Midterm Exam 2 Review
Which of the following will result in an increased price of milk?
A shift to the right of the demand curve for milk.
A number of semi-skilled workers in an industry find themselves out of work when improvements in technology render their jobs obsolete. These workers experience _____ unemployment.
structural
Unemployment that results from a mismatch between worker qualifications and the characteristics employers require is called _____ unemployment.
structural
Which of the following statements is true?
Unexpected deflation benefits lenders and hurts borrowers.
To determine whether an economy's output is growing or shrinking, one must keep track of
changes in real GDP.
When the price of gas goes up and the demand for tires goes down, this means tires and gas are:
complements.
The formula for calculating a price index is:
current cost of basket ÷ base-period cost of basket.
Researchers demonstrate conclusively that drinking 4-6 ounces of beer each day increases life expectancy by 3 years. What happens in the market for beer?
The equilibrium price and quantity rise.
The price of cotton rises. What happens in the market for cotton shirts?
The equilibrium price rises and the equilibrium quantity falls.
Suppose nominal GDP in a country rose in the third quarter of 2018 (from the second quarter). Yet, real GDP fell in the third quarter of 2018. What could have accounted for this?
The general price level in the economy in the third quarter is higher than that in the second quarter of 2018.
Demand
The principle stating that, for virtually all goods and services, there is a negative relationship between price and quantity demanded, all other things unchanged, is the law of:
Which of the following is a source of frictional unemployment?
The time it takes to search for jobs that best matches one's skills
A shift of a demand curve to the right, all other things unchanged, will:
increase equilibrium price and quantity.
The trough of the business cycle:
is the point where a recession ends and an expansion begins.
The consumer price index (CPI) reflects:
the changes in the prices of goods and services typically purchased by consumers.
The implicit price deflator is given by the formula:
nominal GDP ÷ real GDP.
If the cost of a market basket is $200 in 2006 and $230 in 2007, the price index for 2007 using 2006 as the base year is _____.
1.15
Which of the following would be defined as inflation?
An increase in the average level of prices
. Which of the following most correctly states the law of demand?
As the price falls, all other things unchanged, the quantity demanded will increase.
What is a business cycle?
It is the economy's pattern of fluctuations in economic activity: expansion followed by contraction and then by another expansion.
Your grandfather tells you that his Social Security payments are indexed. What does this mean?
It means that the dollar value of his Social Security payment is adjusted for changes in the price level so that his purchasing power is constant.
GDP measures the value of final goods and services. Consider a pizza parlor that buys flour to make pizzas. Which of the following statements is true?
Only the value of the pizza is counted in GDP to avoid double counting.
If the price of hamburger increases, it would probably result in ________ in the demand for hamburger buns.
a decrease
An unemployed person is:
a person without a job who is actively seeking and available for work.
Demand is defined as:
a schedule that shows how much will be purchased at various prices during a particular period, all other things unchanged.
A(n) _____ shows the movement in the average level of prices.
price index
Plastic and steel are substitutes in the production of automobiles. If steel prices go up, all other things unchanged:
the demand curve for plastic will shift to the right.
