Econ Macro Final
When the price of tortilla chips rose by 10 percent, the quantity of tortilla chips sold fell 4 percent, and the sale of dips (like salsa and bean dip) fell 8 percent. This set of facts indicates that the cross-price elasticity between tortilla chips and dip is ________, so the two are
-0.8; complements
According to the "Rule of 70," it will take 4 years for real GDP per capita to double when the growth rate of real GDP per capita is
17.5 percent 70/4=17.5%
A cigar store in the mall sells hand-rolled cigars for $10 and machine-made cigars for 2.50 each. What is the opportunity cost of buying a hand-rolled cigar?
2.50+2.50+2.50+2.50=10.00 Answer is 4 machine-made cigars is the opportunity cost
In Figure 2 if the economy is currently producing at point C (20 forks and 90 spoons), what is the opportunity cost of moving to point B (46 forks and 60 spoons )?
20 thousand spoons
Figure 1 shows the production possibilities frontier for Vidalia, a nation that produces two goods, roses and orchids. What is the opportunity cost for one dozen roses?
200 dozen= maximum roses 80 dozen= maximum orchids Divide 80/200=.4 .4= opportunity cost of one dozen roses
If real GDP per capita measured in 2009 dollars was $6,000 in 1950 and $48,000 in 2016, we would say that in the year 2016, the average American could buy ______ times as many goods and services as the average American in 1950.
8
If the number employed is 190 million, the number unemployed is 10 million, and the working-age population is 250 million, then the labor force participation rate is
80%
Which of the following goods is directly counted in GDP?
A 12-inch Subway Sandwich purchased by a student.
Which of the following is an example of human capital?
A college education
Last year, the Pottery Palace supplied 8,000 ceramic pots at $40 each. This year, the company supplied the same quantity of pots (8,000) at $55 each. Based on this evidence, The Pottery Palace has experienced
A decrease in supply Therefore their pots are of more value because there is less stuff to make the pots so they make each pot cost more
Suppose the value of the price elasticity of demand is -3. What does this mean?
A one percent increase in the price of good causes quantity demanded to decrease by 3 percent.
Which of the following would cause an unambiguous decrease in the real price of DVD players?
A shift to the right in the supply curve for DVD players and a shift to the left in the demand curve for DVD players.
Which of the following is an example of a worker experiencing frictional unemployment?
A worker quits his job at the Post Office to find more interesting work. Frictional Unemployment is searched and match
The nominal GDP of the US in 2015 was approximately $17.3 trillion. This means that
All of the above: The value of output in 2015 was around $17.3 trillion. Total income in 2015 was around $17.3 trillion. Total spending in 2015 was around $17.3 trillion.
Refer to Table 3-3. Assume the market basket for the consumer price index has three products- Cokes, hamburgers, and CDs- with the following values in 2011 and 2016 for price and quantity: The CPI for 2016 equals
Answer 121 Quantity: 100, 200, 10 Price Base Year 2011: $0.50, $2.00, $20.00 Price 2016: $0.75, $2.50, $21.00 Formula: Current expenditure/Base expenditure x100 Current expenditure: 100(.75)+200(2.50)+10(21)=785 Base year expenditure: 100(.50)+200(2)+10(20)=650 785/650 x100=120.77=121
Refer to Table 4. Consider the data above (in billions of dollars) for an economy. GDP (in billions of dollars) for this economy equals
Answer: $1,200 Y=C+I+G+NX C=800 I=200 G=300 NX(exports-imports)=100-200 Y=800+200+300+(100-200) Y=1,200
Refer to Table 18. What is nominal GDP in 2011?
Answer: $3,320 Quantity: 20, 100, 3 Price: $6.00, $2.00, $1,000 20(6)+100(2)+3(1,000)=3,320
Refer to Table 18. What is the real GDP in 2016, using 2011 as the base year?
Answer: $6,360 Quantity (in 2016): 30, 90, 6 Price (in 2011): $6.00, $2.00, $1,000 30(6)+90(2)+6(1,000)=$6,360
Refer to Table 18. What is nominal GDP in 2016?
