Macro Exam #1
Financial investment
used to make our future better (households)
Investment
what businesses do with funding from financial institutions--they buy capital goods
opportunity cost
what you give up to get something else. The value we would have received if we had done the next best thing. All costs in economics are these
In competitive markets, a surplus or shortage will: a)Never exist because the markets are always at equilibrium b)Cause changes in the quantities demanded and supplied that tend to eliminate the surplus or shortage c)Cause shifts in the demand and supply curves that tend to eliminate the surplus or shortage d)Cause changes in the quantities demanded and supplied that tend to intensify the surplus or shortage
b
Inventories rise when: a)Actual demand for output is more than expected b)Actual demand for output is less than expected c)Actual supply of output is less than expected d)Actual demand for output is about the same as expected
b
Nominal gross domestic product: a)Is a measure of the overall level of prices b)Measures the value of final output produced within a nation in one year, using current prices c)Measures the value of final output produced within a nation in one year, adjusted for changing prices d)Only changes when the level of output changes
b
Situations in which firms expect one thing to happen but then something else happens are called: a)Recessions b)Shocks c)Business cycles d)Fluctuations
b
Suppose that inventories are falling. We could expect that, in the future: a)Unemployment will likely increase b)Unemployment will likely decrease c)We can't predict what will happen to unemployment d)Real GDP will likely decrease
b
Suppose that inventories are rising. We could expect that, in the future: a)Real GDP will likely increase b)Real GDP will likely decrease c)We can't predict what will happen to real GDP d)Firms will raise prices of their goods and services
b
The process of observing real-world behavior, developing hypotheses, testing them against facts, then using the results to construct theories is called: a)Opportunity cost estimation b)The scientific method c)Marginal analysis d)Normative analysis
b
The sale of a used automobile would not be included in GDP of the current year because it is a: a)Nonmarket transaction b)Nonproduction transaction c)Purely financial transaction d)Private transfer payment
b
The simple circular flow model shows that workers and capital-owners offer their services to firms through the: a)Product markets b)Resource markets c)Employment agencies d)Government agencies
b
Two months ago, the Maryville Shirt company sold 2000 shirts at $30 per shirt. Last month the company raised its price to $35 per shirt and sold 3000 shirts. Evidently the company experienced a(n): a)Decrease in demand b)Increase in demand c)Decrease in supply d)Increase in supply
b
Which of the following is included in GDP? a)Welfare payments received by some households b)Fees received by stockbrokers c)Cash gifts from relatives during the holidays d)Payments received from selling stocks in one's portfolio
b
Which of the following is not a determinant of demand for laptop computers? a)Income of buyers of laptop computers b)The cost of inputs for producing laptop computers c)The prices of related goods such as software and iPads d)Expectations about the future price of laptop computers
b
Which of the following statements is correct? (assume demand is interacting with an upward sloping supply curve): a)If demand increases, then price will decrease b)If demand decreases, then price will decrease c)If price increases, then demand will decrease d)If price decreases, then demand will decrease
b
Which of the following would be primarily determined in the resource markets? a)The airfares charged by airlines for family vacations b)The wage rates for computer programmers and engineers c)The number of home-internet connections installed d)The amount of money in circulation issued by the government
b
A business buys $5,000 worth of inputs from other firms in order to produce a product. The business makes 100 units of the product and each of them sells for $65. The value added by the business to these products is: a)$5,000 b)$6,500 c)$1,500 d)$1,000
c
An "increase in the quantity supplied" suggests a: a) Rightward shift of the supply curve b)Movement down along the supply curve c)Movement up along the supply curve d)Leftward shift of the supply curve
c
An increase in the overall level of prices in an economy is called: a)Growth b)Expansion c)Inflation d)Nominal GDP growth
c
GDP does not include which of the following activities? a)Businesses installing anti-pollution equipment b)Households spending to enhance security of their neighborhoods c)Couples remodeling their own homes d)Families eating out in restaurants
c
