macro midterm
Suppose a basket of goods and services has been selected to calculate the CPI and Year 1 has been selected as the base year. In Year 1, the basket's cost was $50; in Year 2, the basket's cost was $52; and in Year 3, the basket's cost was $55. The value of the CPI in Year 3 was 90.9. 104.0. 105.0. 110.0.
110.0.
Last year real GDP in the imaginary nation of Oceania was 561.0 billion and the population was 2.2 million. The year before, real GDP was 500.0 billion and the population was 2.0 million. What was the growth rate of real GDP per person during the year? 12 percent 10 percent 4 percent 2 percent
2%
Last year real GDP per person in the imaginary nation of Olympus was 4,250. The year before it was 4,100. By about what percentage did Olympian real GDP per person grow during the period? 1.6 percent 2.5 percent 3.7 percent Correct answer 6 percent
3.7%
The price index was 120 in Year 1 and 126 in Year 2. What was the inflation rate? 5.0 percent 6.0 percent 7.2 percent 105 percent
5%
Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase in the demand for cheese causes the price of cheese to increase by 15 percent, then the quantity supplied of cheese will increase by 0.4 percent in the short run and 4.6 percent in the long run. 1.7 percent in the short run and 0.7 percent in the long run. 9 percent in the short run and 21 percent in the long run. 25 percent in the short run and 10.7 percent in the long run.
9 percent in the short run and 21 percent in the long run.
Which of the following is correct? A horizontal line has an infinite slope, and a vertical line has a zero slope. A horizontal line has a slope of 1, and a vertical line has a slope of −1. A horizontal line has a zero slope, and a vertical line has an infinite slope. A horizontal line has a slope of −1, and a vertical line has a slope of 1.
A horizontal line has a zero slope, and a vertical line has an infinite slope.
Other things the same, which of the following would increase productivity? An increase in either human or physical capital An increase in human capital but not an increase in physical capital An increase in physical capital but not an increase in human capital Neither an increase in human capital nor an increase in physical capital
An increase in either human or physical capital
The inflation rate you are likely to hear on the nightly news is calculated from the GDP deflator. CPI. Dow Jones Industrial Average. unemployment rate.
CPI.
Country A has a population of 1,000, of whom 800 work 8 hours a day to make 128,000 final goods. Country B has a population of 2,000, of whom 1,800 work 6 hours a day to make 270,000 final goods. Country A has higher productivity and higher real GDP per person than country B. Country A has lower productivity but higher real GDP per person than country B. Country A has higher productivity but lower real GDP per person than country B. Country A has lower productivity and lower real GDP per person than country B.
Country A has lower productivity and lower real GDP per person than country B.
In the circular-flow diagram, which of the following items flows from households to firms through the markets for goods and services? Goods and services Dollars paid to land, labor, and capital Dollars spent on goods and services Wages, rent, and profit
Dollars spent on goods and services
When the government implements programs such as progressive income tax rates, which of the following is likely to occur? Equality is increased and efficiency is increased. Equality is increased and efficiency is decreased. Equality is decreased and efficiency is increased. Equality is decreased and efficiency is decreased.
Equality is increased and efficiency is decreased.
Suppose that demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good? Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.
A worker in Vietnam can earn $6 per day making cotton cloth on a hand loom. A worker in the United States can earn $85 per day making cotton cloth with a mechanical loom. What is the likely explanation for the difference in wages? U.S. textile workers belong to a union, whereas Vietnamese textile workers do not belong to a union. There is little demand for cotton cloth in Vietnam and great demand in the United States. Labor is more productive making cotton cloth with a mechanical loom than with a hand loom. Vietnam has a low-wage policy to make its textile industry more competitive in world markets.
Labor is more productive making cotton cloth with a mechanical loom than with a hand loom.
