ECN 211 final exam

The table below displays data from the Bureau of Economic Analysis for the United States in 2007. Expenditure category Trillions of U.S. Dollars Consumption 9.77 Investment 2.30 Government Purchases 2.67 Exports 1.66 Imports 2.37 Calculate nominal GDP in 2007 $18.77 Trillion $14.03 Trillion $16.40 Trillion $15.45 Trillion cannot be determined from the information given

$14.03 Trillion

year Nominal GDP Real GDP 2000 $9,952 $11,216 2005 $12,623 $12,623 2008 $14,292 $13,162 2009 $13,939 $12,703 2010 $14,527 $13,088 2011 $15,088 $13,313 Source: Bureau of Economic Analysis Refer to the table above. What is the value of the GDP deflator in 2000? cannot be determined 100 105 89 113

89

Which of the following correctly describes how price adjustments eliminate a shortage? As the price rises, the quantity demanded decreases while the quantity supplied increases. As the price rises, the quantity demanded increases while the quantity supplied decreases. As the price falls, the quantity demanded decreases while the quantity supplied increases. As the price falls, the quantity demanded increases while the quantity supplied decreases.

As the price rises, the quantity demanded decreases while the quantity supplied increases.

Refer to the figure above. Suppose apple farmers decide to sell some of their orchard land for housing developments. What best describes the effect in the market for fresh apples? A B C D E F

B

If consumers view cappuccinos and lattés as substitutes, what would happen to the equilibrium price and quantity of lattés if the price of cappuccinos rises? Both the equilibrium price and quantity would increase. Both the equilibrium price and quantity would decrease. The equilibrium price would increase, and the equilibrium quantity would decrease. The equilibrium price would decrease, and the equilibrium quantity would increase.

Both the equilibrium price and quantity would increase.

Refer to the figure above. Technology advances in the smartphone industry. What best describes the result in the smartphone market? A B C D E F

D

Which of the following events must result in a higher price in the market for cigars? Demand for cigars increases, and supply of cigars decreases. Demand for cigars and supply of cigars both decrease. Demand for cigars decreases, and supply of cigars increases. Demand for cigars and supply of cigars both increase

Demand for cigars increases, and supply of cigars decreases.

Refer to the figure above. Which of the following best describes the change in the washing machine market after an advance in technology and an increase in income? Washing machines are normal goods. A B C D E F

E

Which of the following is FALSE regarding GDP per person as a measure of standard of living? GDP does not include the production and sale of illegal goods. GDP does not account for leisure time. GDP is adjusted to include the value of goods produced in the home for home consumption. GDP does not include information on income distribution.

GDP is adjusted to include the value of goods produced in the home for home consumption.

Which of the following would lead to an increase in GDP for the United States in 2013? I. Toyota, a Japanese firm, produces cars in Kentucky in the first quarter of 2013. II. A 2013 model year Ford Fiesta is produced, but sits on a dealer lot until February 2014. III. $10,000 worth of new-crop Washington-grown wheat is exported to Japan in October 2013. IV. An international student purchases a ham sandwich from a Tempe Subway sandwich shop in May 2013 III and IV I and II I, II, and III II and III I, II, III and IV

I, II, III and IV

Which of the following would lead to a leftward shift in the demand curve for iPads (a normal good)? New information is available that suggests iPads will be cheaper in the future. An increase in household income An increase in the price of laptop computers A decrease in in the price of the applications that run on iPads An increase in the price of iPads

New information is available that suggests iPads will be cheaper in the future.

What would happen to the equilibrium price and quantity of lattés if the cost of producing steamed milk, which is used to make lattés, rises? Both the equilibrium price and quantity would increase. Both the equilibrium price and quantity would decrease. The equilibrium price would increase, and the equilibrium quantity would decrease. The equilibrium price would decrease, and the equilibrium quantity would increase.

The equilibrium price would increase, and the equilibrium quantity would decrease.