GDP tends to underestimate the productive activity in the economy because it excludes the value of output from: a)Public transfer payments to households b)The consumption of fixed capital c)The underground economy d)Intermediate goods
c
In analyzing human decision and action, economists assume that: a)Scarcity is more important than choice b)Costs are more important than benefits c)People's behavior reflects rational self-interest d)There are scarce resources in the economy
c
In the circular flow model of the market system, households: a)Buy products and resources b)Sell products and resources c)Buy products and sell resources d)Sell products and buy resources
c
Nominal GDP differs from real GDP because: a)Nominal GDP is based on constant prices b)Real GDP is based on current prices c)Real GDP results from adjusting for changes in the price level d)Nominal GDP results from adjusting for changes in the price level
c
Real gross domestic product is a measure of the: a)Average price level in the economy b)Value of final output produced within a country in one year, using current prices c)Value of final output produced within a country in one year, adjusted for changing prices d)Total value of available resources in a nation
c
The major statistics that provide macroeconomists a picture of the health of an economy include the following, except: a)Real gross domestic product b)Inflation statistics c)Prices of oil and gasoline d)Unemployment data
c
The market system automatically corrects a surplus condition in a competitive market by: a)Raising the price of the commodity in question while increasing the quantity demanded b)Raising the price of the commodity in question while decreasing the quantity demanded c)Reducing the price of the commodity in question while increasing the quantity demanded d)Reducing the price of the commodity in question while decreasing the quantity demanded
c
The production possibilities curve is a graph of: a)The maximum amounts of labor and capital resources available for production b)Various combinations of goods and services among which consumers are indifferent c)The maximum combinations of products that can be produced d)The maximum amount of capital and labor that the economy can employ
c
Which of the following is NOT a factor that increases short-run price stickiness? a)Consumers tend to prefer stable prices b)Stable prices make it easier for consumers to plan their spending c)A firm can lower its price without fear that rival firms will also lower their prices d)Firms try to avoid price wars
c
Which of the following is a primary use for national income accounts? a)To analyze the environmental cost of economic growth b)To assess the economic efficiency of specific industries in the economy c)To measure changes in the value of production and income in the economy d)To determine whether there is a fair and equitable distribution of income in the economy
c
Which of the following is one of the simplifying assumptions made in constructing a production possibilities curve? a)The state of technology is constantly changing b)A wide variety of products are produced c)Resources are fully employed and are used in least-cost methods of production d)Quantities of available resources in the economy vary from one point to another
c
Which question is an example of a macroeconomic question? a)What is the level of industrial concentration in the U.S. automobile industry? b)What economic incentives can be used to reduce the cost of health care in the nation? c)What policies would be recommended for stimulating national economic growth? d)What market conditions are expected for milk in the nation this year?
c
Real GDP
corrects for price changes and has a focus on production level changes in GDP
production possibilities curve
curve that shows the maximum output the economy can produce
A market in which the money of one nation is exchanged for the money of another nation is a a)resource market. b)bond market. c)stock market. d)foreign exchange market.
d
A recurring theme in economics is that people a) Have unlimited resources, but limited economic wants b)Can increase resources by limiting their economic wants c)Have limited economic wants and limited resources d)Have unlimited economic wants, but limited resources
d
A television station reports that the price of coffee has increased but the quantity traded in the market has decreased. This situation would be caused by a(n): a)Increase in demand b)Increase in supply c)Decrease in demand d)Decrease in supply
d
According to the circular flow model, product markets are where: a)Households earn their money incomes b)Businesses incur their consumption expenditures to households c)Businesses acquire their inputs from households d)Businesses earn their revenues from households
d
In the circular flow model of the market system, business firms: a)Buy products and resources b)Sell products and resources c)Buy products and sell resources d)Sell products and buy resources
