ECON211 Exam 2

(Figure5: Understanding Surplus and Efficiency) In the graph, what is the sum of consumer and producer surplus?

$50

(Table1) The associated table provides a hypothetical bundle of goods and their respective prices for three different years. If 2014 is selected as the base year, the cost of the market basket in 2017 would be would be:

$640.50.

(Figure1: Determining Surplus and Loss) Consider the graph. If the price is lowered from $8 to $5, producer surplus:

decreases by $90 and deadweight loss increases by $70.

Joe fixes cars in his driveway to earn his income. He works late at night and makes so much noise that Moe, his neighbor across the street, cannot sleep. Joe:

is imposing an external cost on Moe.

The natural rate of employment:

is the rate at which the actual inflation rate is equal to people's inflationary expectations.

A legal maximum price that can be charged for a product or service is known as a(n):

price ceiling.

When prices fall below equilibrium:

producer surplus falls and it is uncertain what happens to consumer surplus.

Which of these is NOT a public good?

shirts at a clothing store

Markets tend to produce:

too much of a good exhibiting external costs.

What is real GDP in 2014 dollars if nominal GDP in 2014 is $15,000 billion, the GDP deflator in 2014 is 110, and the GDPdeflator in 2010 was 100?

$13,636 billion

Which of the following is true about business cycles?

$14,010 billion

If personal consumption is $100, investment is $25, government purchases total $25, imports equal $20, and exports equal $10, then GDP equals:

$140.

(Figure3: Determining Surplus 2) In the graph, the consumer surplus is equal to ______.

$15

A sheep ranch produces $30 worth of wool. A suit manufacturer produces $60 worth of suits. A retail outlet sells a suit to a customer for $180. The change in GDP would be:

$180.

Suppose a market basket of goods costs $10,000 in 2009, the base period, and that same basket of goods now costs $11,200. What is the consumer price index for the current period?

112.0

(Table3) According to the table, what is the unemployment rate of this economy?

14.3%

(Table2) According to the table, what is the labor force of this economy?

350

What impact will a rising price level have on real GDP?

Changes in the price level do not impact real GDP.

_____ is an overall decline in prices throughout the economy.

Deflation

The key to being counted as unemployed by the Bureau of Labor Statistics is to be:

actively seeking work.

According to the circular flow model, the value of the household sector and the value of the business sector will:

always be equal.

Which one of the following would NOT lead to higher prices?

an increase in the supply of food

What is an example of a final good?

bacon purchased at a grocery store

Suppose the equilibrium price for a gallon of milk is $2.50, but due to government price supports, the minimum legal price is $2.75 per gallon. This price floor:

causes a surplus of milk in the market.

Suppose that the price of a good is $6 and equilibrium price is $3. Compared to market equilibrium:

consumer surplusis decreased and deadweight loss is increased.

When the Bureau of Labor Statistics calculates the consumer price index, it assumes that:

consumers do not substitute cheaper goods for goods when prices have risen.

The largest component of GDP is:

consumption expenditure.

If a price ceiling is set below the market price, it is:

effective.

The two approaches used by the government in estimating GDP are:

expenditure and income.

Net exports equal:

exports minus imports.

Inflation is a:

general rise in prices.

Investment in structures, equipment, software, and net inventory is known as:

gross private domestic investment.

The GDP deflator is an index that includes prices of all of the following EXCEPT:

imports

Hannah is not at work because she broke her leg, but she will return once it heals. She is:

in the labor force.

Which component of GDP includes inventory changes?

investment

Which component is the smallest part of U.S. GDP?

net exports

The simple circular flow diagram shows that economic aggregates can be calculated either by the _____ flows in the product market or by the _____ flowing to households in the resource market.

spending; income

If a price floor is set below the equilibrium price in the market, consumer surplus will be:

the same as it would be without the price floor.

At equilibrium price:

the sum of consumer surplus and producer surplus is maximized.

(Figure4: Determining Surplus) In the graph, which shape represents producer surplus?

the triangle jik

Which situation involves an external cost?

Alma lives next to a freeway and the noise wakes her up every morning, against her wishes, at six o'clock.

In the United States, our principal measure of inflation is:

the consumer price index.

