Econ Exam 1

Which would NOT be included in the investment spending component of GDP? A) purchases of robots to assemble automobiles B) the construction of a new house for a family C) an increase in a discount store's inventory of bicycles D) a mutual fund's purchase of 100,000 shares of General Motors stock

A mutual fund's purchase of 100,000 shares of General Motors stock

(Figure: The Demand and Supply of Wheat) Look at the figure The Demand and Supply of Wheat. A temporary price of $4 in this market would result in: A) a surplus of 4,000 bushels. B) a shortage of 2,000 bushels. C) a shortage of 4,000 bushels. D) a surplus of 2,000 bushels.

A shortage of 4,000 bushels (Ask about)

When markets fail A)government intervention may help. B)the market realizes the maximum possible gains from trade given the available resources. C)there may still be an efficient allocation of resources. D)no goods and services are produced.

government intervention may help

(Figure: Demand for DVDs) Examine the figure Demand for DVDs. A decrease in the rental price of DVDs would result in a change illustrated by: A)the move from f to "g" in panel A B)the move from h to "I" in panel B C)the move from j to"k" in panel C D)the move from l to "m" in panel D.

the move from j to"k" in panel C

For a student who owns his or her own home and doesn't plan to live in the dorm, the cost of going to college is: A)tuition and the cost of housing. B)tuition, the cost of housing, and the cost of books and other school materials .C)tuition, the cost of books and other school materials, and forgone income. D)forgone income only.

Tuition, the cost of books and other school materials, and forgone income.

If the value of a U.S. dollar changes from ¥120 to ¥110, it follows that: A) the Japanese yen is depreciating and the U.S. dollar is appreciating. B) U.S. goods become cheaper for Japanese consumers to purchase. C) Japanese goods become cheaper for U.S. consumers to purchase. D) U.S. services become more expensive for Japanese firms to purchase.

U.S. goods become cheaper for Japanese consumers to purchase

Which would NOT be a part of GDP? A) used car sales B) new residential construction C) a new truck purchased by a building contractor D) telephone service purchased for a home

Used car sales

The value added is equal to the: A) value of sales by a company. B) value of sales minus the value of intermediate goods used by a company. C) value of intermediate goods. D) sum of payments to labor and capital.

Value of sales minus the value of intermediate goods used by company

The Boeing Company buys $3 million worth of steel, $2.5 million worth of computer hardware and software, and $1 million worth of mechanical tools to manufacture a certain model of aircraft. Boeing sells this particular model of aircraft at $10 million. The value added by Boeing is equal to: A) $3.5 million. B) $16.5 million. C) $13 million. D) $15.5 million.

3.5 million

Good X and good Y are related goods. Holding everything else constant, if the price of X decreases and the demand for Y increases, then this most likely means that X and Y are: A) complements. B) substitutes. C) inferior. D) normal.

Complements

If people demand more of product A when the price of B falls, then A and B are: A) not related. B) substitutes. C) complements. D) inferior goods.

Complements

In 2012, _____ was the largest component of U.S. GDP, at approximately 71% of the total aggregate spending. A) government spending B) consumer spending C) investment spending D) net export spending

Consumer Spending

Gross domestic product is defined as: A) consumer spending + government purchases + financial spending + exports - imports. B) consumer spending + government transfers + investment spending + exports - imports. C) disposable income + taxes + investment spending + exports + imports. D) consumer spending + government purchases + investment spending + exports - imports.

Consumer spending + government purchases + investment spending + exports - imports.

(Figure: Change in the Demand for U.S. Dollars) Refer to the information in the figure Change in the Demand for U.S. Dollars. A movement from E2 to E1 in this foreign exchange market would cause Americans to purchase ______ goods and services from Europe A) the same amount of B) fewer C) more D) zero

Fewer

GDP is the total dollar value of: A) intermediate goods and services produced in the economy in a given period. B) wages paid to producing workers in a given period. C) final goods and services produced in the economy in a given period. D) government production in a given perio

Final goods and services produced in the economy in a given period

The market in which foreign currencies are traded is known as the : A) stock market. B) bond market. C) commodities market. D) foreign exchange market.

Foreign exchange market

When a country's currency depreciates A) foreigners find the country's goods to be relatively cheaper. B) the country's exports fall. C) the country's imports rise. D) foreign goods become cheaper.