d
In year 1, nominal GDP for the United States was $2,250 billion and in year 2 it was $2,508 billion. The GDP deflator was 72 in year 1 and 79 in year 2. Between year 1 and year 2, real GDP rose by: a)11.4 percent b)9.7 percent c)2.4 percent d)1.6 percent
d
Mia wants to buy a book. The economic perspective suggests that Mia will buy the book if: a)She has enough money to pay for the marginal cost of the book b)The marginal benefit of the book is a positive value c)The marginal cost of the book is greater than its marginal benefit d)The marginal benefit of the book is greater than its marginal cost
d
Money spent on the purchase of a new house is included in the GDP as a part of: a)Household expenditures on durable goods b)Personal consumption expenditures c)Personal saving d)Gross domestic private investment
d
The Great Recession occurred in: a)1970-74 b)1985-87 c)1992-94 d)2007-09
d
The money income of households consists of all the following, except: a)Wages b)Profits c)Interest d)Revenues
d
There is a shortage in a market for a product when: a)The current price is higher than the equilibrium price b)Supply is less than demand c)Quantity demanded is less than quantity supplied d)Quantity demanded is greater than quantity supplied
d
When economists describe "a market," they mean: a)A place where stocks and bonds are traded b)A communication network that allow individuals to keep in touch with each other c)A hypothetical place where the production of goods and services takes place d)A system that allows buyers and sellers to interact with one another
d
When economists say that the demand for a product has decreased, they mean that: a)The demand curve has shifted to the right b)The product has become particularly scarce for some reason c)The product has become more expensive and thus consumers are buying less of it d)Consumers are now willing and able to buy less of this product at each possible price
d
Which of the following groups is the principal source of savings in an economy? a)Banks b)Government c)Businesses d)Households
d
Which statement is true about supply? a)There is an inverse relationship between price and quantity supplied b)Supply refers to the amount of inventory that sellers have in their warehouses c)As price decreases, producers are willing to put more of the good on the market for sale d)To entice producers to offer more of a good on the market for sale, price must rise
d
Production Possibilities Model
designed to highlight the impact of scarcity on an economic system
Utility
happiness of satisfaction people get from consuming goods and services
Resource capital
includes man made items such as machinery, tools, factories and warehouses
Ceteris Paribus
other things being equal
Rational
people act in their own self interest or have a purpose
Households
seller of all inputs and buyers of all output
Economic growth
situation where more can be produced in an economy due to technology improvements or other situations (shifting the PPC out)
Rule of 70
something will double in n years if it is growing at x percent each year. Formula is n=70/x
Economics
study of how people allocate their limited resources in an attempt to satisfy their unlimited wants. Look how society makes choices with scarcity and the results of those choices.
Nominal GDP
the dollar value of all final goods and services produced within the borders of the country using the prices of the year
Gross Domestic Product(GDP)
the total value of goods and services produced in a country in a year
Scarcity
unlimited wants and limited resources
A decrease in supply, holding demand constant, will cause: a)Higher prices and a larger quantity sold b)Higher prices and a smaller quantity sold c)Lower prices and a smaller quantity sold d)Lower prices and a larger quantity sold
b
A nation's real GDP was $250 billion in 2013 and $265 billion in 2014. Its population was 120 million in 2013 and 125 million in 2014. What is its real GDP growth rate in 2014? a)15.0% b)6.0% c)5.7% d)1.1%
b
Businesses
Buyers of all inputs and sellers of all output
As a consequence of the problem of scarcity: a)There is never enough of anything b)Individuals have to make choices from among alternatives c)Only some people can "have it all" d)Things which are plentiful have relatively high prices
b
Per person (per capita) basis
Economic growth has to do with the growth in production stated as an average, or on a _____
Capital
Includes all those man made tools and items we use to make other goods
Land
Includes soil, water, trees and other natural resources
Assume that a consumer has a given budget or income of $12, and that she can buy only two goods, apples or bananas. The price of an apple is $1.50 and the price of a banana is $0.75. Refer to the information given above. For this consumer, the opportunity cost of buying two bananas is a)1 apple. b)1.5 apples. c)0.5 apple. d)0.75 apple.
