Macro Economics Everything - 1

If Oscar's MPC is 0.95 and he earns an additional $2,000, how much would he spend?

$1,900

Larry's demand schedule for pizza is indicated below. If the current price of pizza is $1.00 per slice, what is Larry's consumer surplus if he buys 6 slices of pizza? (It might help to draw his demand curve from the schedule listed).

$1.50

According to the table above, if the price of Rap CDs equals $15, the total consumer surplus Psy receives from purchasing Rap CDs is:

$30.

"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:

$44.

A given change in disposable income would have the greatest effect on consumption with which of the following marginal propensities to consume?

0.8

According to the above information, what would the price index equal in 2011?

113.2

If the nominal rate of interest is 10.5 percent, and the inflation rate is 4.3 percent, what is the real rate of interest?

6.2 percent

Consider the following data: T he Official number of people Employed is 142 million and the official number of people Unemployed is 12 million, From the data provided, the unemployment rate is approximately ____ percent.

7.8

Figure 2 Supply and demand Equilibrium price and quantity in Figure 2 occur at:

A price of $15 and a quantity of 30 units.

Figure 2 If a price ceiling of $10 was in effect in Figure 2:

A shortage of 20 units would occur.

Which of the following events would cause a rightward shift in the market supply curve of automobiles?

A technological improvement which reduces the cost of production.

If the market price equals P2, the consumer surplus market-wide can be identified in the diagram as area ___________, while the producer surplus can be identified as area ______________.

A+B+E; C+F+D

Faster growth rates by a major trading partner, combined with an increase in stock market wealth, would have what effect on aggregate demand?

AD would increase.

The federal government buys $10 million worth of aircraft engines from General Motors. If the MPC is .80 what will be the impact on aggregate demand, other things being equal?

Aggregate demand will increase $50 million.

The reasons that nations trade include the fact that

All of the above

Which of the following statements is/are true?

All of the above

Which of the following will cause consumption spending (C), and thus AD, to decrease?

All of the above

Which of the following would an economist consider a market failure?

All of the above

Which of the following is an example of an externality?

All of the above are correct.

The terms of trade represent:

All of the above are true

An entrepreneur is:

All of the above.

How much of a good a consumer is willing to buy depends on:

All of the above.

Which of the following is (are) true when one firm's research and production can increase another firm's access to technological advances?

All of the above.

Which of the following is a scarce resource/input?

All of the above.

Ceteris paribus, which of the following would generally cause an increase in the demand (graphically, a shift of the entire curve to the right) for new automobiles?

An increase in consumers' income, assuming new automobiles are "normal goods. "

Which of the following changes in the electricity market would best explain an increase in the equilibrium price of electricity?

An increase in demand and/or a decrease in supply.

Which of the following statements is always true?

An increase in price will lead to an increase in producer surplus along a supply curve.

Tennis balls and tennis rackets are commonly used together. A decrease in the price of tennis rackets will result in:

An increase in the demand for tennis balls.

If government imposes a tax equal to (P1-P3), the tax revenue can be identified in the diagram as area ___________, while the remaining producer surplus will be ________:

B+C; D

Economics is the study of how:

Best to use society's scarce resources.

In the circular flow model:

Both (a) and (b) are correct.

If the market price equals P2, producer surplus can be identified as area

C + D+ F.

A consequence of the economic problem of scarcity is that:

Choices have to be made about how resources are used.

What is the ability of a country to produce a specific good at a lower opportunity cost than its trading partners?

Comparative advantage

___________________ spending is the largest component of the total demand for final goods and services in the US.

Consumption (C)

Why are creditors harmed by unexpected inflation?

Creditors are paid back money with less spending power than they expected when the money was loaned out.

If consumers expect tablet manufacturers to offer rebates next month, consumers will:

Decrease their demand for tablets today.

The Rule of 70 says that the number of years necessary for a nation to ____________ its output is approximately equal to 70 divided by the nation's __________ rate.

Double; growth

If the market is in equilibrium and then the government imposes a price ceiling equal to P3, buyers lose consumer surplus equal to area ____, but gain consumer surplus equal to area ____.