Foreigners find the country's goods to be relatively cheaper

If your professor wins the lottery: A) GDP goes up. B) GDP goes down. C) GDP is not affected. D) the economy will clearly be better off.

GDP is not affected

Which of the following best represents the equation for GDP? A) GDP=C+I+G-X+IM B) GDP=C+I+G+X-IM C) GDP = C + I + G + taxes - value added D) GDP=C+I+G+taxes+X+IM

GDP=C+I+G+X-IM

When consumers purchase imported products, this is: A) subtracted from GDP. B) considered domestic spending, since it is spent by a domestic consumer. C) double counting. D) not a part of the GDP calculation.

Subtracted from GDP

If there is a widely held expectation that prices of cotton will be higher next year, then A)the demand for cotton will increase today. B)the demand for cotton will decrease today. C)the demand for cotton will shift to the left today. D)there will be no change in the current demand.

The demand for cotton will increase today

If the U.S. dollar changes from $1 = €1 to $0.80 = €1, then: A) the dollar has depreciated relative to the euro. B) the dollar has been fixed by the United States and the euro bloc. C) the dollar has appreciated relative to the euro. D) U.S. goods are now cheaper in the euro bloc.

The dollar has appreciated relative to the euro

.(Figure: Demand for DVDs) Examine the figure Demand for DVDs. A decrease in the price of DVD players (a complement to DVDs) would result in a change illustrated by: A)the move from f to g in panel A B)the move from h to I in panel B C)the move from j to k in panel C D)the move from l to m in panel D.

The move from H to I in panel B

Aggregate output is: A) equal to consumer spending on goods and services. B) the value of new construction, changes in inventories, and the purchase of physical capital by businesses. C) the total quantity of intermediate goods produced within an economy. D) the total quantity of final goods and services produced within an economy.

The total quantity of final goods and services produced within an economy

The invisible hand refers to

The way in which the individual pursuit of self-interest can lead to good results for society as a whole.

After swimming 100 laps at the pool, Erik decides to swim 10 more before lifting weights. This statement best represents this economic concept: A)Choices are necessary because resources are scarce. B)The true cost of something is its opportunity cost. C)"How much" is a decision at the margin. D)There are gains from trade.

"How much" is a decision at the margin

A decrease in the price of a good will result in A) an increase in demand. B) an increase in supply. C) an increase in the quantity demanded. D) an increase in the quantity supplied.

An increase in quantity demand (Law of Demand)

Which will NOT cause an increase in the supply of good X?

An increase in the price of inputs used to produce good X

If the exchange rate is initially $1 = 12.95 pesos but changes to $1 = 15 pesos, then the dollar has ________ and the price in Mexico of a $10,000 Harley Davidson motorcycle has _______. A) depreciated; decreased B) depreciated; increased C) appreciated; increased D) appreciated; decreased

Appreciated; increased

Suppose that Europeans begin to view the United States as a more attractive investment opportunity. Which is likely to occur? A) depreciation of the dollar, which will raise U.S. exports B) appreciation of the dollar, which will discourage Europeans from buying American goods and services C) depreciation of the dollar, which will lower U.S. exports D) depreciation of the dollar, which will make Europeans buy more American products

Appreciation of the dollar, which will discourage Europeans from buying American goods and Services

Goods that are produced in a particular period but not sold in that period: A) count as consumption in the next year. B) are included in investment. C) are treated like exports. D) are classified as purely financial transactions.

Are included in investments

If an economy has to sacrifice increasing amounts of good X for each unit of good Y produced, then its production possibility frontier is: A)bowed out from the origin. B)bowed in toward the origin. C)a straight line. D)a vertical line.

Bowed out from the origin

(Figure: Change in the Demand for U.S. Dollars) Refer to the information in the figure Change in the Demand for U.S. Dollars. A flow of capital from Europe to the United States would cause a movement in this foreign exchange market that is best represented by the shift from: A) D2 to D1. B) E2 to E1. C) D1 to D2. D) E1 to E2.

D1 to D2

When a country's currency appreciates, the prices of its imports in terms of the domestic currency will _______. A) increase B) decrease C) remain constant D) fluctuate randomly.

