midterms 1 and 2

The law of supply states that as the price of a good rises, (i)_______ of the good rises, (ii)_______ .

A. (i) the quantity supplied, (ii) ceteris paribus B. (i) the quantity demanded, (ii) if all other prices are equal C. (i) the supply, (ii) ceteris paribus D. (i) the quantity supplied, (ii) if all other prices are equal

Choose the correct signs: Personal income = National income ___ Undistributed corporate profits ___ Social insurance taxes ___ Corporate profits taxes ___ Transfer payments

A. +, -, -, - B. -, +, -, - C. -, -, +, - D. -, -, -, +

State the category/categories of resource(s) to which the following belong: (i) Human employee (ii) Working Robotic Machine.

(a) (i) Labor, (ii) Land (b) (i) Capital, (ii) Capital (c) (i) Labor (ii) Capital (d) (i) Labor (ii) Labor

Pick the appropriate option given the following two statements. Statement (i): A unit of a commodity can be both good and bad for an individual at the same time. Statement (ii): A unit of a commodity can be both good and bad for two different individuals at the same time.

(a) (i) is true, (ii) is false. (b) (i) and (ii) are both false. (c) (i) is false, (ii) is true. (d) (i) and (ii) are both true.

Consider the following statements and pick the appropriate option. (i) Keynesians believe that the economy is inherently unstable. (ii) Keynes believed that the time frame required for wages and prices to adjust is too long to call the economy self-regulating.

(a) (i) is true, (ii) is true (b) (i) is true, (ii) is false (c) (i) is false, (ii) is true (d) (i) is false, (ii) is false

Pick the appropriate option. Statement (i) The CPI market basket contains all goods and services produced in an economy. (ii) The GDP Implicit Price Deflator uses all goods and services produced in an economy.

(a) (i) is true, (ii) is true (b) (i) is true, (ii) is false (c) (i) is false, (ii) is true (d) (i) is false, (ii) is false

Suppose the structural unemployment rate is 5% and the frictional unemployment rate is 4%. What is the natural rate of unemployment?

(a) 1% (b) 9% (c) 20% (d) 5%

Suppose your salary is $20,000 in year 1 and increases to $25,000 in year 2. Suppose the CPI was 100 in year 1 and 150 in year two. What is your year two salary in year one prices?

(a) 16,666 (b) 17,777 (c) 15,555 (d) 18,888

Suppose your nominal income goes from $20,000 in year 1 to $X in year 2. Suppose the CPI was 100 in year 1 and 150 in year two. How much should X be so that your real income remains the same?

(a) 25,000 (b) 30,000 (c) 20,000 (d) 40,000

Which of the following cases is considered an unemployed person?

(a) Ann is 14 years old, but has no job. (b) Ann is in prison, and has no job. (c) Ann doesn't have a job and hasn't made any effort to find a job for the last two years. (d) Ann lost her job two weeks ago.

At a given price level, suppose that investment (I), government purchases (G), and net exports (NX) increased while the AD curve shifted left. Which of the following statements can be true?

(a) Higher future prices were expected (b) Consumption decreased a lot (c) Consumption increased a lot (d) There were increases in wealth

Which of the following is true?

(a) In making an optimal decision, neither Benefits nor Costs are important. (b) In making an optimal decision, only Benefits are important. (c) In making an optimal decision, only Costs are important. (d) In making an optimal decision, both Benefits and Costs are important.

The reason the field of economics exists is because

(a) Individuals and societies have collective wants that are greater than the limited resources to satisfy those wants. (b) Individuals and societies have collective wants that are lesser than the limited resources to satisfy those wants. (c) Individuals and societies have collective wants that are equal to the limited resources to satisfy those wants. (d) None of the above.

Jim quit his job and became unemployed. He is a ____.

(a) Job Loser (b) Job Leaver (c) Reentrant (d) New Entrant

Which of the following is NOT a reason for why the AD curve slopes downward?

(a) Real balance effect (b) Sticky wages (c) International trade effect (d) Interest rate effect

Not counting discouraged workers as unemployed workers biases the unemployment rate estimates ___.

(a) Upwards (b) Downwards (c) Doesn't affect (d) None of the above

When does your real income increase?

(a) When the percentage change in nominal income is 0%, and the inflation rate is -2%. (b) When the inflation rate is 4% and the percentage increase in nominal income is 2%. (c) When the percentage change in nominal income is 0%, and the inflation rate is 2%. (d) When the inflation rate is -4% and the percentage change in nominal income is -8%.

If Jim used to work at a typewriter factory, and personal computers result in the factory being shut down, what kind of unemployment best describes Jim's circumstance?

