Econ Midterm Exam
Suppose you paid $300 to take this economics course, which meets 30 times for one hour a class during the course of the semester. Instead of attending class you could have either flipped hamburgers for $8 an hour or waited tables for $5 an hour. Given this information, the opportunity cost of attending each class session is:
A) $13. B) $5. C) $30. D) $8
Suppose nominal GDP is $14 trillion and the GDP deflator is 122.5. Given this information, what is real GDP?
A) $13.8 trillion B) $15.2 trillion C) $11.4 trillion D) $9.8 trillion
If real GDP in a year was $3,668 billion and the price index was 112, then nominal GDP in that year was approximately
A) $4,108 billion. B) $4,379 billion. C) $3,925 billion. D) $3,846 billion.
A nation's real GDP was $250 billion in 2013 and $265 billion in 2014. Its population was 120 million in 2013 and 125 million in 2014. What is its real GDP growth rate in 2014?
A) 1.1% B) 15.0% C) 6.0% D) 5.7%
If real GDP rises from $500 billion to $510 billion, the economic growth rate is
A) 1.96 percent. B) 10 percent. C) 2 percent. D) -2 percent.
Which of the following is an example of an intermediate product?
A) A share of IBM stock B) A pair of skis sold by a sporting goods retailer to a skier C) An antique car sold to the highest bidder D) The lumber produced by Boise Cascade and sold to a builder of old houses
Which of the following will cause the production possibilities curve to shift inward?
A) A technological advance. B) An increase in the working-age population. C) A decrease in the size of the labor force. D) An increase in knowledge.
In order to shift the current production possibilities curve outward, an economy
A) Can raise the prices of goods and services to encourage firms to produce more. B) Will never be able to produce a combination of goods and services outside the current production possibilities curve. C) Must find additional resources or better technology. D) Must use more of the existing resources.
Assume the real U.S. GDP in 1929 was $942 billion and the U.S. population was 122 million, and the real U.S. GDP in 1930 was $858 billion and the U.S. population was 123 million. From 1929 to 1930, the per capita real GDP
A) Decreased. B) Remained unchanged. C) Increased. D) Cannot be determined from the information given
Ceteris paribus, if imports increase in any given year,
A) Exports will increase. B) NDP will increase. C) GDP will decrease. D) GDP will increase.
The best measure of living standards is
A) GDP per capita. B) GDP per worker. C) The ratio of current GDP to GDP in the base period. D) Investment as a percentage of GDP.
Assume the real U.S. GDP in 1997 was $7,269 billion and the U.S. population was 268 million, and the real U.S. GDP in 1998 was $7,552 billion and the U.S. population was 270 million. From 1997 to 1998, the per capita real GDP
A) Increased. B) Remained unchanged. C) Decreased. D) Cannot be determined from the information given
If an economy is producing inside the production possibilities curve, then
A) It is operating efficiently. B) It can produce more of one good without giving up some of another good. C) There is full employment of resources. D) There are not enough resources available to produce more output.
If a country moves from a point below the production possibilities curve to a point on the curve, it is experiencing
A) Long-run growth. B) Economic growth. C) Expanded capacity. D) Increased capacity utilization.
Nation A's real GDP was $520 billion in 2013 and $550 billion in 2014. Its population was 150 million in 2013 and 155 million in 2014. On the other hand, Nation B's real GDP was $200 billion in 2013 and $210 billion in 2014; and its population was 53 million in 2013 and 55 million in 2014. Which of the following statements is true?
A) Nation B's GDP per capita increased from 2013 to 2014, while Nation A's decreased. B) Nation A's and Nation B's GDP per capita both decreased from 2013 to 2014. C) Nation A's and Nation B's GDP per capita both increased from 2013 to 2014. D) Nation A's GDP per capita increased from 2013 to 2014, while Nation B's decreased.
Which is most likely to be observed in a community where legal ceilings are imposed on residential rents?
A) People moving into the community will have difficulty locating residential space to rent. B) Poor people will be able to find adequate housing. C) Those whose needs for housing are most urgent will be able to obtain the space they want. D) Homeowners will reduce their own use of housing space, making more available to others.
Which of the following expenditures are included in consumption?
A) Personal medical services. B) Public parks. C) Public highways. D) Police services.
Which of the following is a normative statement?
A) Tariffs on imported cars result in higher prices for domestic auto consumers. B) The governments should spend more to aid the poor. C) A tax cut will cause higher inflation. D) Reducing the budget deficit will also reduce the balance of trade deficit.
Which of the following topics is best categorized as a macroeconomic issue?
A) The choices a student makes in selecting college courses B) The effect of a drought on the price of corn C) The effect of an increase in federal spending on the unemployment rate D) The decision by Apple to produce fewer Macintosh computers
9) Which of the following topics is most appropriately studied in a microeconomics course?