Decrease

If goods A and B are substitutes, a decrease in the price of good B will: A) increase the demand for good A. B) increase the demand for good B. C) decrease the demand for goodA. D) increase the demand for good B and decrease the demand for good A

Decrease the demand for good A

Figure: Change in the Demand for U.S. Dollars) Refer to the information in the figure Change in the Demand for U.S. Dollars. The change from D1 to D2 will occur, all other things being equal, if the: A) supply of euros decreases. B) demand for euros increases. C) demand for euros decreases. D) demand for dollars increases.

Demand for dollars increases

Suppose that the United States and European Union are the only trading partners in the world. If the European Union imposes some import tariffs on U.S. goods, we would expect the: A) supply of the euro to decrease, depreciating the euro. B) demand for the dollar to decrease, depreciating the dollar. C) demand for the dollar to increase, appreciating the dollar. D) supply of the dollar to decrease, depreciating the dollar.

Demand for the dollar to decrease, depreciating the dollar

Suppose that the United States and European Union are the only trading partners in the world. If interest rates in the United States are significantly lower than those in the European Union, we would expect the: A) supply of the dollar to fall, appreciating the dollar. B) demand for the dollar to fall, depreciating the dollar. C) supply of euros to increase, depreciating the euro. D) demand for euros to decrease, depreciating the euro.

Demand for the dollar to fall, depreciating the dollar (ask)

What will happen in the market for canned pinto beans if income increases A)Demand will increase if pinto beans are an inferior good. B)Demand will increase if pinto beans are a normal good. C)Supply will increase if pinto beans are an inferior good. D)Supply will increase if pinto beans are a normal good.

Demand will increase if pinto beans are a normal good

When the exchange rate changes from (5.5 pesos = 1 dollar) to (6.5 pesos = 1 dollar), the peso has ________ and the dollar has ________. A) appreciated; appreciated B) depreciated; depreciated C) depreciated; appreciated D) appreciated; depreciated

Depreciated; appreciated

Value added in national income accounts refers to the: A) value added by labor to the production process. B) difference between the final price and the value of inputs purchased. C) difference in profits at various stages of production. D) value of all the inputs used by the final producer.

Difference between the final price and the value of inputs purchased

If all of the opportunities to make someone better off (without making someone else worse off) have been exploited, an economy is: A)equitable. B)inefficient. C)marginally optimal. D)efficient.

Efficient

If nominal GDP increases from one year to the next: A) prices must have risen from one year to the next. B) real GDP must have risen from one year to the next. C) prices and real GDP must have risen from one year to the next. D) either output or prices or both must have risen from one year to the next.

Either output or prices or both must have risen from one year to the next

When a currency becomes less valuable in terms of other currencies, we say that it: A) has appreciated. B) has depreciated. C) is undervalued. D) is no longer in equilibrium.

Has depreciated

Nominal GDP: A) has not been adjusted for changes in prices over time. B) has been adjusted for changes in prices over time. C) is a small or nominal amount of output. D) excludes the international sector.

Has not been adjusted for changes in prices over time

Who would demand dollars in the foreign exchange market? I. Americans who want to buy American goods, services, and assets II. Americans who want to buy European goods, services, and assets III. Europeans who want to buy American goods, services, and assets A) I only B) II only C) III only D) I, II, and III

III only

Who would supply euros in the foreign exchange market? I. Americans who want to buy American goods, services, and assets II. Americans who want to buy European goods, services, and assets III. Europeans who want to buy American goods, services, and assets A) I only B) II only C) III only D) I, II, and III

III only

An increase in which determinant of demand will have an ambiguous (uncertain) effect on price? A) tastes and preferences B) price of a substitute C) price of a complement D) income

Income

When a country's currency depreciates, the prices of its imports in terms of the domestic currency will _______. A) increase B) decrease C) remain constant D) fluctuate randomly.

Increase

If Poland decides to increase the production of steel—and decrease the production of vodka—the bowed-out production possibility frontier would suggest that there will be ________ opportunity cost of producing more steel A)increasing B)decreasing C)nonexistent D)unchanged

Increasing

(Figure: Change in the Demand for U.S. Dollars) Refer to the information in the figure Change in the Demand for U.S. Dollars.. The change from D1 to D2 will occur, all other things being equal, if: A) interest rates are higher in Europe. B) interest rates are higher in the United States. C) interest rates in the United States and Europe are equal. D) inflation is higher in Europe.

Interest rates are higher in the United States

Which is FALSE? Gross domestic product: A) is aggregate output. B) is the total production of final goods and services. C) grows during an expansion. D) is the total production of all final and intermediate goods and services.