E; C

Which of the following statements is not correct?

Economic growth is best measured by the annual percentage change in nominal GDP per capita.

Every point on the production-possibilities curve is considered to be:

Efficient

If Don beautifully paints the outside of his house and landscapes his front yard,

He probably has raised the value of his home and the value of his neighbors' homes

Which of the following is the best description of the origin of the economic problem of scarcity?

Humans have relatively unlimited wants for goods and services but resources are limited.

Which of the following is false?

In adverse selection situations, it is rational for a seller with more information about a product to provide a truthful and complete disclosure and make that fact known to a potential buyer.

Which of the following is correct?

Increased education adds to the stock of human capital, not unlike building factories adds to the stock of physical capital.

According to the law of supply, the quantity of a good supplied in a given time period:

Increases as its price rises, ceteris paribus.

A change in demand for a good means there has been a shift in the demand curve. On the other hand, a change in the quantity demanded of a good:

Is shown as a movement along the demand curve between two points.

If an economy is producing inside the production-possibilities curve (PPC), then:

It is using its resources inefficiently.

Free trade typically results in ______ prices and _____ consumption.

Lower, more

A nation's production-possibilities curve (PPC) indicates the:

Maximum combinations of goods and services an economy could possibly produce given its currently available resources and technology.

If an economy is producing a combination of goods directly on its production-possibilities curve (PPC), then producing:

More of one good implies producing less of another good.

An increase in the selling price of a good causes a:

Movement up along the supply curve.

Which of the following is the best example of a public good (as defined in class)?

National Defense

A ballet performance had many empty seats. This implies that the:

Price of the tickets must have been above the equilibrium price (i. e. "too high").

An increase in the supply of gasoline, ceteris paribus, will cause equilibrium:

Price to fall and quantity to rise.

A rightward shift of the market demand curve for MP3 players, ceteris paribus, causes equilibrium:

Price to increase and quantity to increase.

In a freely-operating market, if the quantity demanded of a good is greater than the quantity supplied of the good at the current price, then:

Price will increase until it reaches the equilibrium price.

When a surplus exists:

Producers reduce price in an attempt to decrease excess inventory.

A _______ is a limit on the quantity of a good that may be imported in a given time period.

Quota

An effective price ceiling results in black-market pressures to:

Raise prices because of shortages.

Draw a basic diagram of aggregate demand and aggregate supply in the short run on a sheet of paper. What does the model predict will happen to the price level, real output and unemployment if there is a decrease in the SRAS curve?

Real GDP will fall, but the price level and unemployment will increase

A country should specialize in what it is _______ efficient at producing, that is, goods for which it has the _______ opportunity cost.

Relatively; lowest

Which of the following is not a major trading partner of the US?

Russia

Assume that the economy is currently operating efficiently (i.e. it is currently on its PPC). Long-run economic growth for this nation would best be represented by a:

Shift outward of the production-possibilities curve.

Suppose a hurricane hits Florida causing widespread damage to houses and businesses. The governor of Florida places a price ceiling on all building materials to keep the prices reasonable. Which of the following is the most likely result?

Shortages of building materials and a slower recovery from the storm.

Which of the following is not a resource as defined in this class?

The $100,000 used to start a new business.

The opportunity cost of studying for an economics test is:

The best alternative use of your time.

Microeconomics is concerned with issues such as:

The demand for CD players by individuals.

When there is market failure due to a positive externality

The free market produces too little of the good

Which of the following is false?

The labor force includes those people over the age of 14 who are either employed or unemployed.

Macroeconomics focuses on the performance of:

The overall economy.

A change in which of the following would cause a movement along a given demand curve (i. e. a "change in quantity demanded")?

The price of the good itself.

Ceteris paribus, which of the following can change without shifting the demand curve for a good?

The price of the good itself.

Which of the following is allowed to change along a given supply curve for a good?

The price of the good itself.

Figure 2 Using Figure 2, at a price of $5

The quantity demanded is 50 units.