When the price of fresh apples rises, There is a decrease in the quantity supplied of apples and a movement down along the supply curve for fresh apples. There is an increase in the quantity supplied of apples and a movement up along the supply curve for fresh apples. There is an increase in supply and a rightward shift of the supply curve. There is a decrease in supply and a leftward shift of the supply curve.

There is an increase in the quantity supplied of apples and a movement up along the supply curve for fresh apples.

Which of the following is a normative economic statement? Better awareness of health risks has decreased tobacco use. Tobacco products should be banned in all public spaces. The increase in tobacco taxes has caused an increase in the price of cigarettes. A reduction in tobacco subsidies has caused the price of tobacco to increase.

Tobacco products should be banned in all public spaces.

In the circular-flow diagram, which of the following items flows from firms to households through the markets for goods and services? goods and services dollars paid to land, labor, and capital dollars spent on goods and services wages, rent, and profit

goods and services

For two individuals who engage in the same two productive activities, it is impossible for one of the two individuals to have a comparative advantage in both activities. have an absolute advantage in both activities. be more productive per unit of time in both activities. gain from trade with each other.

have a comparative advantage in both activities.

After an increase in income, the equilibrium price of tablet computers _____ and equilibrium quantity of tablet computers ______. increases/decreases increases/increases decreases/decreases decreases/increases decreases/cannot be determined

increases/increases

As households in an economy become richer, they purchase less powdered laundry detergent and switch to more expensive liquid detergent. Powdered laundry detergent is a(n) cheap good inferior good normal good good that is not subject to the law of demand economic bad

inferior good

In the circular-flow diagram, which of the following is not a factor of production? labor land capital money

money

Suppose that the country of Xenophobia chose to isolate itself from the rest of the world. Its ruler proclaimed that Xenophobia should become self-sufficient, so it would not engage in foreign trade. From an economic perspective, this idea would make sense if Xenophobia had an absolute advantage in all goods. make sense if Xenophobia had no absolute advantages in any good. not make sense as long as Xenophobia had a comparative advantage in some good. not make sense as long as Xenophobia had an absolute advantage in at least half the goods that could be traded.

not make sense as long as Xenophobia had a comparative advantage in some good.

The signals that guide the allocation of resources in a market economy are surpluses and shortages. quantities. government policies. prices.

prices

The law of demand states that, other things remaining the same, the higher the price of a good, the smaller is the demand for the good. larger is the demand for the good. smaller is the quantity of the good demanded. larger is the quantity of the good demanded.

smaller is the quantity of the good demanded.

A rational decisionmaker ignores marginal changes and focuses instead on "the big picture." ignores the likely effects of government policies when he or she makes choices. takes an action only if the marginal benefit of that action exceeds the marginal cost of that action. takes an action only if the combined benefits of that action and previous actions exceed the combined costs of that action and previous actions.

takes an action only if the marginal benefit of that action exceeds the marginal cost of that action.

If you are considering buying either an Apple iPhone or a Samsung Galaxy, and you choose the Samsung only because the price is lower, then you consider the iPhone and the Galaxy to be complements. the iPhone and the Galaxy to be substitutes. the iPhone to be a normal good and the Galaxy to be an inferior good. the iPhone to be an inferior good and Galaxy to be a normal good.

the iPhone and the Galaxy to be substitutes.

In economics, the cost of something is the dollar amount you must pay to obtain it. the time you had to spend to obtain it. the value of the next-best alternative forgone to get it. often impossible to quantify, even in principle.

the value of the next-best alternative forgone to get it.

Suppose the figure above represents the market for apples. Suppose a price ceiling of $1.75 per pound is imposed. As a result, there is a shortage of about 45 thousand pounds of apples. there is a surplus about 45 thousand pounds of apples. there is a shortage of about 20 thousand pounds of apples. the market remains in equilibrium because the price ceiling is not binding.

there is a shortage of about 45 thousand pounds of apples.

When two variables move in the same direction, the curve relating them is upward sloping, and we say the variables are positively related. upward sloping, and we say the variables are negatively related. downward sloping, and we say the variables are positively related. downward sloping, and we say the variables are negatively related.

upward sloping, and we say the variables are positively related.