Macroeconomics Final

Mark quit his job as a salesman where he made $43,000 per year to start his own t-shirt making business. His business expenses are $6,000 per year on rent, $12,000 per year on supplies, and $4,000 per year on part-time help. As for his personal expenses, his apartment costs him $4,800 per year and his personal bills are an extra $1,200 per year. What is Mark's opportunity cost of running the business? A) $65,000 B) $57,000 C) $71,000 D) $43,000

A) $65,000

Suppose that there are only three consumers of a product. At a price of $3 per unit, the first consumer would buy 6 units of the product, the second consumer would buy 5 units, and the third consumer would buy 7 units of the product. If you drew a market demand curve for this product, the quantity demanded at a price of $3 would be: A) 18 units. B) 11 units. C) 13 units. D) unable to be determined based on the information provided.

A) 18 units.

Real GDP per capita is measured as: A) GDP (adjusted for inflation) divided by population. B) the population divided by GDP (adjusted for inflation). C) GDP (adjusted for inflation) divided by the population growth rate. D) the population growth rate divided by GDP (adjusted for inflation).

A) GDP (adjusted for inflation) divided by population.

Suppose Bob can produce more jeans than Joe in a day. Bob has ________ advantage over Joe in sewing jeans. A) an absolute B) an absolute and a comparative C) a comparative D) neither an absolute nor a comparative

A) an absolute

The presence of unemployment in the labor market implies that: A) at the current wage, there are people who want to work but cannot find work. B) people are not willing to work at the current wage. C) there are some people who will not work at the current wage. D) there is excess demand in the labor market.

A) at the current wage, there are people who want to work but cannot find work.

Which of the following is the least likely complement for hamburgers? A) beef B) cheese C) hamburger buns D) soda

A) beef

Relative to hotdogs, hotdog buns are considered: A) complements. B) substitutes. C) inputs. D) luxury goods.

A) complements.

The market demand curve is: A) downward sloping and is flatter than an individual's demand curve. B) upward sloping and is flatter than an individual's demand curve. C) downward sloping and is steeper than an individual's demand curve. D) upward sloping and is steeper than an individual's demand curve.

A) downward sloping and is flatter than an individual's demand curve.

Which of the following are most likely to be considered substitutes to pizzas? A) hamburgers B) cheese C) pepperoni D) soda

A) hamburgers

The market demand curve is: A) negatively sloped. B) upward sloping. C) always vertical D) always horizontal

A) negatively sloped.

Bob is unemployed if he: A) is temporarily laid off. B) is not looking for a job. C) looked for a job for two months and then quit looking. D) A and C are correct.

A) is temporarily laid off.

Which of the following is not a factor of production? A) money B) human capital C) physical capital D) labor

A) money

If an increase in income results in an increase in the demand for Honda Civics, then Honda Civics are considered: A) normal goods. B) inferior goods. C) substitute goods. D) complementary goods.

A) normal goods.

Judy demands more peanuts as her income increases. From this, we can conclude that, for Judy: A) peanuts are a normal good. B) peanuts are an inferior good. C) peanuts are a complementary good. D) peanuts are a substitute good.

A) peanuts are a normal good.

What was observed about labor markets during the Great Depression that was not explained by classical models? This was also what most models developed after the Great Depression tried to explain. A) persistent unemployment B) persistent inflation C) persistent growth D) persistent equilibrium

A) persistent unemployment

The quantity of a product that consumers are willing and able to buy at a given price is called the A) quantity demanded. B) quantity supplied. C) demand for a good. D) demand schedule.

A) quantity demanded.

Quantity demanded is defined as the A) quantity of a product that consumers are willing and able to buy at a given price. B) quantity of a product that sellers are willing and able to buy at a given level of income. C) quantity of a product that consumers and producers are willing and able to buy, given their level of preference. D) quantity of a product that consumers are willing and able to sell at a given price.

A) quantity of a product that consumers are willing and able to buy at a given price.

What event led economists to question the usefulness of classical models in explaining how the true economy works? A) the Great Depression B) World War II C) World War I D) the Revolutionary War

A) the Great Depression

If the classical models provided an accurate description of the workings of the economy during the Great Depression, then: 15 A) the Great Depression would have lasted much shorter. B) the Great Depression would have lasted much longer. C) the Great Depression would have been much deeper. D) the Great Depression would have occurred exactly the way it did.

A) the Great Depression would have lasted much shorter.

If incomes increase and Honda Civics are considered normal goods, then A) the demand for Honda Civics will increase. B) the quantity demanded for Honda Civics will increase. C) the demand for Honda Civics will decrease. D) the quantity demanded for Honda Civics will decrease.

A) the demand for Honda Civics will increase.

A change in the quantity demanded of a product is the result of a change in: A) the price of the product. B) the price of related goods. C) consumer income. D) the cost of producing the product.