Which of the following was not a reason OPEC failed to keep the price of oil high? Over the long run, producers of oil outside of OPEC responded to higher prices by increasing oil exploration and by building new extraction capacity. Consumers responded to higher prices with greater conservation. Consumers replaced old inefficient cars with newer efficient ones. The agreement OPEC members signed allowed each country to produce as much oil as each wanted.
The agreement OPEC members signed allowed each country to produce as much oil as each wanted.
Acme Home Builders, Inc., has built 24 houses so far this year at a total cost to the company of $4.80 million. If the company builds a 25th house, its total cost will increase to $5.05 million. Which of the following statements is correct? For the first 24 houses, the average cost per house was $205,000. The marginal cost of the 25th house, if it is built, will equal $250,000. If the company can sell the 25th house for at least $202,000, then it should build it. The company should never build the 25th house because this increases its total cost.
The marginal cost of the 25th house, if it is built, will equal $250,000.
Which of the following events could cause an increase in the supply of ceiling fans? The number of sellers of ceiling fans increases. There is an increase in the price of air conditioners, and consumers regard air conditioners and ceiling fans as substitutes. There is an increase in the price of the motor that powers ceiling fans. The average temperature rises over time.
The number of sellers of ceiling fans increases.
Which of the following would not increase in response to a decrease in the price of ironing boards? The quantity of irons demanded at each possible price of irons The equilibrium quantity of irons The equilibrium price of irons The quantity of irons supplied at each possible price of irons
The quantity of irons supplied at each possible price of irons
Which of the following is not a characteristic of a perfectly competitive market? Different sellers sell identical products. There are many sellers. Sellers must accept the price the market determines. There is no free entry or exit.
There is no free entry or exit.
Which of the following is an example of a normative, as opposed to a positive, statement? Universal healthcare would be good for U.S. citizens. An increase in the cigarette tax would cause a decrease in the number of smokers. A decrease in the minimum wage would decrease unemployment. A law requiring the federal government to balance its budget would increase economic growth.
Universal healthcare would be good for U.S. citizens.
Which of the following is the correct formula for calculating the consumer price index? [(CPI in Year 1 − CPI in Year 2)/CPI in Year 2] × 100 [(price of basket of goods and services in current year/price of basket in base year)]× 100 [(price of basket of goods and services in current year − price of basket in base year)/price of basket in base year] × 100 [(price of basket of goods and services in base year/price of basket in current year)] × 100
[(price of basket of goods and services in current year/price of basket in base year)]× 100
Duties of the Council of Economic Advisers include advising the president and writing the annual Economic Report of the President. implementing the president's tax policies. managing of the nation's money supply. managing the Social Security program.
advising the president and writing the annual Economic Report of the President.
The willingness of citizens to pay for vaccinations does not include the benefit society receives from having vaccinated citizens who cannot transmit an illness to others. This extra benefit society gets from vaccinating its citizens is known as productivity. an externality. market power. property rights.
an externality.
If a decrease in income increases the demand for a good, then the good is a substitute good. a complementary good. a normal good. an inferior good.
an inferior good.
Positive statements are prescriptive. claims about how the world should be. claims about how the world is. made by economists speaking as policy advisers.
claims about how the world is.
Scenario 5-2 The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10 percent. The equilibrium price will... increase in both the aged cheddar cheese and bread markets. increase in the aged cheddar cheese market and decrease in the bread market. decrease in the aged cheddar cheese market and increase in the bread market. decrease in both the aged cheddar cheese and bread markets.
decrease in both the aged cheddar cheese and bread markets.
Two goods are substitutes when a decrease in the price of one good decreases the demand for the other good. decreases the quantity demanded of the other good. increases the demand for the other good. increases the quantity demanded of the other good.
decreases the demand for the other good.
In the actual economy, households spend all of their income. divide their income among spending, taxes, and saving. buy all goods and services produced in the economy. save all of their income.
divide their income among spending, taxes, and saving.