(a) frictional unemployment (b) structural unemployment (c) cyclical unemployment (d) seasonal unemployment

As a person's income (i)_______, that individual's demand for a particular good may (ii)______ if the good is a(n) (iii)_________ good.

a) (i) increases, (ii) fall, (iii) normal b) (i) decreases, (ii) rise, (iii) inferior c) (i) increases, (ii) rise, (iii) inferior d) (i) decreases, (ii) fall, (iii) neutral

Consider the following two statements. (i) The unemployment rate is 5%; (ii) The unemployment rate is far too high.

a) (i) is a normative statement; (ii) is a normative statement b) (i) is a positive statement; (ii) is a normative statement c) (i) is a normative statement; (ii) is a positive statement d) (i) is a positive statement; (ii) is a normative statement

Consider the following two statements: (i) speculators are able to help reduce price fluctuations by buying at a high price and selling at a low price; (ii) speculators always make others worse off

a) (i) is true; (ii) is true b) (i) is true; (ii) is false c) (i) is false; (ii) is false d) (i) is false; (ii) is true

Suppose the money price of a Playstation 4 is $300 and the money price of a textbook is $100. Then the relative price of a book is ___. Suppose the government imposes a 5% tax on the Playstation 4 and a 5% tax on books. Then the after-tax relative price of a book in terms of a Playstation 4 ___.

a) 1/3; increases b) 3/1; decreases c) 1/3; stays the same d) 3/1; stays the same

A small country has a population of 10,000. 8,000 are the civilian non-institutional population. 2,000 are not in labor force. 1000 are unemployed. The employment rate is ___.

a) 5,000/8,000 b) 6,000/8,000 c) 5,000/6,000 d) 4,000/6,000

Why do economists make use of the ceteris paribus assumption?

a) Economists wish to specify what they believe to be real-world relationships between two variables. b) Economists wish to say something false about the world c) Economists think that other variables never change in the real world d) Economists simply know more about the real world than other social scientists

Who understands this economic concept most exactly?

a) Emma : "All else equal, as the price of a football ticket rises, the quantity demanded of football tickets falls." b) Keira : "All else equal, as the price of a football ticket rises, the demand decreases." c) Scarlett : "Regardless of other things, there is a negative relationship between price and demand." d) Ariana : "If the price goes down, then the demand curve shifts rightward, so the demandincreases at every given price."

Which of the followings is true about the Government's Role according to the Simple Keynesian Model?

a) Government should do nothing b) Government should do something to change the net export c) Government could play an important role in shifting the AD curve d) None of the above are true

Which of the followings is true for Market Disequilibrium:

a) Market price is always high enough to allow firms to earn a positive profit. b) Market price is not at the right place to make the market clear c) Market price is always low enough for consumers to buy all that they want. d) Market price is at a level where there is neither a shortage nor a surplus.

If the price of materials used to make PCs rises sharply, what happens to the equilibrium price and the quantity sold of PCs?

a) P falls; Q rises b) P rises; Q falls c) P falls; Q falls d) P, Q are undetermined

The law of increasing opportunity costs holds because

a) People have varying abilities b) Everyone works at the same pace c) As more people start producing the same good, the opportunity cost decreases d) It is impossible for opportunity costs to be constant

Which statement is true?

a) Sellers always prefer higher prices to lower prices b) Sellers prefer higher prices to lower prices given all other factors equal c) Sellers prefer higher prices to lower prices when they are faced with a price floor d) Sellers might prefer lower prices to higher prices at market equilibrium

Suppose that last month the money price of a Honda Civic was $10,000 and the money price of a TI graphing calculator was $10. Today the money prices become $8800 and $9. Then

a) The absolute price of the TI calculator increases; the relative price of it increases b) The price of the TI calculator in terms of the Honda Civic is higher c) The absolute price of the TI calculator decreases; the relative price of it is unchanged d) The price of the Honda Civic in terms of the TI calculator is higher

Suppose that tennis racket prices increase. Which is the most plausible?

a) The demand curve for tennis rackets increases b) The demand curve for tennis balls shifts leftward. c) The price of squash balls falls d) The demand for squash rackets goes down.

John has been working out at the gym. John usually works out for three hours and then returns to his apartment. Which of the following best describes John's decision to stop working out after three hours?

a) The marginal benefit of John working out for a fourth hour exceeds the marginal cost to him b) The marginal cost of the third hour of working out exceeds the marginal benefit c) We cannot apply marginal cost/marginal benefit to John's decision because the decision to work out has nothing to do with economics d) The marginal benefit of the third hour of working out equals the marginal cost of the third hour of working out

If automobile manufacturers are producing more cars than people want to buy,

a) There is an excess supply and price can be expected to decrease. b) There is an excess supply and price can be expected to increase. c) There is an excess demand and price can be expected to decrease. d) There is an excess demand and price can be expected to increase.

