Macro Final Exam

In the United States, over 1 million deaths were attributed to the COVID-19 pandemic. How would we expect these deaths to have affected the production possibilities curve for the United States?

It would shift the production possibilities curve in.

Which of the following is an example of a public good?

a weather warning system

A table of numbers showing the total amount spent on final goods and final services at different levels of real gross domestic product (real GDP) is the

aggregate expenditures schedule.

Say's law in classical economics suggests that, over a period of time,

aggregate spending would tend to equal total output and income.

The industries or sectors of the economy in which business cycle fluctuations tend to affect output most are

capital goods and durable consumer goods.

Which point or output combination in the provided graph could the nation produce only if it experienced economic growth?

combination G

When the price of oil increases significantly, the price of gasoline also increases. The latter occurs because of a(n)

decrease in supply of gasoline.

Demand-side market failures occur when

demand curves underreport how much consumers are willing to pay for a good or service.

In which phase of the business cycle will the economy most likely experience rising realGDP and employment?

expansion

Public goods are those for which there

is nonrivalry and nonexcludability.

47) Consumer surplus

is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price.

Modern economic growth refers to countries that have experienced an increase in

output per person.

The amount of real output that could be purchased at current prices if all of our assets were liquidated (turned to cash) and the money used to purchase goods and services is the

real-balances effect.

Suppose that tacos and pizza are substitutes, and that soda and pizza are complements. We would expect an increase in the price of pizza to

reduce the demand for soda and increase the demand for tacos.

The market system automatically corrects a surplus condition in a competitive market by

reducing the price of the product in question while increasing the quantity demanded.

Attaining "allocative efficiency" means that

resources are being devoted to the production of products most desired by society.

If product Y is a normal good, an increase in consumer incomes will

shift the demand curve for product Y to the right.

Economics may best be defined as the

social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity.

One of the most important views expressed by classical macroeconomists was that

supply creates its own demand.

When the price of a product rises, consumers with a given money income shift their purchases to other products whose prices are now relatively lower. This statement describes

the substitution effect.

The idea in economics that "there is no free lunch" means that

there are opportunity costs involved even in free lunches.

Other things equal, if the price of a key resource used to produce product X falls, the

supply curve of product X will shift to the right.

The relationship between quantity supplied and price is

direct; inverse

81) Dissaving means

that households are spending more than their current incomes.

61) Net exports are

exports less imports.

75) The natural rate of unemployment is the

full-employment rate of unemployment.

74) Part-time workers who want full-time work are counted as

fully employed, and therefore the official unemployment rate may understate the level of unemployment.

The simple circular flow model shows that

households are on the selling side of the resource market and on the buying side of the product market.

You should decide to go to a movie

if the marginal benefit of the movie exceeds its marginal cost.

When the price of a product increases, a consumer is not able to buy as much of it with a given money income. This describes the

income effect.

85) All else equal, a large decline in the real interest rate will shift the

investment schedule upward.

An economic system

is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem.

The upward slope of the supply curve reflects the

law of supply.

A decline in investment will shift the AD curve to the

left by a multiple of the change in investment.

If farmers withhold some of their current corn harvest from the market because they anticipate a higher price of corn in the near future, then this would cause a

leftward shift in the current supply of corn.

The French term "laissez-faire" means

let it be.

Refer to the diagram. A decrease in quantity demanded is depicted by a

move from point y to point x.

The foreign purchases effect

moves the economy along a fixed aggregate demand curve.

84) The change in real GDP resulting from an initial change in spending can be calculated by

multiplying the multiplier by the initial change in spending.

65) The GDP price index equals

nominal GDP divided by real GDP.

Toll-free roads sometimes get extremely congested, such as during rush-hour traffic. During those times, we would say that these roads are

nonexcludable and rival.

46) Market failure is said to occur whenever

output is being produced for which minimum acceptable price does not equal maximum willingness to pay.

Which of the following is a feature of laissez-faire capitalism?

people are free to interact in markets to buy and sell goods and services

64) The largest expenditure component of GDP is

personal consumption expenditures.

60) GDP can be calculated by summing

personal consumption, investment, government purchases, and net exports.

In representative democracy, voters are ______ and politicians are _____

principals; agents

The two basic markets shown by the simple circular flow model are

product and resource.

An increase in the demand for online streaming music indicates that more is

purchased even if prices of online streaming music stayed the same.

If we say that a price is too high to clear the market, we mean that

quantity supplied exceeds quantity demanded.

The pursuit through government for special benefits at someone else's expense refers to

rent-seeking behavior.

Which of the following does not illustrate the idea of creative destruction?

A firm has to destroy some of the expired products in its inventory.

76) Inflation caused by a rise in the prices of inputs is referred to as

A) cost-push inflation.

80) Which of the following is correct?