A) the price of the product.

If the number of unemployed increases by the same number as the number of people in the labor force, then: A) the unemployment rate will increase. B) the labor force participation rate will decrease. C) the unemployment rate will decrease. D) the population growth rate will increase

A) the unemployment rate will increase.

Suppose the unemployment rate is currently at 5 percent. If the number of unemployed increases by the same number as the number of people employed, then: A) the unemployment rate will increase. B) the labor force participation rate will decrease. C) the unemployment rate will decrease. D) the population growth rate will increase.

A) the unemployment rate will increase.

A person who is currently actively looking for a job, but has not found a job is classified by the BLS as: A) unemployed. B) employed. C) not in the labor force. D) under 16.

A) unemployed.

An increase in the labor force, without a corresponding increase in the number of employed workers will cause the: A) unemployment rate to increase. B) the labor force participation rate to decrease. C) unemployment rate to decrease. D) the population growth rate will increase.

A) unemployment rate to increase.

Suppose that your tuition to attend college is $5,000 per year and you spend $5,000 per year on room and board. If you were working full time, you could earn $22,000 per year. What is your opportunity cost of attending college? A) $13,000 B) $27,000 C) $30,000 D) $35,000

B) $27,000

Normative economic analysis: A) is the focus of most modern economic reasoning. B) answers the question "What ought to be?" C) predicts the consequences of alternative actions. D) All of the above are correct.

B) answers the question "What ought to be?"

The effect of income on the demand for normal goods is such that A) as the price of a normal good falls, people are likely to buy less of the good. B) as the price of a good falls, people are likely to buy more of all normal goods. C) as the price of a good falls, people are likely to buy less of all normal goods. D) both A and C

B) as the price of a good falls, people are likely to buy more of all normal goods.

The diagram that shows the flow of income, spending, goods and services between markets is called the: A) aggregate demand-aggregate supply diagram. B) circular flow diagram. C) income flow diagram. D) income-production diagram.

B) circular flow diagram.

The idea that wages and prices adjust freely and quickly to changes in the demand and supply is adopted and defended by: A) Keynesian economists. B) classical economists. C) fine-tuning economists. D) demand-side economists.

B) classical economists.

The ability of one person or nation to produce a good at a lower opportunity cost than another is called a(n): A) market advantage. B) comparative advantage. C) absolute advantage. D) specialization advantage.

B) comparative advantage.

The unemployment rate equals: A) labor force/population. B) unemployed/employed. C) (employed - unemployed)/labor force. D) (labor force - employed)/labor force.

D) (labor force - employed)/labor force.

n the circular flow diagram, firms ________ inputs and households ________ goods and services. A) demand; supply B) demand; demand C) supply; demand D) supply; supply

B) demand; demand

A person who is currently actively looking for a job, but has a job that pays for 5 hours a week only is classified by the BLS as: A) unemployed. B) employed. C) not in the labor force. D) under 16.

B) employed.

Economics is the study of: A) how to invest in the stock market. B) how society uses limited resources. C) the role of money in markets. D) how government officials decide which goods and services are produced.

B) how society uses limited resources.

The principle that states that the cost of something is equal to what is sacrificed to get it is known as the: A) marginal principle. B) principle of opportunity cost. C) principle of diminishing returns. D) reality principle.

B) principle of opportunity cost.

Janie graduated from college a month ago and is now without work. She accepted a job that will start next month. Today, Janie is: A) not in the labor force. B) in the labor force. C) employed. D) a discouraged worker.

B) in the labor force.

When Mary's income increases, she purchases fewer hamburgers. We can conclude that for Mary, hamburger is a(n) ________ good. A) normal B) inferior C) substitute D) complementary

B) inferior

If an increase in income results in a decrease in the demand for Honda Civics, then Honda Civics are considered: A) normal goods. B) inferior goods. C) substitute goods. D) complementary goods

B) inferior goods.

Macroeconomics is the study of the A) purchase decisions of individual consumers. B) national economy taken as a whole. C) economic choices of laboratory animals. D) effects of patents upon product innovation

B) national economy taken as a whole.

In macroeconomics, the term "classical" refers to a school of economics that believed that A) over a short period of time, wages and prices will adjust to bring the economy back to full employment. B) over a long period of time, wages and prices will adjust to bring the economy back to full employment. C) the economy is never at full employment. D) over a short period of time, wages alone and not prices, will adjust to bring the economy back to full employment.

B) over a long period of time, wages and prices will adjust to bring the economy back to full employment.

In the product market of the circular flow diagram, households: A) pay for goods and services supplied to these markets. B) pay for goods and services demanded from these markets. C) earn income for goods and services supplied to these markets. D) earn income for goods and services demanded from these markets.