Which of the following is the best example of "land" resource?

The river water used to float a riverboat casino.

Which of the following is most clearly a macroeconomic statement?

The unemployment rate for the United States rose to 7 percent in the last quarter.

If public goods were marketed like private goods, then

There would be market failure because too few public goods would be produced

An outward shift of the production-possibilities curve (PPC) could be caused by:

Training programs which improve the skills of workers.

A mixed economy:

Utilizes both market and non-market signals to allocate goods and services.

Which of the following is an example of a positive incentive?

You expect to receive a scholarship if your grades remain high.

The expected marginal benefit to you from purchasing a new sport utility vehicle is $20,000. The price of the new sport utility vehicle is $22,000.

You will not purchase the new sport utility vehicle at this time if you are acting rationally.

Which of the following would be an example or result of expansionary fiscal policy in action?

a budget deficit

A recession is generally caused by:

a decrease in aggregate demand.

The short-run aggregate supply curve is:

a schedule showing the relationship between the price level and the quantity of real GDP supplied.

If a drought ruins a significant amount of the coffee crop, then we would expect the price of

all of the above

Keynes believed that economies experiencing high unemployment should adopt policies to

all of the above

Which of the following is true of the long-run aggregate supply curve?

all of the above

Which of the following will cause consumption, and as a result, aggregate demand, to shift to the right?

all of the above

Real output per capita:

all of the above are correct.

Which of the following could not explain the increase in college tuition over the last decade?

all of the above could explain the rise in college tuition

In countries with low levels of income:

all of the above tend to be true.

A tax in a competitive industry (with no sources of market failure such as externalities or asymmetric information) would result in:

all of the above.

Which of the following affects the rate of economic growth?

all of the above.

A major macroeconomic goal of nearly every society is:

all of the above. achieving high rates of economic growth.

When economists use the term "ceteris paribus," they mean that:

all other variables except the ones specified are assumed to be constant.

The following graph suggests:

an economy operating with an inflationary gap.

Assume that potatoes are an inferior good. If income decreases substantially, there would be:

an increase in the demand for potatoes

The law of demand is best illustrated by the statement that:

an increase in the purchases of personal computers has been the result of lower prices

Socially inefficient outcomes may occur in markets where there are:

any of the above.

Choose the letter of the diagram in the figure below that best describes the type of shift that would occur in each situation for the market listed at the left, ceteris paribus. Laptop computers: An advancement in technology reduces the cost of producing laptop computers.

b

The tax revenue collect is represented by area:

b + d

Reducing a tariff on a particular good does which of the following?

both (a) and (c)

Economic models

both b. and c.

Which of the following is true about capitalist economic systems?

both b. and c.

The underground economy includes:

both legal and illegal sources of unreported income.

Choose the letter of the diagram in the figure below that best describes the type of shift that would occur in each situation for the market listed at the left, ceteris paribus. Donuts: People become more health-wise and prefer power bars over donuts.

c

Choose the letter of the diagram in the figure below that best describes the type of shift that would occur in each situation for the market listed at the left, ceteris paribus. Last year's model cars: This year's new model cars are introduced for purchase in the market, and consumers prefer the new cars.

c

According to the graph below of a competitive industry (with no sources of market failure), The deadweight loss of a tax is area:

c + e

Which of the following is an example of an intermediate good?

cloth sold to a suit manufacturer

Marginal analysis involves:

comparing the additional benefit from an action to the additional cost.

The largest single expenditure component of GDP is:

consumption

Marginal propensity to consume is equal to the change in ____ divided by the change in ____.

consumption spending; disposable income

Which of the following would lead to stagflation?

cost-push inflation

Choose the letter of the diagram in the figure below that best describes the type of shift that would occur in each situation for the market listed at the left, ceteris paribus. This year's new model cars: Consumer confidence in the economy improves.

d

Chalk and erasers are complementary goods. If the price of chalk were to increase because of a decrease in supply, the equilibrium price of erasers would

decrease

Over the last several decades, the amount of government investment in U.S. infrastructure in real terms has:

decreased

Positive statements are:

descriptive, making claims about how the world is.