APC + APS = 1.

The $2.2 trillion CARES Act was designed to

All of these choices are correct.

59) Which of the following is an example of economic investment?

B&O Railroad buys a new railcars for their trains.

Which of the following is the best example of a microeconomic statement?

Car prices have increased recently because of a microchip shortage.

A recessionary expenditure gap exists if

the aggregate-expenditures schedule lies below the 45-degree line at the full-employment GDP.

Opportunity costs exist because

the decision to engage in one activity means forgoing some other activity.

Graphically, the market demand curve is

the horizontal sum of individual demand curves.

*ON EXAM* The most important determinant of consumer spending is

the level of income.

By an "increase in demand," economists mean that

the quantity demanded at each price in a set of prices is greater.

73) Official unemployment statistics

understate unemployment because discouraged workers are not counted as unemployed.

58) Savings are generated whenever

current income exceeds current spending.

If there is a surplus of a product, its price

is above the equilibrium level.

Which of the following is one of the Five Fundamental Questions?

What goods and services will be produced?

Refer to the diagram. A price of $60 in this market will result in

a surplus of 100 units.

The interest-rate effect suggests that

an increase in the price level will increase the demand for money, increase interest D) rates, and decrease consumption and investment spending.

Markets, viewed from the perspective of the supply and demand model,

assume many buyers and many sellers of a standardized product.

The production technique that is most efficient is the one that produces a given amount of output

at the lowest cost.

The aggregate demand curve is

downward-sloping because of the interest-rate, real-balances, and foreign purchases effects.

When investment remains the same at each level of GDP in a private closed economy, the slope of the aggregate-expenditures schedule

equals the MPC.

If the MPS is 0.25 and the economy has a inflationary expenditure gap of $5 billion, then equilibrium GDP is

$20 billion above the full-employment GDP.

Refer to the table. All figures are in billions of dollars. When there is no investment in this private closed economy, the equilibrium level of GDP will be

$250 billion.

Refer to the graph for a private closed economy. If the consumption schedule shifts up by $50 B at all levels of income or output, then the equilibrium GDP will increase to

$600 B.

67) Economic growth is best defined as an increase in

(A) either real GDP or real GDP per capita.

82) If the marginal propensity to consume is 0.6 then the marginal propensity to save must be

0.4.

A nation can produce two products: steel and wheat. The following table is the nation's production possibilities schedule. The opportunity cost of producing the 31" unit of wheat is approximately

1/25 of a unit of steel.

In view of the indicated resource prices, the economically most efficient production technique(s) is (are) technique(s)

2 and 4.

The table illustrates the multiplier process resulting from an autonomous increase in investment by $5. The multiplier in this economy is

4.

Suppose this two-good economy is operating on its production possibilities curve and the marginal benefit of steel equals the marginal cost of steel at 3 units. What is the optimal quantity of wheat?

55 units of wheat

Suppose a fin can produce 70 units of a product, Zenia, by combining labor, land, capital, and entrepreneurial ability, as in the four alternative techniques shown in the table below. Assume further that the firm can hire labor at $3 per unit, land at $3 per unit, capital at $6 per unit, and entrepreneurship at $9 per unit.

D

62) Transfer payments are

excluded when calculating GDP because they do not reflect current production.

Which of the following is the best example of a macroeconomic statement?

The high rate of inflation is reducing household buying power across the country.

What would best explain why the equilibrium price of pink salmon decreased and the equilibrium quantity increased?

The increase in supply was greater than the decrease in demand.

Isabella buys a piece of costume jewelry for $33, for which she was willing to pay $42. The minimum acceptable price to the seller, James, was $30. Isabella experiences a

a consumer surplus of $9, and James experiences a producer surplus of $3.

79) The consumption schedule shows

a direct relationship between aggregate consumption and aggregate income.

Economic growth in a fully employed economy may be represented by

a rightward shift of the production possibilities curve.

When economists refer to scarcity, they are referring to

a situation where what we want exceeds what we have.

A person should consume more of something when its marginal

benefit exceeds its marginal cost.

What is the term for the level of disposable income at which households plan to consume (spend) all their income and to save none of it?

break-even income

71) Recurring increases and decreases in an economy's real GDP over periods of years are called

business cycles.

"Consumer sovereignty" means that

buyers determine what will be produced based on their "dollar votes" for the goods and services offered by sellers.

66) GDP does not include which of the following activities?

c) couples remodeling their own homes

69) Given the annual rate of economic growth, the "rule of 70" allows one to

calculate the number of years required for real GDP to double.

68) Real GDP per capita

can grow either more slowly or more rapidly than real GDP.

Which of the following is a distinguishing feature of a command system?

central planning

Refer to the diagram for a private closed economy. At the $300 level of GDP,

saving exceeds planned investment.