic downturns, such as the Great Depression, Keynesian economists favor 1. the use of contractionary monetary policy. 2. no government intervention in the economy. 3. the use of expansionary fiscal policy. 4. the use of expansionary monetary policy.

high unemployment and substantial deflation and the use of expansionary fiscal policy.

If the United States imposes an import quota on Portuguese port, the result in the short run is likely to be _____ profits for American wine producers and _____ profits for Portuguese port producers. 1. lower; lower 2. lower; higher 3. higher; lower 4. higher; higher

higher; lower

If Isabella drives to a Kansas City, 120 miles from Manhattan, Kansas (home of Kansas State University) to do her back-to-school shopping, this will: 1. help Isabella's community because Isabella's shopping in the big city leaves more goods for the other small-town residents to buy. 2. hurt Isabella's community because Isabella's spending will be income for people in the large city. 3. hurt the city because Isabella will take the goods that she purchases back home to her small town. 4. help the city because people from small towns usually buy things that people in big cities don't want.

hurt Isabella's community because Isabella's spending will be income for people in the large city.

If workers' nominal wages have risen by 50% over 10 years, and prices have increased by 40% during that period, then we can safely conclude that the goods and services workers can buy have: 1. decreased in quality. 2. not changed in either quantity or quality. 3. decreased in quantity. 4. increased in quantity.

increased in quantity.

Please select all likely consequences of rent controls when the price ceiling is binding. There is more than one correct answer. 1. surplus of affordable housing 2. inefficient allocation of apartments 3. reductions in apartment quality 4. shortage of affordable housing

inefficient allocation of apartments reductions in apartment quality shortage of affordable housing

Trade can be beneficial to an economy because: 1. it eliminates unemployment. 2. it enables more goods and services to be obtained at a lower opportunity cost. 3. it results in a more inefficient use of resources overall. 4. it prevents specialization in activities in which countries have a comparative advantage.

it enables more goods and services to be obtained at a lower opportunity cost.

Spaghetti and lasagna are substitutes. Holding all other things constant, this means that if the price of spaghetti increases, the demand for: 1. both spaghetti and lasagna will increase. 2. lasagna will increase. 3. spaghetti will increase. 4. lasagna will decrease.

lasagna will increase

The ____ index is likely to respond more quickly to price changes than are the other indexes, so it is regarded as a warning sign of inflation. 1. producer price index 2. personal consumption indicator 3. consumer price index 4. GDP deflator

producer price index

When a market begins to engage in international trade: 1. consumers of the exported good may be better off. 2. consumers of the imported good may be worse off. 3. producers in the importing industry may be better off. 4. producers in the exporting industry may be better off.

producers in the exporting industry may be better off.

Advocates of trade barriers suggest that trade restrictions are needed for national security, job creation, and to: 1. allow for government involvement in trade discussions. 2. protect new producers until they become more established. 3. eliminate government tariff revenues. 4. foster the creation of absolute advantage.

protect new producers until they become more established.

If nominal GDP increases from one year to the next, _____ must have risen. 1. real GDP 2. prices and real GDP 3. real GDP or prices or both 4. prices

real GDP or prices or both

What is the main goal of macroeconomic policy activism? 1. to increase government debt 2. to reduce the severity of business cycles 3. to increase aggregate demand by expanding the size of the federal government 4. to increase aggregate demand through tax cuts 5. to ensure that only politicians that believe in Keynesian economics get elected

to reduce the severity of business cycles

Economists may disagree about policies because they: 1. disagree for the sake of discussion. 2. approach issues using the same sets of values. 3. only consider issues in positive economics and not normative economics. 4. use different economic models.

use different economic models

A normative statement is a statement regarding: 1. what should be. 2. the normalizing assumptions of an economic model. 3. the forecast of a model. 4. what is.

what should be