FINAL STUDYGUIDE PART 1

The market value of final goods and services produced within a country during a period of time is called:

gross domestic product.

The measure of the cost of a standard basket of goods and services in any period relative to the cost of the same basket of goods and services in the base year is called the:

consumer price index.

The four components of aggregate expenditures are:

consumption, investment, government spending, and net exports.

As coffee becomes more expensive, Joe starts drinking tea, and therefore quantity demanded for coffee decreases. This is called:

the substitution effect.

Which of the following is an example of an investment in human capital?

A firm pays for workers to take college classes.

The entire group of buyers and sellers of a particular good or service makes up:

A market

If the real interest rate is 3% and the inflation rate is 7%, then the nominal interest rate equals:

4%

Which of the following would increase the consumption component of U.S. GDP?

A restaurant in Denver purchases a bottle of California wine to include on its wine list.

Which of the following expenditures would increase the investment component of U.S. GDP?

You purchase 1,000 shares of stock.

Which of the following is not classified as a final good?

Fresh vegetables purchased by a restaurant

Gertie saw a pair of jeans that she was willing to buy for $35. The price tag, though, said they were $29.99. Therefore:

Gertie should buy the jeans because the price is less than her reservation price.

Which of the following is an example of frictional unemployment?

Hector looked for a job for five weeks after finishing college. He turned down several jobs that didn't fit his skills, but now has a job that requires the expertise he gained in college.

Which of the following is NOT true of a demand curve?

It shows how an increase in price leads to an increase in quantity demanded of a good.

Which of the following is an example of cyclical unemployment?

Marsha was laid off from her job with the airline because the recession reduced demand for airline travel. She expects to get her job back when the economy picks up.

Which of the following would increase the government purchases component of U.S. GDP?

The U.S. federal government pays $3 billion in salaries to soldiers in the military.

Who from among the following is counted as employed?

Ray wants to work forty hours per week, but can only find work for twenty hours per week.

Which of the following is a nominal quantity?

The current price of a barrel of oil

If country A can produce more of practically everything than can country B, then which of the following statements is true?

Trade can benefit both countries.

Chris has a one-hour break between classes every Wednesday. Chris can either stay at the library and study or go to the gym and work out. The decision Chris must make is:

an economic problem because Chris has only one hour, and engaging in one activity means giving up the other.

Assume consumers eat either rice or pasta for dinner every night. If the price of rice increases, in the pasta market one would expect to see:

an increase in the demand for pasta.

Real GDP is measured in ______ prices; nominal GDP is measured in ______ prices.

base-year; current

If the price of TVs produced by XYZ-TV Company falls from $1,000 to $750 per TV set, then the:

demand for labor by the XYZ-TV Company decreases.

A decrease in the price of pizza will cause a(n):

increase in quantity demanded.

If workers received a 5 percent wage increase and the rate of inflation was 3 percent, then their real wage:

increased.

The price of a gallon of gasoline at the pump increased by 10 percent at the same time that the inflation rate was 15 percent. The nominal price of gasoline _____, and the real price of gasoline _____.

increased; decreased

GDP excludes important factors that affect people's well-being, such as the value of:

leisure time.

Capital goods are

long-lived goods used for producing other goods and services.

One shortcoming of real GDP as an indicator of society's social well-being is that it fails to take into account the:

non-market production.

Jim Brown would like to work, but has not looked for work in the past four weeks because he does not believe any jobs are available. In the official employment statistics, Jim is classified as:

out of the labor force.

Real GDP measures the ______ of production.

physical volume

Current income minus spending on current needs equals:

saving.

Three equivalent ways to measure GDP are total _____, total _____, and total ______.

production; income; expenditure

The key indicator of a country's living standard and economic well-being is:

real GDP per person.

To compare the change in physical production (GDP) between 2010 and 2016, we should compare ______ GDP in 2010 with ______ GDP in 2016.

real;real

Government purchases include all of the following except:

social security benefits paid by the federal government.

Regarding specialization, it is generally true that:

specialization imposes costs as well as benefits.

When a U.S. firm engages in outsourcing, it benefits ______ and harms ______.

the U.S. consumers of the firm's products; the firm's U.S. employees

According to the Cost-Benefit Principle, you should go see the latest Star Wars movie with your friends this week-end if:

the extra benefits of seeing the movie are greater than the extra costs of seeing the movie.

Alex received a four-year scholarship to State U. that covered tuition and fees, room and board, and books and supplies. If Alex becomes a full-time student, then:

the opportunity cost of attending State U. includes the money Alex could have earned working for four years.

Labor income includes:

wages, salaries, and earnings of the self-employed.

The scarcity principle states that

with limited resources, having more of one thing means having less of another

If workers and employers agree to a three-year wage contract under the expectation of 3% inflation, and inflation turns out to be 5%, then:

workers lose and employers gain.

If you have a comparative advantage in a particular task, then:

you give up less to accomplish that task than do others.