Macro Final Exam

When a firm produces another unit of output the total benefit increases from $1,000 to $1,200 and the total cost rises from $700 to $800. The marginal benefit of producing this unit is $___ and the marginal cost of producing this unit is $___

$200 $100

Your real salary declines if:

your raise is less than the inflation rate in percentage terms

A farmer grows wheat and sells it to the miller for $81. The miller turns the wheat into flour and sells it to the baker for $107. The baker turns the flour into bread and sells it to consumers for $194. What is the value added by the baker?

87

Which of the following best illustrates the concept of diminishing returns?

As additional people are employed, the amount of additional goods produced will diminish.

A country's standard of living is best measured by

real GDP per capita

The inflation rate can be measured by calculating the percentage change in:

the GDP deflator, the consumer price index

The inflation rate between the years 2000 and 2001 was 3.46%. Based on this information, a basket of goods that cost $177 in the year 2000 would now cost how much in the year 2001?

---

A country has a constant opportunity cost of production. If they devote all of their resources to the production of blankets they can produce a total of 531 per week. If they devote all of their resources to the production of t-shirts they can produce a total of 282 shirts per week. What is the opportunity cost of producing 1 t-shirt?

1.88

In a given year, nominal GDP is $445 and real GDP is $384. Find the GDP deflator.

115.89

In a given amount of time John can produce either 30 pounds of vegetables or 10 pounds of chicken. In the same amount of time George can produce either 25 pounds of vegetables or 5 pounds of chicken. In this simple economy if John and George decide to specialize and exchange with each other then we can expect one pound of chicken to trade for at least _ pounds of vegetables but not more than _ pounds of vegetables.

3, 5

In 1988 the value of RGDP was $8,474.492 billion, the population was 244.499 million, and the number of people employed was 115,060 measured in thousands. What was the value of real GDP per capita?

34661

Company A produces paper and sells it to Company B for a total of $100. Company B uses the paper to make books and then sells the books to consumers for a total of $375. What is the value of GDP in this simple economy?

375

Consider the following information about production in quarter 1 of 2019. Firm T produces 600 tires at a cost of $28 each, and sells 580 tires to Firm B at a cost of $35 each. Firm B produces 290 bicycles at a total cost of $338 each, and sells 280 bicycles to consumers for $401 each. In this simple economy, what is the value of inventory investment?

3940

GDP increased from $16.09 trillion to $16.85 trillion. What was the growth rate of GDP?

4.72

If real GDP grows at an annual rate of 1.61% then we can expect real GDP to double in how many years?

43.48

Old Navy sells 100 t-shirts to consumers for $13 each. It bought the t-shirts from a company in China for $4 each. What is the contribution to GDP?

900

Firm C produces 1,000 pounds of cotton at a cost of 50 cents per pound. They sell all of the cotton to Firm S for 75 cents per pound. Firm S makes 1,000 t-shirts with the cotton for a total cost of $1.50 per t-shirt. They sell all of the shirts to Firm R for $2.00 each. Firm R sells 900 of the t-shirts to consumers for $10 each and the total cost of producing each shirt is $8 each. There are no other firms in this simple economy. The value of consumption spending is $ The value of GDP is $

9000 9800

Marty buys three goods: A, B, and C. When the price of good A rises he buys more of good B and less of good C. When his income rises he buys less of good C and more of goods A and B. Which goods are complements?

A and C

Which of the following would shift the supply curve for laptop computers to the right?

A reduction in the cost of producing computers causes firms to reduce the price of a laptop.

Which of the following would shift the demand curve for laptop computers to the right?

All college students are now required to own a laptop computer.

Which of the following are considered to be factors of production?

Capital, Land, Labor

Goods that are produced in the year 2020 but are not sold in 2020 do not count in 2020's GDP.

False

Having a large endowment of natural resources is necessary for a country to be highly productive in producing goods and services.

False

If Tom has a comparative advantage in producing corn then he must also have an absolute advantage in producing corn.

False

If the average wage paid to the worker was $20 in the year 1990 and $30 in the year 2000, then the average worker in the year 2000 must have been better off in terms of purchasing power.

False

In macroeconomics, the four categories of expenditure are wages, rent, interest, and profit.