If you walk into CVS and observe a price increase in vitamin water, what information can you infer?

a) There might be a positive supply shock shifting the supply curve rightward b) There might be more people beginning to drink vitamin water c) The vitamin water might be absolutely less scarce d) None of the above

Mexico and USA decide to trade with each other. Mexico can produce either 50 apples or 80 tomatoes whereas USA can produce either 80 apples or 80 tomatoes. Which of the following statement is true?

a) USA will produce 80 apples and 0 tomatoes whereas Mexico will produce 0 apples and 80 tomatoes. b) USA will produce 0 apples and 70 tomatoes whereas Mexico will produce 50 apples and 0 tomatoes. c) USA will produce 80 apples and 80 tomatoes whereas Mexico will produce 50 apples and 80 tomatoes d) USA will produce 50 apples and 50 tomatoes whereas Mexico will produce 50 apples and 50 tomatoes.

The GDP deflator is a measure of:

a). Price Level b). Total Production c). Available Resources d). Total Demand

Suppose that the money supply in an economy is $10, and that velocity is 5. If the price level is $2, what is Real GDP?

a. $50 b. $30 c. $15 d. $25

Consider the following two statements: (i) Classical economists believe that interest rate flexibility supports Say's Law in a money economy; (ii) A worker who spends less than his full income automatically disproves Say's Law.

a. (i) is true; (ii) is true b. (i) is false; (ii) is true c. (i) is true; (ii) is false d. (i) is false; (ii) is false

Consider the following two statements: (i) An economy can never produce at a point beyond its institutional PPF; (ii) An economy in an inflationary gap is producing at a point beyond its physical PPF.

a. (i) is true; (ii) is true b. (i) is false; (ii) is true c. (i) is true; (ii) is false d. (i) is false; (ii) is false

Suppose that the money supply is $15 and the velocity is 2. If government spending increases, what must happen to consumption, assuming the price level remains constant?

a. Consumption must increase if the money supply and velocity remain constant b. Consumption must decrease if the money supply and velocity remain constant c. Consumption must remain unchanged if the money supply and velocity remain constant d. Consumption must decrease if velocity increases

Suppose that an economy is initially in long-run equilibrium. If there is a decrease in Aggregate Demand, then

a. In the short run, both the price level and Real GDP fall; in the long run, the price level falls but Real GDP does not change b. In the short run, both the price level and Real GDP increase; in the long run, the price level and Real GDP both fall c. In the short run, neither price level nor Real GDP change; in the long run, the price level and Real GDP both increase d. In the short run, the price level rise and Real GDP remains unchanged; in the long-run, the price level increases and Real GDP decreases

Suppose an economy is in short-run equilibrium at a price level of 100 and a Real GDP level of $200 million. As time passes, the price level falls to 70 and Real GDP rises to $220 million. Which of the following might be a cause?

a. SRAS rises due to a decrease in input prices and AD remains constant b. SRAS falls due to an increase in input prices and AD rises due to US dollar depreciation c. SRAS keeps constant and AD falls due to US dollar appreciation d. SRAS falls due to a positive supply shock and AD falls due to a higher expectation for future prices

Suppose that foreign real national income decreases and labor productivity rises at the same time. Ceteris paribus, what will happen?

a. Short-run equilibrium price level rises, real GDP falls b. Short-run equilibrium price level falls, real GDP falls or rises c. Short-run equilibrium price level falls or rises, real GDP rises d. Short-run equilibrium price level falls, real GDP rises

What problem arises if we counted expenditures on both final and intermediate goods?

a. Understating GDP b. Double counting c. Omission of important factors d. Triple counting

A key assumption of the self-regulating economy is that:

a. Wages rates and resources prices are flexible b. Wage rates and resource prices are sticky c. Only the government can see the invisible hand d. The economy always move away from the direction of long-run equilibrium

One way to explain the influence of changes in the money supply on aggregate demand is: a change in the money supply will affect ___ and this effect will further affect ___ so that aggregate demand might be affected finally.

a. interest rates; consumption and investment b. interest rates; price level c. wage; price level d. business taxes; consumption and investment

Why is the SRAS curve is upward-sloping while the LRAS curve is vertical?

a. wages are sticky and workers have misperceptions in both short and long run b. wages are sticky and workers have misperceptions only in the short run c. wages are sticky and workers have misperceptions only in the long run d. wages are flexible and workers have no misperception in macroeconomics

At one point along a PPF, 50 tons of coffee and 100 tons of bananas are produced. At another point along the same PPF, 30 tons of coffee and 140 tons of bananas are produced. The opportunity cost of a ton of coffee between these points is

a.) 7/5 of a ton of bananas per ton of coffee. b.) 1/2 of a ton of bananas per ton of coffee. c.) 5/7 of a ton of bananas per ton of coffee. d.) 2 tons of bananas per ton of coffee.

Moving from one point on the production possibilities frontier to another ________.

a.) involves a tradeoff but does not incur an opportunity cost b.) involves an opportunity cost but no tradeoff c.) involves a tradeoff and incurs an opportunity cost d.) involves no tradeoff but it does incur an opportunity cost