A) The decision by a nurse to change professions B) Why unemployment is so low and inflation has not accelerated C) When the next recession will arrive D) How the presidential candidates' tax plans might affect economic growth
The percentage change in real GDP from one period to another is called
A) The growth rate. B) GDP per capita. C) Nominal GDP. D) Real GDP.
Which of the following is a part of GDP?
A) The value of a homemaker's services B) The value of an old car purchased during a year C) The value of an existing house sold during a year D) The value of a haircut
In 2008, the value of the stocks listed on the New York Stock Exchange decreased tremendously. As a direct result:
A) U.S. GDP declined by the amount of the stock market decline but U.S. GNP was unaffected. B) neither U.S. GDP nor U.S. GNP were affected. C) both U.S. GDP and U.S. GNP declined by the same amount. D) U.S. GNP declined by the amount of the stock market decline but U.S. GDP was unaffected.
For the purposes of calculating GDP using the expenditure approach, which of the following is not included in the government purchases account?
A) Welfare payments to the poor B) Government purchases of pencils C) The government's purchase of a computer D) The payroll of the federal government
Which would cause an increase in the supply curve of cell-phone services?
A) a decrease in a subsidy given to cell-phone service providers B) a decrease in the wages of phone-company workers C) an increase in the price of cell-phone services D) an increase in the taxes paid by cell-phone service providers
The statement "government should provide affordable health care coverage for every member of society" is:
A) a positive statement. B) a statement that everyone agrees with. C) a normative statement. D) a statement that everyone disagrees with.
Which of the following will cause a decrease in market equilibrium price and a decrease in equilibrium quantity?
A) an increase in demand B) a decrease in demand C) a decrease in supply D) an increase in supply
From an economic perspective, a student's decision to go to the movies instead of studying for a test indicates that in the student's thinking the marginal
A) benefit of studying is greater than the marginal benefit of going to the movies. B) cost of going to the movies is greater than the marginal cost of studying. C) benefit of studying is greater than the marginal cost of studying. D) cost of going to the movies is less than the marginal benefit of going to the movies.
If the economy's real GDP doubles in 17.5 years, we can
A) conclude that its average annual rate of growth is 8%. B) conclude that its average annual rate of growth is 4%. C) not say anything about the average annual rate of growth. D) conclude that its average annual rate of growth is 12%.
Suppose that corn prices rise significantly. If farmers expect the price of corn to continue rising relative to other crops, then we would expect
A) consumer demand for corn to fall in the future. B) the future supply to increase as farmers plant more corn. C) the future supply to fall as farmers plant more of other crops. D) the supply of ethanol, a corn-based product, to increase in the future
A change in business inventories is:
A) counted in GDP as investment. B) counted in GDP as net exports. C) counted in GDP as consumption. D) not counted in GDP because it does not represent final sales.
An increase in the supply for MP3 music indicates that more will be
A) demanded because sellers are selling more MP3 music. B) demanded because sellers are putting MP3 music on sale. C) sold even if prices of MP3 music stayed the same. D) sold because MP3 music prices have decreased.
The number of years required for real GDP to double can be found by
A) dividing 70 by the annual growth rate. B) dividing the annual growth rate by .070. C) multiplying the annual growth rate by 70. D) adding 7o to annual growth rate.
Suppose that both nominal GDP and prices double. We can conclude that real output:
A) doubled. B) fell. C) more than doubled. D) remained constant.
Say that an economic model concludes that "government raising payroll takes is a measure that can maintain current Social Security benefit levels for every retiree." This conclusion is:
A) false because there is no payroll tax rate high enough to maintain current benefits. B) a positive statement because raising payroll taxes is one way to maintain Social Security benefits. C) a normative statement because there is disagreement over whether Social Security benefits should be maintained. D) a statement in the art of economics because it is about policy
The income approach to measuring GDP:
A) focuses on how income is spent. B) adds up all household expenditures to calculate aggregate income and GDP. C) uses the factors payments made by businesses to households to estimate GDP. D) ignores how income is earned and focuses instead on how it is used.
Which of the following pairs are not considered to be complementary goods?
A) gasoline and motor oil B) fertilizer and irrigation systems C) digital cameras and memory card D) steel and cars
Personal consumption expenditures consist of
A) household and individual purchases of services and durable and nondurable goods. B) foreign investments in the United States. C) domestic investments. D) foreign plus domestic investments.
GDP is $7 trillion. If consumption is $3.5 trillion, investment is $1.4 trillion, and government purchases are $2.1 trillion, then:
A) imports exceed exports. B) exports exceed imports. C) exports are equal to imports. D) net exports cannot be determined from the available information.