Answer: $7,035 Quantity: 30, 90, 6 Price: $7.00, $2.50, $1,100 30(7)+90(2.)+6(1,100)=7,035
Refer to Table 5. The value added by the automobile dealer equals
Answer: $8,000 Stage of Production 2: Buyer: Auto dealer=$18,000 Stage of Production 3: Seller: Auto dealer=$26,000 Subtract 26,000-18,000=8,000
Refer to Table 9-1. The official unemployment rate for this simple economy equals
Answer: (100/1,100)x100 Why: unemployment rate=unemployment/labor force x100 Labor force=employment+unemployment Unemployment=100 Employment=1,000 LF=1,000+100=1,100
Jaycee Jeans sold 40 pairs of jeans at a price of $40. When it lowered its prices to $20, the quantity sold increased to 60 pairs. Calculate the absolute value of the price elasticity of demand. Use the midpoint formula.
Answer: 0.6 P1=$40, Q1=40; P2=$20, Q2= 60 Midpoint formula: ArcEp=Pbar/Qbar x Q2-Q1/P2-P1 Pbar= 40+20/2=30; Qbar= 40+60/2=50 =30/50 x (60-40)/(20-40) =30/50 x 20/-20 =0.6 :)
If real GDP grows by 3% in 2014, 3.2% in 2015, and 2.5% in 2016, what is the average annual growth rate of real GDP?
Answer: 2.9% 3+3.2+2.5=8.7/3
Refer to Table 9-7. Suppose that the data in the table above reflect price levels in the economy. What is the inflation rate between 2015 and 2016?
Answer: 2.9% Formula: New-Initial/Initial x100 2015 CPI: 175 2016 CPI: 180 CPÍ016-CPÍ015/CPÍ015 x100 =180-175/175 x100 =2.85%=2.9%
If the growth rate of real GDP rises from 3% to 4% per year, then the number of years required to double real GDP will increase from
Answer: 23.3 years to 17.5 years. Rule of 70 formula: 70/#of years 70/3=23.3 70/4=17.5
Refer to Table 10-1. Using the table above, what is the approximate growth rate of the real GDP from 2015 to 2016?
Answer: 3% Why: Use %change formula=new-initial/initial x100 2015:9,000 2016:9,280 9,280-9,000/9,000 x100
The cross-price elasticity of demand for peanut butter with respect to the price of jelly is -0.3. If we expect the price of jelly to decline by 15%, what is the expected change in the quantity demanded for peanut butter?
Answer: 4.5% EqpPj=percent change Qp/percent change j -.3=%changeQp/-15% Multiply -15% to both sides to get %changeQp by itself -.3(-.15)x100=4.5
If the number employed is 190 million, the number unemployed is 10 million, and the working-age population is 250 million, then the labor force participation is
Answer: 80% Formula: Labor Force=employed+unemployed 190+10=200/250 x100
If real GDP in a small country in 2015 is $8 billion and real GDP in the same country in 2016 is $8.3 billion, the growth rate of real GDP between 2015 and 2016
Answer: is 3.75% Why: Use %change formula=new-initial/initial x100 =8.3-8/8 x100
Which of the following describes the accuracy of the Consumer Price Index?
Changes in the CPI overstate the true rate of inflation
Which of the following price indices comes closest to measuring the cost of living in the typical household?
Consumer Price Index (CPI)
What is the largest component of spending in the US?
Consumption spending
Figure 2-4 shows various points on three different production possibilities frontiers for a nation. A movement from X to Y
Could occur because of an influx of immigrant labor
The US work week has declined from 60 hours in 1890 to 40 hours today. The impact of the decline in working hours
Decreases US GDP and increases the well-being of a typical working person in the US
The Bureau of Labor Statistics (BLS) would categorize a person as _____________ if they were temporarily away from their job because they were ill.
Employed
The labor force equals the number of people
Employed plus unemployed
The natural rate of unemployment is made up of
Frictional and structural unemployment
The advice to "keep searching, there are plenty of jobs around here for which you are qualified," would be most appropriate for which of the following types of unemployment?
Frictional unemployment
A student who just graduated from college but has not found a job would most likely be
Frictionally unemployed
National income is
GDP minus depreciation
Which of the following equations correctly measures GDP in an economy?
GDP=C+I+G+NX
If nominal GDP exceeds real GDP for a specific year, then the GDP deflator must be
Greater than 100
Which of the following is not an example of a transfer payment?