If your firm's production function has constant returns to scale, then if you double all your inputs, your firm's output will double and productivity will rise. double but productivity will not change. more than double and productivity will rise. more than double but productivity will not change.
double but productivity will not change.
When small changes in price lead to infinite changes in quantity demanded, demand is perfectly elastic, and the demand curve will be horizontal. inelastic, and the demand curve will be horizontal. elastic, and the demand curve will be vertical. inelastic, and the demand curve will be vertical.
elastic, and the demand curve will be horizontal.
The terms equality and efficiency are similar in that they both refer to benefits to society. However, they are different in that equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources. equality refers to maximizing benefits from scarce resources and efficiency refers to uniform distribution of those benefits. equality refers to everyone facing identical tradeoffs and efficiency refers to the opportunity cost of the benefits. equality refers to the opportunity cost of the benefits and efficiency refers to everyone facing identical tradeoffs.
equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources.
"Minimum wage laws result in unemployment" is a normative statement, while "the minimum wage should be higher" is a positive statement. (T/F)
false
A decrease in the price of pizza will shift the supply curve for pizza to the left. (T/F)
false
A linear, downward-sloping demand curve has a constant elasticity but a changing slope. (T/F)
false
Along the elastic portion of a linear demand curve, total revenue rises as price rises. (T/F)
false
An increase in the marginal cost of an activity necessarily means that people will no longer engage in any of that activity. (T/F)
false
Economic models can help us understand reality only when they include all details of the economy. (T/F)
false
Economists believe that production possibilities frontiers rarely have a bowed shape. (T/F)
false
GDP can measure either the total income of everyone in the economy or the total expenditure on the economy's output of goods and services, but GDP cannot measure both at the same time. (T/F)
false
If a firm is facing inelastic demand, then the firm should decrease price to increase revenue. (T/F)
false
If wages for accountants rose, then accountants' leisure time would have a lower opportunity cost. (T/F)
false
If we observe that when the price of chocolate increases by 10%, total revenue increases by 10%, then the demand for chocolate is unit price elastic. (T/F)
false
Inflation measures the increase in the quantity of goods and services produced from each hour of a worker's time. (T/F)
false
Macroeconomic statistics tell us about a particular household, firm, or market. (T/F)
false
Since economists cannot use natural experiments offered by history, they must use carefully constructed laboratory experiments instead. (T/F)
false
The fact that people are willing to pay much more for a diamond, which is not needed for survival, than they are willing to pay for a cup of water, which is needed for survival, is an example of irrational behavior. (T/F)
false
The flatter the demand curve that passes through a given point, the more inelastic the demand. (T/F)
false
Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the steeper the demand curve will be. flatter the demand curve will be. further to the right the demand curve will sit. closer to the vertical axis the demand curve will sit.
flatter the demand curve will be.
Economists make assumptions to mimic the methodologies employed by other scientists. minimize the number of experiments that yield no useful data. minimize the likelihood that some aspect of the problem at hand is being overlooked. focus their thinking on the essence of the problem at hand.
focus their thinking on the essence of the problem at hand.
To improve living standards, policymakers should impose restrictions on foreign competition. formulate policies designed to increase productivity. impose tougher immigration policies. provide tax breaks for the middle class.
formulate policies designed to increase productivity.
For any given year, the CPI is the price of the basket of goods and services in the given year divided by the price of the basket in the base year, then multiplied by 100. given year divided by the price of the basket in the previous year, then multiplied by 100. base year divided by the price of the basket in the given year, then multiplied by 100. previous year divided by the price of the basket in the given year, then multiplied by 100.
given year divided by the price of the basket in the base year, then multiplied by 100.
In the CPI, goods and services are weighted according to how long a market has existed for each good or service. the extent to which each good or service is regarded by the government as a necessity. how much consumers buy of each good or service. the number of firms that produce and sell each good or service.
how much consumers buy of each good or service.