(Table6) Suppose the Bureau of Labor Statistics collects the data presented in the following table:

there is no unemployment.

Last year, the consumer price index (CPI) was 115 while the consumer price index for this year is 125. The rate of inflation is:

8.7%.

Child care provided by a nanny is not included in the GDP if the parents pay the nanny "under the table."

TRUUU

Lexie works Monday to Friday from 4 P.M. to 6 P.M. in the after-school program at a local elementary school. She began looking for a full-time job last week and has already scheduled three job interviews. According to the Bureau of Labor Statistics, Lexie is:

employed.

(Table4) According to the table below, when using the expenditure approach, GDP is:

$1,770 billion.

Suppose that a customer's willingness to pay for a product is $79, and the seller's willingness to sell is $64. If the negotiated price is $68, how much is consumer surplus?

$11

(Figure2: Determining Surplus and Loss) In the graph, which price would allow for an effective price ceiling?

$5

_____ unemployment includes workers who voluntarily quit their jobs to search for better positions.

Frictional

Suppose an economy has historically grown at a rate of 2.25%. The economy is growing at a rate of 3%, and the unemployment rate is low by historical standards. The economy is expected to continue to grow in the near future, but monetary authorities are concerned that inflation may increase. This economy is probably in the _____ stage of the business cycle.

expansion

Arlina got a 5% raise while the rate of inflation was 6%. Arlina's standard of living:

fell by 1%.

When a recession gets under way:

firms start to lay off workers to reduce costs.

What is your new salary if you earned $40,000 last year, the consumer price index increased from 120 to 125, and your salary is adjusted by the rate of inflation annually?

$41,666.67

(Table5) According to the table, the GDP deflator for 2012 is:

100.

An economy has a population of 226,500, of whom 12,500 are unemployed and actively seeking work, and 35,000 have given up looking for a job. Also, 28,000 people work part-time, and 151,000 people work full-time. This economy's unemployment rate is _____.

7.0%

Suppose that a major hurricane hits Florida, causing widespread damage to homes and businesses. If the legislature imposes price controls in order to keep reconstruction costs reasonable, which of these is the MOST likely result?

a shortage of building materials

Retirees and creditors:

are hurt by inflation because their purchasing power is reduced.

Which is one of the four major reasons why markets fail?

asymmetric information

The mortgage crisis caused a lot of consumers to stop spending money. The decrease in spending led to a decrease in production. Which type of unemployment resulted?

cyclical

The U.S. gross domestic product is equal to the total market value of all:

final goods and services produced by resources in the United States.

Jennifer did not work during college. She just obtained a bachelor's degree in marketing, and she is now looking for a marketing job in the retail industry. Jennifer is considered:

frictionally unemployed.

Consumer surplus is defined as the:

gap between the demand curve and the market price.

Producer surplus is defined as the:

gap between the supply curve and the market price.

Other things equal, if a recession gets worse, the number of discouraged workers _____, and the number of those in the labor force _____.

increases; decreases

If there is only one provider of electricity in a city, then that market is likely to fail due to:

lack of competition.

One of the key concepts involved in the circular flow diagram is that:

one person's spending is another person's income.

If one person consumes a public good:

others cannot be excluded from enjoying it.

The high point of a business cycle is called the:

peak

Which phase of the business cycle occurs immediately after a recovery?

peak

Karl's Keychain Company produces keychains that sell for $1 each. On January 1, 2015, the company had inventory of 8,000 keychains. During 2015, the company sold 900,000 keychains. At the end of the business year on December 31, 2015, the company's inventory of keychains was 9,000. What was the value of Karl's total production and inventory investment in 2015?

production= $901,000; inventory investment = $1,000

(Table7) Look at the table (Macroeconomic Data for Econoland); what stage of the business cycle would the NBER declare Econoland to be in during the 4th quarter of 2014?

recession

If a product becomes obsolete and the workers who produced that product will need additional training to find new jobs, then they are experiencing:

structural unemployment.

A market with external costs:

tends to overproduce goods.

A business cycle is:

the periodic fluctuation of economic activity.

Zach has been laid off from his job as an aircraft worker . He has been actively looking for a job but has had no luck for the past six weeks. According to the Bureau of Labor Statistics, Zach is:

unemployed.