Is the total production of all final and intermediate goods and services

Marginal Analysis A) refers to decisions about whether or not to engage in a particular activity. B)is primarily used when making an either-or choice. C)is used primarily when deciding how much of an activity should be done. D)does not help when making a "how much"choice.

Is used primarily when deciding how much of an activity should be done

(Figure: Change in the Demand for U.S. Dollars) Refer to the information in the figure Change in the Demand for U.S. Dollars. A movement from E1 to E2 in this foreign exchange market would cause Americans to purchase ______ goods and services from Europe. A) the same amount of B) fewer C) more D) zero

More

Which component of GDP is currently negative for the United States? A) net exports B) investment spending C) consumer spending D) government spending

Net exports

The total value of all final goods and services produced in the economy in a given year and calculated using prices from the year in which the output is produced is: A) real GDP. B) nominal GDP. C) net exports. D) consumption spending.

Nominal GDP

If the production possibilities frontier is a straight line, which statement is TRUE? A)Opportunity costs are constant. B)The firm faces increasing costs. C)The firm faces decreasing costs. D)There is no trade-off between the two goods represented.

Opportunity costs are constant

The typical supply curve illustrates that: A) other things equal, the quantity supplied for a good is inversely related to the price of a good. B) other things equal, the supply of the good creates its own demand for the good. C) other things equal, the quantity supplied for a good is positively related to the price of a good. D) price and quantity supplied are unrelated.

Other things equal, the quantity supplied for a good is positively related to the price of a good

The effect of an increase in productive inputs such as labor and capital can be shown by a(n): A)point inside of the production possibility frontier. B)outward shift of the production possibility frontier. C)movement from one point to another along the production possibility frontier. D)inward shift of the production possibility frontier.

Outward shift of the production possibility frontier (ASK)

(Figure: Shifts in Demand and Supply IV) Examine the figure Shifts in Demand and Supply IV. The figure shows how supply and demand might shift in response to specific events. Suppose half of the people in San Diego pack up and move to Colorado Springs. Which panel best describes how this will affect the supply of houses in San Diego? A) panel A B) panel B C) panel C D) panel D

Panel A

(Figure: Shifts in Demand and Supply IV) Examine the figure Shifts in Demand and Supply IV. The figure shows how supply and demand might shift in response to specific events. Suppose consumer incomes increase. Which panel best describes how this will affect the market for big-screen televisions, a normal good? A) panel A B) panel B C) panel C D) panel D

Panel B

(Figure: Shifts in Demand and Supply IV) Examine the figure Shifts in Demand and Supply IV. The figure shows how supply and demand might shift in response to specific events. Suppose the Surgeon General announces that eating chocolate prevents heart disease. Which panel best describes how this will affect the market for chocolate? A) panel A B) panel B C) panel C D) panel D

Panel B

42. (Figure: Shifts in Demand and Supply IV) Examine the figure Shifts in Demand and Supply IV. The figure shows how supply and demand might shift in response to specific events. Suppose half of the people in San Diego move to Colorado Springs. Which panel best describes how this will affect the market for houses in Colorado Springs? A) panel A B) panel B C) panel C D) panel D

Panel B

(Figure: Shifts in Demand and Supply IV) Examine the figure Shifts in Demand and Supply IV. The figure shows how supply and demand might shift in response to specific events. Suppose the price of lumber falls dramatically. Which panel best describes how this will affect the market for new houses? A) panel A B) panel B C) panel C D) panel D

Panel C

(Figure: Shifts in Demand and Supply IV) Examine the figure Shifts in Demand and Supply IV. The figure shows how supply and demand might shift in response to specific events. Suppose oil becomes more expensive. Which panel best describes how this will affect the market for gasoline, which is made from oil? A) panel A B) panel B C) panel C D) panel D

Panel D

A country's living standard is best measured by the: A) per capita nominal GDP. B) real GDP. C) nominal GDP. D) per capita real GDP.

Per capita real GDP

Real per capita GDP is: A) real GDP divided by the population. B) real GDP divided by the amount of capital available in the economy. C) not a good useful measure of human welfare. D) rarely used as a tool to compare countries' possible resources.

Real GDP divided by the population

For measuring a nation's standard of living, the best available common measure is: A) nominal GDP. B) market GDP. C) real GDP per capita. D) nominal GDP per capita.