Health insurance payments to an army private.
Which of the following would cause a rightward shift in the demand curve for gasoline? I. A large increase in the price of public transportation II. A large decrease in the price of automobiles III. A large reduction in the costs of gasoline
I. A large increase in the price of public transportation and II. A large decrease in the price of automobiles only
Which of the following is a positive economic statement?
If the price of iPhones fall, a larger quantity of iPhones will be purchases
Legalizing all forms of illegal activities
Increases GDP and reduces the size of the underground economy.
Which of the following increases labor productivity?
Inventions of new machinery, equipment, or software
Macroeconomics
Is the study of the economy as a whole
All of the following contributed to the downfall of the Soviet Union in 1991 except
Lack of a strong dictator who could coordinate economic activities
The United States has ________________ social insurance programs, and generally has a _____ unemployment rate, as compared to Canada and Western Europe.
Less generous; lower
Consider the PPF that shows the trade-off between the production of cotton and the production of soybeans. Suppose that genetic modification makes soybeans resistant to insects, allowing yields to increase. Draw the PPF and show how genetic modifications can change it.
Make a normal x and y graph, have cotton be on the Y-axis and soybeans on the X-axis, make a curved line from cotton to soybeans. Then make another line above stemming from the same line as cotton but making the curve farther away from the original soybean. To show that the production of cotton has not changed but due to the genetic modification there are more soybeans being grown.
Firms choose how to produce the goods and services they sell. In many cases, firms face a trade-off between using more workers or using more machines. For example
Many times in the past several decades, firms may have chosen between a production method in the US that uses fewer workers and more machines and a production method in China that uses more workers and fewer machines.
Last year, Joan bought 50 pounds of hamburger when her household income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. Holding everything else constant, Joan's income elalsticity of demand for hambuger is
Negative, so Joan considers hamburger to be an inferior good Why: Because Inferior goods the income decreases and quanity increases which is a negative relationship.
Jack just received a promotion at work and now works 50 hours per week instead of 35. As a result,
Neither the unemployment rate nor the labor force participation rate changed
Discouraged workers are classified by the BLS as
Out of the labor forces
Carries Bradshaw claims that when it comes to buying shoes, "price is no object." If this is true, then her demand for shoes is
Perfectly inelastic
Disposable personal income is
Personal income minus personal taxes
Every society faces economic trade-offs. This means
Producing more of one good means less of another good can be produced
Which of the following would be included in the Gross National Product of the US?
Production from a US firm that operates in Mexico.
Suppose the base year is 2001. Looking at GDP data from the US from 2001 to the present, what would be true of the relationship between nominal GDP and real GDP?
Real GDP < Nominal GDP; because prices are rising Real GDP= Base year Nominal GDP= Current year
In terms of economic growth, the key measure of the standard of living is
Real GDP per capita
One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist call
Scarcity
The US Department of Agriculture is interested in analyzing the domestic market for corn. The USDA's staff economists estimate the following equations for the demand and supply curves: Qd=1,600-125P Qs=440 +165P Quantities are measured in millions of bushels; prices are measured in dollars per bushel. Calculate the equilibrium price and quantity that will prevail in a completely free market.
Set the two equations equal to each other 1,600-125P=440+165P Then add 125P to both sides 1,600=440+290P Then subtract 440 and divide 290 from that subtraction 1,160/290=290/290P 4=P Then substitute 4 in for P in the separate equations Qd=1,600-125(4) Qd=1,100 Qs=440+165(4) Qs=1,100
People who lost their jobs as hand-drawn animators because of the popularity of computer-generated 3D animation are examples of persons who are suffering
Structural employment-skills of workers
When the price of gasoline rises, some consumers begin riding their bikes more frequently or riding the bus instead of driving their cars. The fact that the CPI does not fully account for such changes in consumer behavior is called
Substitution bias
Refer to Table 8-25. Given the following information, calculate the rate of increase in the price level from 2015 to 2016 (inflation rate). Use the percent change in the GDP deflator. Show work completely.