B) pay for goods and services demanded from these markets.

If a competitive market operates perfectly, it relies on A) the number of people buying goods. B) the laws of supply and demand. C) how many products can be produced for sale. D) how much people are willing to pay for the products.

B) the laws of supply and demand.

The opportunity cost of something is: A) the cost of the labor used to produce it. B) what you sacrifice to get it. C) the price charged for it. D) the search cost required to find it.

B) what you sacrifice to get it.

Suppose that your tuition to attend college is $10,000 per year and you spend $4,000 per year on room and board. If you were working full time instead of attending college, you could earn $20,000 per year. What is your opportunity cost of attending college for one year? A) $14,000 B) $24,000 C) $30,000 D) $34,000

C) $30,000

Suppose that in the time it takes for him to bake a cake, Bob can sew 5 pairs of jeans. In the time it takes for Joe to bake a cake, he can sew 8 pairs of jeans day. In this example, who has the comparative advantage in baking a cake? A) Joe B) both Bob and Joe C) Bob D) neither Bob nor Joe

C) Bob

Which of the following is a question answered with positive economic analysis? A) If we had more money, should the college offer free parking for students? B) If we can afford it, should the college provide more financial aid assistance? C) If the college increased tuition, by how much will class sizes decline? D) As a result of the recession, should the college cut tuition to stimulate enrollments?

C) If the college increased tuition, by how much will class sizes decline?

Which of the following is not a question answered with normative economic reasoning? A) If we had more money, should the college offer free parking for students? B) As a result of the recent recession, should the college offer more financial aid assistance? C) If the college increased tuition, what is the estimated decline in enrollments? D) Given the additional funding that we received, should the college cut tuition to stimulate enrollments?

C) If the college increased tuition, what is the estimated decline in enrollments?

Which of the following is an example of a normative question? A) How will an increase in the price of gasoline affect taxi drivers? B) What fraction of an income-tax cut will be spent on consumer goods? C) Should the government provide free prescription drugs to senior citizens? D) How will an increase in the minimum wage affect teenaged workers?

C) Should the government provide free prescription drugs to senior citizens?

Suppose that in the time it takes for him to bake a cake, Bob can sew 5 pairs of jeans. In the time it takes for Joe to bake a cake, he can sew 8 pairs of jeans day. In this example, Bob has ________ advantage over Joe in cake baking. A) an absolute B) an absolute and a comparative C) a comparative D) neither an absolute nor a comparative

C) a comparative

The ability of one person or nation to produce a good at a lower resource cost than another is called a(n): A) market advantage. B) comparative advantage. C) absolute advantage. D) specialization advantage.

C) absolute advantage.

Macroeconomics is concerned with: A) only long-run trends in economic activity. B) only short-run fluctuations in the business cycle. C) both long-run trends and short-term fluctuations in aggregate economic activity. D) only with changes in the overall price level.

C) both long-run trends and short-term fluctuations in aggregate economic activity.

According to the classical economists, the economy: A) requires fine-tuning to reach full employment. B) can never deviate from full employment. C) is self-correcting. D) will never be at full employment.

C) is self-correcting.

Which of the following is the most likely complement for hamburgers? A) soda B) cheese C) hamburger buns D) All of the above are complements.

D) All of the above are complements.

A worker who currently is not working, but is not looking for a job is considered as: A) employed. B) unemployed. C) not in the labor force. D) in the labor force.

C) not in the labor force.

The saying that "There's no such thing as a free lunch" refers to the: A) marginal principle. B) spillover principle. C) principle of opportunity cost. D) reality principle.

C) principle of opportunity cost.

Becky demands more raisins as her income increases. From this, we can conclude that, for Becky: A) raisins are an inferior good. B) raisins are a complementary good. C) raisins are a normal good. D) raisins are a substitute good

C) raisins are a normal good.

Scarcity can best be defined as a situation in which: A) there are no buyers willing to purchase what sellers have produced. B) there are not enough goods to satisfy all of the buyers demands. C) resources are limited in quantity and can be used in different ways. D) there is more than enough money to satisfy consumers wants.

C) resources are limited in quantity and can be used in different ways.

If incomes increase and Honda Civics are considered inferior goods, then A) the demand for Honda Civics will increase. B) the quantity demanded for Honda Civics will increase. C) the demand for Honda Civics will decrease. D) the quantity demanded for Honda Civics will decrease.

C) the demand for Honda Civics will decrease.

Which of the following is not a topic studied in macroeconomics? A) Gross Domestic Product B) the unemployment rate C) the relative price of IBM computers D) the inflation rate

C) the relative price of IBM computers

The concerns of macroeconomics include all of the following except: A) consumer prices. B) gross domestic output. C) the structure of the U.S. steel industry. D) the unemployment rate.

