Macro midterm 1

Which of the following is counted as consumption expenditure?

A person buying a new car

The largest category of expenditures in the US, by far, is

Consumption

GDP deflator is equal to

Nominal GDP divided by real GDP multiplied by 100

Which of the following is the best example of a tariff?

a $1000-per-car fee imposed on all small cars imported

When Sophie, a French citizen, purchases a Dell computer in Paris that was produced in Texas, the purchase is

a US export and a French import

A factor of production that is produced in order to produce something else is called

capital

The economy in a particular country is booming. Real GDP is growing at a rate of 6% per year, well above the average growth rate. Under these circumstances, which of the following types of unemployment is most likely to be the lowest?

cyclical unemployment

For computing GDP, the official measure of the value of all goods produced during a period for use in the production of other goods is called

gross private domestic investment

Disposable personal income equals personal income

minus personal tax payments

If the opportunity costs of production of two goods is different between two countries, then

mutually beneficial trade is possible

The minimum wage is an example of

price floor

In the calculation of GDP, the value of a new house constructed by a firm is included in

private investment

Technological improvements will

shift the production possibility frontier outward.

What is the big innovation in the video that transformed international trade?

shipping containers

Increasing opportunity cost along a bowed out production possibilities frontier occurs because

some factors of production are not equally suited to producing both goods or services.

Which of the following is counted in GDP?

the cost of a speed boat purchased by drug smugglers

The terms of trade refers to

the ratio at which a country can trade its exports for imports from other countries

Examples of comparative advantage show how trade between two countries can make each better off. Compared to their pre-trade positions, trade makes both countries better off because in each country

total consumption of goods is greater

The gross domestic product of an economy is defined as the

total value of all final goods and services produced during a given period.

Social Security payments to U.S. citizens are considered

transfer payments and are not included in GDP.

A shift in the demand curve to the left, all other things unchanged

will cause a movement downward along the supply curve and a lower equilibrium quantity.

What is the business cycle?

It is the economy's pattern of fluctuations in economic activity: expansion followed by contraction and then by another expansion.

In a small economy, consumption spending in 2012 is $6,000, government spending is $1,200, gross investment is $1,500, exports are $2,000, and imports are $1,000. What is gross domestic product in 2012?

$9700

Using the expenditure approach, what is the formula for GDP?

GDP=C+I+G+NX

Consider the following scenario: In January, 8 million people were seeking jobs but did not succeed. In February, 2 million of these people gave up and stopped looking for work. Holding all else constant, what happened to the unemployment rate in February?

It decreased

What does the downward slope of the production possibilities curve represent?

Scarcity

What is the difference between a shortage and scarcity?

Scarcity will always exist because choices must be made, but a shortage will only exist if the price is kept below the equilibrium level

In the market for coffee, what will happen if a fungus damages the crop?

Supply will shift left, and the price will increase

For each watch that Switzerland produces, it gives up the opportunity to make 50 pounds of chocolate. Germany can produce 1 watch for every 100 pounds of chocolate it produces. Which of the following is true about the comparative advantage between the two countries?

Switzerland has the comparative advantage in watches.

What are the three fundamental questions?

What to produce? How to produce? For whom to produce?

Which of the following transactions would be included in the official calculation of GDP?

You buy a new iPod.

When Tesla, a U.S. company, purchases Italian-made Pirelli tires for its automobiles, the purchase is

a U.S. import and an Italian export.

The term "market" in economics refers to

a group of buyers and sellers of a product and the arrangement by which they come together to trade.

The difference between iron ore deposits and the steel produced from these deposits that is later used to make factory equipment illustrates the difference between

a natural resource and capital

Which of the following would cause an increase in the supply of cheese?

an increase in the number of firms that produce cheese

Which of the following will not shift the demand curve for a good?

an increase in the price of the good

Many disagreements among economists result because

economists sometimes make normative judgments

Which of the following reduces the duration of frictional unemployment?

establishing employment agencies which give out information about job vacancies

The natural rate of unemployment

includes frictional and structural unemployment.

The law of demand implies, holding everything else constant, that as the price of yogurt

increases, the quantity of yogurt demanded will decrease.

The GDP deflator is equal to

nominal GDP divided by real GDP, multiplied by 100

You have been attending college for the last four years, and are focused solely on your studies. You would be classified

not in the labor force

Formula for unemployment rate

number of unemployed/labor force x 100

The point on a business cycle where real GDP stops rising and begins falling is called a(n)

peak

Disposable personal income is defined as

personal income less personal taxes

If the quantity demanded for a product exceeds the quantity supplied, the market price will rise until

quantity demanded equals quantity supplied. The market price will then equal the equilibrium price.

Supply is best defined as the

relationship between the quantity of a good or service sellers are willing to offer for sale and various prices, all other things unchanged.

A critical function of the government in facilitating the operation of a market economy is

setting up and enforcing private property rights

According to the production possibility model, if more resources are allocated to the production of physical and human capital, then all of the following are likely to happen except

the country's total production will fall

Gross national product is defined as

the value of final goods and services produced by residents of the United States, even if the production takes place outside the United States

If Norwegian workers are more productive than Albanian workers, then trade between Norway and Albania

will take place so long as each country has a comparative advantage in a good or service that buyers in the other country want.

Countries will benefit from trade if they specialize based on

Comparative advantage

Which of the following is correct about the economic decisions consumers, firms, and the government have to make?

Each faces the problem of scarcity which necessitates tradeoffs in making economic decisions.

In recent years the cost of producing wines in the U.S. has increased largely due to rising rents for vineyards. At the same time, more and more Americans prefer wine over beer. Which of the following best explains the effect of these events in the wine market?

The supply curve has shifted to the left and the demand curve has shifted to the right. As a result, there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.

If the United States lifted the embargo on Cuban products, what would happen in the U.S. market for Cuban cigars?

The supply curve would shift to the right

Which of the following best describes an assumption economists make about human behavior?

They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time.

In which measure would we include the value of production of a Swiss-owned watch factory located in Pennsylvania?

US GDP and Swiss GNP

A negative relationship between the quantity demanded and price is called the law of

demand

The primary difference between a change in demand and a change in the quantity demanded is

A change in quantity demanded is a movement along the demand curve, and a change in demand is a shift in the demand curve.