Table 8-25: 2015: Nominal GDP: $10,000 Real GDP: $9,500 2016: Nominal GDP: $15,000; Real GDP: $10,500 Formula: nominal GDP/Real GDP x 100 2015: 10,000/9,500=1.05 x100=105 2016: 15,000/10,500=1.42 x100=142 Use %change formula new-initial/initial x100 142-105/105 x100=35.2
How has the growing popularity of factory outlet stores affected the market for clothing at retail department stores?
The demand curve for clothing at retail department stores shifts to the left.
Plastic and steel are substitutes in the production of body panels for certain automobiles. If the price of plastic increases, with other things remaining the same, we would expect
The demand curve for steel to shift to the right Why: because the price of steel has not changed and can be used the same as plastic so the demand for steel increased moving it right on a graph
How does the increasing use of the digital camera affect the market for traditional camera film?
The demand curve for traditional camera film shifts to the left. Why: Demand for digital increases which makes the film demand decrease and so it shifts left
In January, buyers of gold expect that the price of gold will fall in February. What happens in the gold market in January, holding everything else constant?
The demand curve shifts to the left. Why: Because if the price is going to be lower in the next month people are going to wait to buy their gold.
The Production Possibilities Frontier (PPF) model assumes which of the following?
The economy produces only two products.
Assume that in recent years the cost of producing a microbrew beer in the US has decreased largely due to technological improvements. At the same time, more and more Americans prefer microbrew beer over wine. Which of the following best explains the effects of these events in the microbrew beer market?
The supply curve has shifted to the left and the demand curve has shifted to the right. As a result, there has been an increase in the equilibrium price and uncertain effect on the equilibrium quantity.
Gross domestic product is calculated by summing up
The total market value of final goods and services produced in the economy during a period of time.
When is an economy at its natural rate of unemployment, which of the following will be true?
The unemployment rate will be greater than 0%
The circular flow diagram shows that
The value of total income is equal to the total value of expenditure on final goods and services.
The equilibrium wage in a local labor market is $10 per hour. If a minimum wage of $15 per hour is imposed, which of the following will occur?
There will be an increase in unemployment.
Refer to Table 5-12. Consider a simple economy that produces only three products: burritos, flashlights, and golf balls. Use the information in the table to calculate with inflation rate for 2016, as measured by the consumer price index.
Two Step Procedure: Step 1: Find expenditure/CPI for each year then use Formula Current expenditure/base expenditurex100=100 Base Year(2001): 10(1)+15(5)+8(2)=101 2015: 10(1.5)+15(7)+8(3)=144 2016: 10(1.75)+15(6.75)+8(3.5)=146.75 2015CPI=144/101 x100=142.57 2016CPI=146.75/101 x100= 145.29 Step 2: Use %change formula between two CPIs to find inflation rate %change=newCPI-initialCPI/initialCPI x100 %change=145.29-142.57/142.57 x100 =1.9%
Over the next few years, several newly constructed office blocks will become available at the World Trade Center site. As well, economists expect New York economy will continue to exhibit modest growth. What is the expected outcome for the office space market in downtown Manhattan?
Unambiguously higher equilibrium quantity, and equilibrium rental rates could be higher.
Economists often are interested in percent change from one period to the next. The percentage rate of change of GDP is an important macroeconomic variable. If in 2010 GDP was $11,150 billion, and GDP increased to $11,200 in 2011, what is the growth rate of the US economy in 2011?
Use rate of change formula: New GDP-Initial GDP/Initial GDP x100 2011GDP-2010GDP/2010GDP x100 11,200-11,150/11.150 x100 =50/11,150 x100 =.44
What are the four categories of income?
Wages, Interest, Rent, and Profit
We can show economic inefficiency (when economy does not use all of the goods produced)
With points inside the production possibilites frontier (PPF)
Which of the following equations sums up the components of Gross Domestic Product (GDP)?
Y=C+I+G+NX Y=GDP C=Consumption I= Investments G= Government spending NX= Exports-Imports
Microeconomics is the study of
how households and firms make choices, how they interact in markets, and how the government attempts to influences their choices.
A vertical demand curve
is completely inelastic
The only way the standard living of the average person in a country can increase is if ______ increases faster than ______
production: population
Elasticity measures
the percentage change in one variable in response to a one percent increase in another variable
Along any downward sloping straight-line demand curve
the price elasticity varies, but slope is constant