The gross domestic product is not a good measure of the standard of living in a nation because it
A) includes the cost of health insurance. B) does not account for the cost of police protection. C) excludes payments for pollution control equipment. D) does not account for the size of the population.
A television station reports that the price of coffee has increased but the quantity traded in the market has decreased. This situation would be caused by a(n)
A) increase in supply. B) decrease in supply. C) increase in demand. D) decrease in demand.
Brooke and Sandy both attend the same college and have the same expenses for tuition, books, and supplies. However, Brooke is a famous actress who could earn $2 million per year if she were not attending college whereas Sandy could earn $10,000 a year serving hamburgers if he were not attending college. It follows that the opportunity cost of attending college:
A) is the same for both Brooke and Sandy. B) is greater for Sandy than for Brooke. C) for Brooke and Sandy cannot be compared. D) is greater for Brooke than for Sandy
The economizing problem is essentially one of deciding how to make the best use of
A) limited resources to satisfy limited economic wants. B) unlimited resources to satisfy unlimited economic wants. C) limited resources to satisfy unlimited economic wants. D) unlimited resources to satisfy limited economic wants.
If farmers receive a subsidy for their corn, then this would cause a
A) movement up along the current supply curve of corn. B) rightward shift in the current supply of corn. C) leftward shift in the current supply of corn. D) movement down along the current supply curve of corn.
Joe sold gold coins for $1,000 that he bought a year ago for $1,000. He says, "At least I didn't lose any money on my financial investment." His economist friend points out that in effect he did lose money because he could have received a 3% percent return on the $1,000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of
A) normative economics. B) opportunity costs. C) imperfect information. D) marginal benefits that exceed marginal costs.
As a consequence of the problem of scarcity
A) only some people can "have it all." B) there is never enough of anything. C) individuals have to make choices from among alternatives. D) things that are plentiful have relatively high prices.
Suppose that the base year is 2015, and the GDP price index in 2014 is 92.0. This implies that the
A) output in 2015 was higher than in 2014. B) prices in 2015 were higher than in 2014. C) prices in 2015 were lower than in 2014. D) output in 2015 was lower than in 2014.
If the price index in year A is 130, this means that
A) prices in year A are on average 13 times that in the base year. B) nominal GDP is 130 percent higher than real GDP in year A. C) prices in year A are on average 30 percent higher than in the base year. D) prices in year A are on average 130 percent higher than in the base year
There is an excess demand in a market for a product when:
A) quantity demanded is lower than quantity supplied. B) the current price is lower than the equilibrium price. C) demand is less than supply. D) supply is less than demand.
Suppose that an economy's labor productivity and total worker-hours each grew by 3% between year 1 and year 2. We could conclude that this economy's
A) real GDP remained constant. B) production possibilities curve shifted inward. C) capital stock increased by 3%. D) production possibilities curve shifted outward.
Double counting in the national income accounts will be avoided if GDP is computed by totaling all:
A) sales of final output. B) production costs. C) sales. D) sales of final output and intermediate goods
If product Y is an inferior good, a decrease in consumer incomes will
A) shift the demand curve for product Y to the left. B) shift the demand curve for product Y to the right. C) not affect the sales of product Y. D) make buyers want to buy less of Product Y.
Alexandra has determined that studying an hour for her economics quiz will improve her grade on the quiz from 75 to 100. She also determines that this improvement is worth $20. To study for an hour for her economics quiz, however, she will have to work one fewer hour at her part-time job. Alexandra should:
A) study for the quiz only if her hourly wage rate is exactly $20. B) study for the quiz as long as her hourly wage rate is less than $20. C) not study for the quiz because earning a higher grade cannot have a dollar value. D) study for the quiz as long as her hourly wage rate is more than $20.
An increase in the price of product B leads to an increase in the demand for product C. This indicates that products B and C are
A) substitute goods. B) complementary goods. C) inferior goods. D) normal goods
When economists say that the supply for a product has increased, they mean that the
A) supply curve has shifted to the left. B) product has become more expensive and thus consumers are buying less of it. C) supply curve has shifted to the right. D) product has become particularly scarce for some reason.
The "underground economy" is mostly made up of
A) tax-evasion activities. B) do-it-yourself activities. C) unpaid work. D) illegal activities.
Conceptually, a country's GDP equals:
A) the sum of the value added at all stages of production. B) the sum of the value of its final output and the value of the intermediate goods used to produce that output. C) the difference between the value of its final output and the value of the intermediate goods used to produce that output. D) the sum of the value of all the intermediate goods used to produce final output.
The service a homeowner performs when she mows her yard is not included in GDP because
A) this is a nonproduction activity. B) multiple counting would be involved. C) this is a nonmarket transaction. D) this is a noninvestment transaction.