The spending multiplier effect is based on the fact that ____________ by one person is (are) _____________ to anther.

expenditure; income

Which of the following will decrease aggregate demand?

exports falling faster than imports.

The short-run aggregate supply curve slopes upward because:

firms normally can purchase some inputs at prices that are temporarily fixed in the short run.

Classical economists believe that prices are ____ and that recessions will be relatively ____.

flexible; brief

Economists use the term "business cycle" to refer to:

fluctuations in economic activity, measured by GDP or unemployment.

The development of a nationwide computerized job bank listing of all job openings would be most likely to reduce:

frictional unemployment.

If real GDP per capita is decreasing, real output is:

growing less rapidly than the population.

In Samoa the opportunity cost of producing 1 coconut is 4 pineapples, while in Guam the opportunity cost of producing 1 coconut is 5 pineapples. In this situation:

if trade occurs, both countries will be able to consume beyond their original production possibilities frontiers.

A crucial difference between the impact of an import quota compared to a tariff is that:

import quotas generate no revenue to the domestic government, but tariffs do.

Assume lettuce and spinach are substitutes. Suppose 20% of the lettuce crop is destroyed by flooding. The floods that destroyed part of the lettuce crop would have caused the equilibrium price of spinach to ___________.

increase

Which of the following accounts for the largest percentage of federal taxes?

individual income taxes

Keynes believed that prices were ____ and that recessions would be relatively ____.

inflexible; long

Which of the following is the most unstable category of GDP?

investment

A progressive tax:

is designed to take a larger percentage of higher incomes as compared to lower incomes.

The benefits received principle would notwork well in which of the following cases?

national defense

The official unemployment rate may not reflect the true state of unemployment because:

of (a) and (b) only. part-time employees who want to work more hours are treated the same statistically as those who hold full-time jobs.

Bill looked for work for six months but could not find a job to his liking. He now spends his time at the beach. For purposes of employment he is considered:

out of the labor force.

An externality occurs when:

people other than those making the demand and supply decisions share the benefits or the costs of an activity.

The difference between the value of a good to sellers and its price is known as:

producer surplus

Nonrivalry in consumption and the inability to exclude nonpaying consumers from using the goods are characteristics of what kinds of goods?

public

A "free rider" is a person who

receives benefits from someone else's action but doesn't pay for them.

If some non-price level determinant causes total spending to increase, then the effect on aggregate demand will be a:

shift to the right.

The slope of the consumption function is equal to:

the MPC.

The marginal propensity to consume (MPC) is defined as:

the additional consumption that results from one dollar increase in disposable income.

A market shortage is:

the amount by which the quantity demanded exceeds the quantity supplied at a given price

Graphically, consumer surplus is measured by:

the area below the demand curve, but above the market price.

The fallacy of composition is:

the erroneous view that what is true for the individual will also be true for the group.

The concavity (bowed-out shape) of the production possibilities curve is the result of:

the law of increasing opportunity cost.

The law of demand holds, in part, because:

the more of a good you consume, the less additional satisfaction you obtain

Inflation exists whenever:

the overall price level is rising.

If the price of oranges were to rise, we would expect

the price of orange juice to rise

As the price level decreases, other things being equal,

the quantity of real gross domestic product demanded increases.

Suppose that education provides spillover benefits to the community as illustrated in the graph. Based on this information, we can say that:

the socially optimal quantity of education is Q1 units.

Aggregate demand can be defined as:

the total amounts that all consumers, business firms, government agencies, and foreigners wish to spend on all final goods and services at various price levels.

GDP is:

the value of all final goods and services produced within a country during a given period of time.

In the discussion of correlation and causation, correlation means:

two sets of phenomena may be related, but one does not necessarily cause the other.

Where a free-rider problem exists, goods tend to be:

underproduced.

The unemployment rate measures:

unemployed workers as a percentage of the labor force. unemployed workers as a percentage of the population.

Structural unemployment includes:

unemployment caused by automation that displaces workers from their jobs.