Jackie, a Canadian citizen, works only in the United States. The value of the output she produces is included in both U.S. GDP and U.S. GNP. included in U.S. GDP, but it is not included in U.S. GNP. included in U.S. GNP, but it is not included in U.S. GDP. included in neither U.S. GDP nor U.S. GNP.
included in U.S. GDP, but it is not included in U.S. GNP.
If an economy's GDP falls, then it must be the case that the economy's income falls and saving rises. income and saving both fall. income falls and expenditure rises. income and expenditure both fall.
income and expenditure both fall.
Trade between countries tends to reduce both competition and specialization. reduce competition and increase specialization. increase competition and reduce specialization. increase both competition and specialization.
increase both competition and specialization.
An increase in the overall level of prices in an economy is referred to as the income effect. inflation. deflation. the substitution effect.
inflation
Japan's status as a rich nation is attributable to Japan's quantities of natural resources, but not to international trade. international trade, but not to Japan's domestic quantities of natural resources. the fact that Japanese productivity has remained nearly constant for more than 100 years. the fact that the Japanese have downplayed the role of human capital in economic growth.
international trade, but not to Japan's domestic quantities of natural resources.
Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will raise both price and total revenues. lower both price and total revenues. raise price and lower total revenues. lower price and raise total revenues.
lower both price and total revenues.
The consumer price index is used to monitor changes in the level of wholesale prices in the economy. monitor changes in the cost of living over time. monitor changes in the level of real GDP over time. monitor changes in the stock market.
monitor changes in the cost of living over time.
You have driven 800 miles on a vacation and then you notice that you are only 15 miles from an attraction you hadn't known about, but would really like to see. In computing the opportunity cost of visiting this attraction you had not planned to visit, you should include both the cost of driving the first 800 miles and the next 15 miles. the cost of driving the first 800 miles, but not the cost of driving the next 15 miles. the cost of driving the next 15 miles, but not the cost of driving the first 800 miles. neither the cost of driving the first 800 miles nor the cost of driving the next 15 miles.
neither the cost of driving the first 800 miles nor the cost of driving the next 15 miles.
Proprietary technology is knowledge that is known but no longer used much. but only recently discovered. mostly by only those in a certain profession. only by the company that discovered it.
only by the company that discovered it.
Chloe's college raises the cost of room and board per semester. This increase raises Chloe's opportunity cost of attending college even if the amount she would have to pay for room and board if she didn't attend college rose by the same amount. An increase in opportunity cost reduces Chloe's incentive to attend college. even if the amount she would have to pay for room and board if she didn't attend college rose by the same amount. An increase in opportunity cost increases Chloe's incentive to attend college. only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges. An increase in opportunity cost reduces Chloe's incentive to attend college. only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges. An increase in opportuni
only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges. An increase in opportunity cost reduces Chloe's incentive to attend college.
The adage, "There ain't no such thing as a free lunch," means even people on welfare have to pay for food. the cost of living is always increasing. people face tradeoffs. all costs are included in the price of a product.
people face tradeoffs.
The inflation rate is defined as the price level in an economy. change in the price level from one period to the next. percentage change in the price level from the previous period. price level minus the price level from the previous period.
percentage change in the price level from the previous period.
the use of theory and observation is more difficult in economics than in sciences such as physics due to the difficulty in performing an experiment in an economic system applying mathematical methods to economic analysis. analyzing available data. formulating theories about economic events.
performing an experiment in an economic system
The income that households and noncorporate businesses receive is called personal income. net national product. disposable personal income. national income.
personal income.
The equipment and structures available to produce goods and services are called physical capital. Correct answer human capital. the production function. technology.
physical capital.
Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is negative, and the good is an inferior good. negative, and the good is a normal good. positive, and the good is a normal good. positive, and the good is an inferior good.
positive, and the good is a normal good.