False

In the economy, goods and services are purchased by consumers, firms, the government, and foreigners. In total dollar terms, the government buys a larger amount of goods and services than either of the other three groups.

False

The consumer price index for the year 2010 will always be calculated as: (the cost of the basket of goods in the year 2010/the cost of the basket of goods in 2009) x 100.

False

The consumer price index increased from 120 to 132. If you received a raise equal to 10% during this time period then your real income has decreased.

False

The purchasing power of the $20 bill increases over time due to inflation.

False

When Company X produces cars in the United States this only counts in GDP if Company X is an American company.

False

When people become more productive, the production possibilities frontier shifts inwards because it takes less time to produce each unit.

False

When we assume there are constant opportunity costs of production, there is no incentive for people to engage in specialization and trade.

False

You buy a $100 ticket to a theme park and once inside you can ride on as many rides as you want at no extra cost. In this case, the opportunity cost of going on each ride will be zero.

False

The supply curve is an illustration of what type of behavior?

Firms increase the quantity supplied of a good when the price of the good rises.

A number of countries in the world have achieved sustained economic growth. In all of these countries, what is the source of this growth?

Increases in productivity

Nominal GDP increases from year 1 to year 2. Therefore:

It is not possible to determine in which year we produced a greater quantity of goods and services.

A landscaper performs yard work for people and earns a total of $40,000 during a given year. Regarding the following statements, which is correct:

The $40,000 counts if the landscaper declares it as income on his taxes.

Which of the following would cause the equilibrium quantity of wheat to rise?

The price of corn falls

A period during which real GDP declines is called a recession.

True

A production possibilities frontier allows us to identify the opportunity cost of producing a particular good in an economy.

True

Capital goods are goods that will be used in the future to produce more goods and services.

True

Economics is best defined as the study of how society manages its scarce resources.

True

Having the ability to write computer programs is an example of human capital.

True

In Country A a worker can produce either 6 bushels of corn or 18 pounds of tomatoes in one day. In Country B a worker can produce either 4 bushels of corn or 16 pounds of tomatoes in one day. Country A has an absolute advantage in corn production.

True

In the economy, income earned when producing new final goods and services must equal expenditure on the new final goods and services.

True

John takes 60 minutes to cut the grass and 20 minutes to wash dishes. Sue takes 30 minutes to cut the grass and 10 minutes to wash dishes. There are no gains from specialization in this case.

True

The opportunity cost of an item is what you give up to get that item.

True

The recipe used to make Coca Cola is an example of technological knowledge.

True

We can use the GDP deflator to calculate the inflation rate in the economy.

True

When a business such as CarMax sells a used car to an individual then part of this transaction does count in GDP.

True

When a private individual sells used furniture to another individual, this does not count in GDP.

True

When you pay $20 for a pizza we call this an explicit cost.

True

True or false? All else the same, when the price of apples increases: people will tend to buy fewer apples T/F apple producers will have an incentive to plant more apple trees T/F

True True

Suppose you observe that the price of ice cream has gone up. Which of the following would be a valid explanation of the increase in the price of ice cream?

a popular new diet claims ice cream is good for you

The price of gas rises during the summer because more people take vacations and so they drive more miles. This is best represented by:

a rightward shift of the demand curve, an upward movement along the supply curve

When you stand in line for 20 minutes to buy groceries, the value of that time is:

an implicit cost.

Jane buys a good at the store, and based on her preferences she considers this good to be inferior. This means that

an increase in her income will decrease her demand for the good.

The equilibrium price and quantity of a good have both increased. Which of the following is a valid explanation?

demand increased

Each month you spend $500 buying coffee. If the price of coffee increases from $2 to $3, what happens to your purchasing power?

it decreases

In a given year, if we sell 100 pounds of apples and 100 pounds of oranges, then the contribution to GDP from selling the oranges will be the same as the contribution to GDP from selling the apples.

it depends on the price of each good

All else the same, the law of demand defines a

negative relationship between price and quantity demanded

You bought a new car for $20,000. How can we calculate the opportunity cost of buying the car?

the $20,000 you paid for the car plus the value of the time you spent searching for the car.

The price of a good has gone down. What would be a good explanation of this?

the cost of a key input used to produce the good has declined.

Net exports is defined as

the value of exports minus the value of imports