a
Economists believe that most short-run fluctuations: a)Are the result of demand shocks b)Are the result of supply shocks c)Will not last long because prices will adjust to equalize the quantities demanded and supplied of goods and services d)Will always have a negative impact on real GDP, inflation, and unemployment
a
If prices are "sticky" in the short run, then: a)The economy will respond to demand shocks primarily through changes in output and employment b)The economy will respond to demand shocks primarily through changes in prices and inflation c)Prices will adjust to equalize the quantities demanded and supplied of goods and services d)Unemployment will not change in response to a demand shock
a
In the circular flow model, households earn their incomes in the: a)Resource markets b)Product markets c)Capitalist markets d)Money markets
a
GDP is the market value of: a)Resources (land, labor, capital, and entrepreneurship) in an economy in a given year b)All final goods and services produced in an economy in a given year c)Consumption and investment spending in an economy in a given year d)All output produced and accumulated over the years
b
Entrepreneurial ability
Human effort devoted to the combining of the other three resources in production of goods and services
Labor
Human effort that in not entrepreneurial
4 Basic Resources
Land Labor Capital Entrepreneurial ability
Along the Production Possibilities Curve
Location on PPC Model where economy are employed and used to the fullest
Government purchases in national income accounts would include payments for: a)Social Security checks to retirees b)Salaries for current U.S. military officers c)Public assistance for welfare recipients d)Unemployment benefits
b
Capital goods
Much of the growth in the US in last 100 years is due to ___
If the dollar price of yen rises, then a)the yen price of dollars also rises. b)the dollar depreciates relative to the yen. c)the yen depreciates relative to the dollar. d)the dollar will buy fewer U.S. goods.
b
The U.S. demand for euros is a)downsloping because, at lower dollar prices for euros, Americans will want to buy more European goods and services. Correct b)downsloping because, at higher dollar prices for euros, Americans will want to buy more European goods and services. c)downsloping because the dollar price of euros and the euro price of dollars are directly related. d)upsloping because a higher dollar price of euros makes European goods and services more attractive to Americans.
a
The market demand schedule or curve for a product shows the relationship between how much of the product buyers are willing and able to buy and the: a)Product's price b)Buyers' incomes c)Cost of producing the product d)Time period, say, from one month to the next
a
The service a homeowner performs when she mows her yard is not included in GDP because: a)This is a nonmarket transaction b)This is a nonproduction activity c)This is a noninvestment transaction d)Multiple counting would be involved
a
There is a surplus of tomatoes in the market. This implies that: a)The current price is set above the equilibrium level b)The price will be rising, as a result c)Supply of tomatoes is more than the demand d)Quantity demanded is more than quantity supplied
a
To avoid multiple counting in national income accounts: a)Only final goods and services should be counted b)Intermediate goods and services should be counted c)Both final and intermediate goods and services should be counted d)Primary, intermediate, and final goods and services should be counted
a
When economists speak of "demand" in a particular market, they refer to: a)The whole demand curve or schedule b)One point on the demand curve c)One price-quantity combination on the demand schedule d)How much of an item buyers want to buy at a given price
a
When gross private domestic investment exceeds depreciation, it can be concluded that: a)Net investment is positive b)Net investment is negative c)The economy is exporting more than it imports d)The economy is importing more than it exports
a
Which of the following is the best example of investment as defined by economists? a)A restaurant owner buys a freezer to store ingredients for the restaurant meals b)A college professor buys a truck to drive around in c)A business manager purchases stock on the New York Stock Exchange d)A worker deposits money into a long-term retirement account
a
Aggregate
a collection of specific economic units treated as if they were one unit
Unemployed
a person not working, but willing to work and actively seeking work
Law of increasing relative cost
Some resources are better suited to making one item over the other (reason for curve on PPC)
4 basic resources
also called inputs or factors of production
trade off
an alternative that we sacrifice when we make a decision
Microeconomics and Macroeconomics
Two branches of economics
households and businesses
Two players in economic game
Inflation
an increase in the overall level of prices
"Net foreign factor income" in the national income accounts refers to the difference between: a)The income Americans gain from supplying resources abroad and the income that foreigners earn by supplying resources in the U.S. b)The value of products sold by Americans to other nations and the value of products bought by Americans from other nations c)The value of investments that Americans made abroad and the value of investments made by foreigners in the U.S. d)The income earned by Americans in the U.S. minus the income earned by foreigners in the U.S.
a
All of the following would affect the position of the supply curve for cranberries, except the: a)Popularity of cranberry drinks b)Price of agricultural land for cranberries c)Cost of fertilizers for cranberry production d)Development of a new pest control for cranberries
a
Another way of saying "ceteris paribus" is: a)Other things equal b)In general c)In reality d)Because of this
a