Real GDP per capita

The inflation-adjusted measure of aggregate output typically used by economists is called: A) aggregated output. B) nominal gross national product. C) net domestic product. D) real gross domestic product.

Real gross domestic product

It is cheaper to produce corn in Kansas than in Death Valley, California because for needs a lot of water and moderate temperatures. This statement best represents this economic concept: A)Resources are scarce. B)Markets move toward equilibrium. C)Resources should be used as efficiently as possible to achieve society's goals. D)Markets usually lead to efficiency.

Resources should be used as efficiently as possible to achieve society's goals

Corner offices in high-rise office buildings usually cost more to rent than other offices. This best illustrates the economic principle of: A)specialization. B)scarcity. C)equilibrium. D)opportunity costs.

Scarcity

Researchers find a new strain of genetically modified seeds that results in a higher yield for corn producers. Holding all other things constant, this research will A) shift the supply curve for corn left. B) increase the quantity supplied of corn. C) decrease the quantity supplied of corn. D) shift the supply curve for corn to the right.

Shift the supply curve for corn to the right

A good is inferior if which statement is TRUE? A)When income increases, the demand remains unchanged. B)When income increases, the demand decreases. C)When income increases,the demand increases. D)Income and demand are unrelated.

When income increases, the demand decreases.

A good is normal if which statement is TRUE? A)When income increases, the demand remains unchanged. B)When income increases, the demand decreases. C)When income increases, the demand increases. D)Income and demand are unrelated.

When income increases, the demand increases.

In much of the country, homeowners choose to heat their houses with either natural gas or heating oil. Which statement would cause a change in demand for natural gas? A)a change in the price of home-heating oil B)a change in income C)an increase in consumer tastes for natural gas as an energy source D)a change in the price of home-heating oil, a change in income, and an increase in consumer tastes for natural gas as an energy source

a change in the price of home-heating oil, a change in income, and an increase in consumer tastes for natural gas as an energy source

Too little spending in an economy often leads to A)a recession. B)inflation. C)equilibrium. D)efficiency.

a recession

Thinking in economic terms, when Mary Sweet-Tooth is deciding whether to eat another brownie, she: A)considers only the price of the brownie. B)considers only how much additional exercise she will need to do to work off the calories associated with eating another brownie. C)compares all of the benefits and costs of eating another brownie. D)considers whether she can do so without anyone else noticing.

compares all of the benefits and costs of eating another brownie

Because one person's spending is another person's income A)if one group in the economy spends more, the incomes of other groups will decrease B)if one group in the economy spends less, the incomes of other groups will increase. C)if one group in the economy spends more, the incomes of other groups will increase. D)spending by one group does not influence the income of any other group.

if one group in the economy spends more, the incomes of other groups will increase.

The phrase "gains from trade" refers to the A)profits obtained from sales of a good or service .B)increase in total output that is realized when individuals specialize in particular tasks and trade with each other. C)gains that one obtains by taking advantage of an uninformed buyer and selling at a higher than average price. D)gains that one obtains by taking advantage of a temporary discount, or sale price.

increase in total output that is realized when individuals specialize in particular tasks and trade with each other.

(Figure: The Supply of DVD Rentals) Examine the figure The Supply of DVD Rentals. A decrease in the price of DVDs sold by movie producers to rental stores would result in a change illustrated by the move from: A) n to o in panel A. B) p to q in panel B. C) s to t in panel C. D) u to v in panel D.

n to o in Panel A

Katherine has a physics exam tomorrow. However, a free lecture by one of her favorite authors is taking place this evening. Katherine decides to attend the lecture instead of studying for her exam. Katherine's opportunity cost of attending the lecture is: A)the time spent listening to the lecture. B)not relevant since no money is involved. C)the transportation and time cost of getting to the lecture itself plus the reduction in her physics exam grade as a result of not studying tonight. D)the time spent getting to the lecture.

the transportation and time cost of getting tot he lecture itself plus the reduction in her physics exam grade as a result of not studying tonight

(Figure: The Supply of DVD Rentals) Examine the figure The Supply of DVD Rentals. A decrease in the price of DVD rentals would result in a change illustrated by the move from: A) n to o in panel A. B) p to q in panel B. C) s to t in panel C. D) u to v in panel D.

u to v in panel D