Macro Exam 1

A decreasing returns to scale production function is one where increasing all inputs by a certain proportion leads to output rising by:

a smaller proportion

in 1986, Ken bought a Ford Mustang for $8,000. If the price index was 280 in 2011, then what is the price of the Mustang in 2011 dollars?

$18,360.66

The U.S. sells $500 billion of goods and $250 billion of services to foreign countries. Foreign countries sell $250 billion of goods and $300 billion of services to the U.S. what is the net exports of good and services for the U.S.?

$200 billion

The aggregate production function Y = f(L,H,K) shows that economic growth can occur if: (i) human capital increases (ii) labor productivity falls (iii) the capital stock in the country depreciates (iv) the depreciation rate increases

(i) only

Suppose the consumer price index was 184 in 2009 and 198.7 in 2010. The nominal interest rate during this period was 5.8 percent. What was the real interest rate during this period?

-1.9 percent

Which of the following is an example of hyperinflation?

An economy experience inflation of more than 7,500% in 1 year

You read the case study on Bangladesh and Pakistan. Public policies aimed at increasing education opportunities for women and thereby promoting increased gender equality were more apparent in

Bangladesh

Refer to the Table 1 below. Based on the information shown and given the prediction of the growth model, which of the following is most applicable?

China is exhibiting catching-up growth to the United States

Which of the following is included in the item government purchases (G) when calculating Gross Domestic Product (GDP)?

None of the options is included

Labor unions can lead to:

an increase in structural unemployment

Everything else held constant, legalizing all forms of illegal activities is likely to

increase GDP and reduce the size of the underground (shadow) economy

The equilibrium unemployment rate cannot be equal to zero because:

it is the sum of the frictional and structural unemployment rates

Nerida Kyle could either commute to work via Uber or purchase a new car. The average cost of her one-way Uber trip is $15. Nerida works five days a week for 50 weeks a year. Based solely on avoiding the cost of an Uber, Nerida should purchase a car if the cost of the car is ___ than ___ per week.

less; $150

If the real interest rate is 10.3% and the nominal interest is 12.6%, what is the inflation rate?

2.3%

You have the afternoon free. You have a choice between going to the movies with a friend or studying economics for three hours. If you go to the movies, you will spend $8.00 on a ticket and $4.50 on popcorn. If you choose to study economics for three hours, you will raise your exam grade by 10 points. What is your opportunity cost of going to the movies?

$12.50 and 10 points

Below is the U.S. economic data for 2017. What was the total spending?

$19.52 trillion

If a bakery buys a second oven, hires a second baker, buys double the number of ingredients, doubts the size of the bakery, and then produces double the number of cakes, then bakery is experienceing

constant returns to scale

The CPI changes from 100 to 200. This means that:

overall prices have doubled

The equilibrium unemployment rate is the

rate of unemployment that exists even when cyclical unemployment has gone to zero

If the state begins to subsidize child day care heavily, we would expect labor force participation to:

rise

Suppose, in 2010, you purchased a house that was built in 2003. Which of the following would be included in the gross domestic product for 2010?

the value of the services of the real estate agent

Gary Parker is willing to pay $700 for a new iPad. Apple (the producer of iPads) is selling a new iPad for $600. It costs apple $400 to produce this iPad. How much economic surplus does Apple receive if Gary purchases this iPad?

$200

Which of the following could cause nominal GDP to decease, but real GDP to increase?

The price level falls and the quantity of final goods and services produced rises.

Consider Deborah's decision to go to college. If she goes to college, she will spend $20,000 on tuition, $10,000 on room and board, and $2,000 on books. If she does not go to college, she will earn $18,000 working in a store and spend $8,000 on room and board. Deborah's opportunity cost of going to college is

$42,000

in 1971, the cost of a four-year college degree from a public university was about $1,410. The consumer price index was 40.48 in January 1971. If the current consumer price index is 251.1, what is the approximate cost of the four year degree in current dollars?

$8,746

Suppose that a well-respected study published in Child Psychology finds that a very high proportion of children raised by stay-at-home fathers are accepted to Harvard University. Which of the following will occur, all else equal? (i) The unemployment rate will decrease (ii) The size of the labor force will decrease (iii) The number of unemployed people will increase (iv) The unemployment rate will increase

(ii) and (iv) only

You open an investment account that earns a nominal interest rate of 4.2% a year. The current consumer price index is 108. In one year, the consumer price index is expected to go to 112. What is your expected real rate of return?

0.5%

If the number employed is 190 million, the working-age population is 230 million, and the number unemployed is 10 million, then the unemployment rate is

5%

What is the GDP deflator if nominal GDP is $12 trillion and the real GDP is $15 trillion?

80

How is the economic surplus generated by a decision calculated?

It is the total benefits minus total costs arising from the decision.

What is the difference between microeconomics and macroeconomics?

Microeconomics is the study of individual decisions in specific markets, whereas macroeconomics is the study of the economy as a whole

Consider the data shown in the table below. Assume that the country produced only ice cream and pie. Quantities and prices of these goods for the last several years are shown. Using 2008 as the base year, what is the nominal and real GDP for 2009?

Nominal GDP was $300 and the real GDP was $250

Suppose the government launches a successful advertising campaign that convinces workers with high school degrees to quit their jobs and become full time college students. This would cause

The labor force participation rate to decrease

Labor unions cause unemployment because the union contract wage is set

above the market wage, causing a surplus of labor

The nominal GDP of the U.S. in 2012 was estimated to be $16.2 trillion. This means

all the statements are true

You run a factory that makes leather shoes. You opt to pay your workers twice the going wage in order to reduce tardiness and shrinking and to increase workers' morale and effort example of:

an efficient wage

When inflation is lower than expected, there is redistribution from:

borrowers to lenders

Jonathan Mendez is deciding whether to study for his economics exam at a cafe or go to a concert with friends tonight. The cost of the concert ticket that he purchased yesterday is _____ in his opportunity cost and represent a ____ cost.

not included; sunk

Refer to the diagram of the circular flow of income. Based on the diagram, the arrow going FROM box 2 to box 1 must be:

output bought by households