C) the structure of the U.S. steel industry.

Classical economists assumed: A) involuntary unemployment exists. B) there is never full employment. C) the wage rate adjusts to maintain labor market equilibrium. D) the wage rate cannot adjust to equate the quantity of labor demanded with quantity of labor supplied.

C) the wage rate adjusts to maintain labor market equilibrium.

Suppose a ticket to a concert costs $39, and parking costs $5. Further, in order to watch the concert, you must miss 2 hours of work where your hourly wage is $15 per hour. The total opportunity cost of watching a concert is: A) $74. B) $44. C) $39. D) $30.

D) $30.

A change in the quantity demanded of a product cannot be the result of a change in: A) the buyer's preference. B) the price of related goods. C) consumer income. D) All of the above are correct.

D) All of the above are correct.

A perfectly competitive market is a market that has: A) many buyers B) many sellers C) no single buyer or seller who can affect the price. D) All of the above are correct.

D) All of the above are correct.

Positive economics: A) is the focus of most modern economic reasoning. B) concerns the forces that affect economic activity. C) predicts the consequences of alternative actions. D) All of the above are correct.

D) All of the above are correct.

When a demand curve is drawn, which of the following is held constant? A) people's income B) people's preferences C) prices of related goods D) All of the above are held constant when constructing a demand curve.

D) All of the above are held constant when constructing a demand curve.

Which of the following is not an example of a question answered by positive analysis? A) How will an increase in the price of gasoline affect taxi drivers? B) What fraction of an income-tax cut will be spent on consumer goods? C) How will an increase in interest rates affect investment in factories? D) Should the government increase the minimum wage?

D) Should the government increase the minimum wage?

In the circular flow diagram, the different payments made by firms to households are: A) wages and salaries. B) interest on borrowed money. C) rent on office and factory buildings. D) all of the above

D) all of the above

The market demand curve: A) shows the relationship between the price of a good and the quantity that all consumers together are willing to buy. B) is drawn assuming that variables such as income and tastes are fixed. C) is drawn assuming that the number of consumers is fixed. D) all of the above

D) all of the above

Mark quit his job as a salesman where he made $43,000 per year to start his own t-shirt making business. His business expenses are $6,000 per year on rent, $12,000 per year on supplies, and $4,000 per year on part-time help. As for his personal expenses, his apartment costs him $4,800 per year and his personal bills are an extra $1,200 per year. Which of the following is not part of the opportunity cost of running his business? A) his apartment costs B) his personal bills C) his part-time labor costs D) his apartment costs and his personal bills

D) his apartment costs and his personal bills

61) A normal good is defined as a good for which demand decreases when: A) the price increases. B) income increases. C) the price decreases. D) income decreases.

D) income decreases.

When Tom's income decreases, he purchases more hamburgers. We can conclude that for Tom, hamburger is a(n) ________ good. A) substitute B) complementary C) normal D) inferior

D) inferior

The principle of opportunity cost: A) is more relevant for firms than for individuals. B) only refers to monetary payments. C) is only relevant in economics. D) is applicable to all decision-making.

D) is applicable to all decision-making.

Because resources are limited: A) only the very wealthy can get everything they want. B) firms will be forced out of business. C) the availability of goods will be limited but the availability of services will not. D) people must make choices.

D) people must make choices.

In the circular flow diagram, firms ________ goods and services and households ________ inputs. A) demand; supply B) demand; demand C) supply; demand D) supply; supply

D) supply; supply

An unemployed individual decides to spend the day fishing. The opportunity cost of fishing is: A) the cost of bait and any other monetary expenses. B) zero, because the person doesn't have a job. C) the value of the individual's wages while he was working. D) the cost of bait, any other monetary expenses, and the value of the best alternative use of the individual's time.

D) the cost of bait, any other monetary expenses, and the value of the best alternative use of the individual's time.

Two goods are substitutes if: A) the supply of one good decreases when the price of the other increases. B) the supply of one good decreases when the price of the other decreases. C) the demand for one good decreases when the price of the other increases. D) the demand for one good decreases when the price of the other decreases.

D) the demand for one good decreases when the price of the other decreases.

According to the Classical model, an excess supply of labor would drive up wages to a new equilibrium level and therefore unemployment would not persist. TRUE OR FALSE

FALSE

Inflation is: A) sustained increases in the average prices of all goods and services. B) sustained decreases in the average prices of all goods and services. C) sustained increases in the total prices of all goods and services. D) sustained decreases in the total prices of all goods and services

Inflation is: A) sustained increases in the average prices of all goods and services.

Economics is best defined as the study of: A) financial decision-making. B) how consumers make purchasing decisions. C) choices made by people faced with scarcity. D) inflation, unemployment, and economic growth.

c) choices made by people faced with scarcity