Productivity is the amount of goods and services an economy produces. It is not linked to a nation's economic policies. an economy produces. It is linked to a nation's economic policies. produced for each hour of a worker's time. It is not linked to a nation's economic policies. produced for each hour of a worker's time. It is linked to a nation's economic policies.
produced for each hour of a worker's time. It is linked to a nation's economic policies.
The overriding reason why households and societies face many decisions is that resources are scarce. goods and services are not scarce. incomes fluctuate with business cycles. people, by nature, tend to disagree.
resources are scarce.
If Miguel expects to earn a higher income next month, he may choose to save more now and spend less of his current income on goods and services. save less now and spend more of his current income on goods and services. decrease his current demand for goods and services. move along his current demand curves for goods and services.
save less now and spend more of his current income on goods and services.
Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should sell the ticket because the marginal benefit exceeds the marginal cost. sell the ticket because the marginal benefit exceeds the average cost. not sell the ticket because the marginal benefit is less than the marginal cost. not sell the ticket because the marginal benefit is less than the average cost.
sell the ticket because the marginal benefit exceeds the marginal cost.
An understanding of the best ways to produce goods and services is called human capital. physical capital. technology. productivity.
technology
When a relevant variable that is not named on either axis changes, there will be a movement along the curve. the curve will rotate clockwise. the curve will be unaffected since only the variables on the axis affect the curve. the curve will shift.
the curve will shift
Economists use the term inflation to describe a situation in which some prices are rising faster than others. the economy's overall price level is rising. the economy's overall price level is high, but not necessarily rising. the economy's overall output of goods and services is rising faster than the economy's overall price level.
the economy's overall price level is rising.
Mina decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is the $60 she earns working. the $60 minus the enjoyment she would have received from going to the park. the enjoyment she would have received had she gone to the park. nothing, since she would have received less than $60 worth of enjoyment from going to the park.
the enjoyment she would have received had she gone to the park.
The price elasticity of supply measures how much the quantity supplied responds to changes in input prices. the quantity supplied responds to changes in the price of the good. the price of the good responds to changes in supply. sellers respond to changes in technology.
the quantity supplied responds to changes in the price of the good.
The marginal benefit Sabrina gets from purchasing a third pair of gloves is the same as the total benefit she gets from purchasing three pairs of gloves. more than the marginal cost of purchasing the third pair of gloves. the total benefit she gets from purchasing three pairs of gloves minus the total benefit she gets from purchasing two pairs of gloves. the total benefit she gets from purchasing four pairs of gloves minus the total benefit she gets from purchasing three pairs of gloves.
the total benefit she gets from purchasing three pairs of gloves minus the total benefit she gets from purchasing two pairs of gloves.
Elena's aunt gave her $100 for her birthday with the condition that Elena buys herself something. In deciding how to spend the money, Elena narrows her options down to four choices: Option A, Option B, Option C, and Option D. Each option costs $100. Finally, she decides on Option B. The opportunity cost of this decision is the value to Elena of the option she would have chosen had Option B not been available. the value to Elena of Options A, C, and D combined. the average of the values to Elena of Options A, C, and D. $100.
the value to Elena of the option she would have chosen had Option B not been available.
A marginal change is a small incremental adjustment to an existing plan of action. (T/F)
true
A production possibilities frontier will be bowed outward if some of the economy's resources are better suited to producing one good than another. (T/F)
true
An economy's income is the same as its expenditure because every transaction has a buyer and a seller. (T/F)
true
Assumptions can simplify the complex world and make it easier to understand. (T/F)
true
Demand for a good is said to be inelastic if the quantity demanded increases slightly when the price falls by a large amount. (T/F)
true
Good assumptions simplify a problem without substantially affecting the answer. (T/F)
true
Goods with close substitutes tend to have more elastic demands than do goods without close substitutes (T/F)
true
Historical episodes allow economists to illustrate and evaluate current economic theories.(T/F)
true
Market failure refers to a situation in which the market does not allocate resources efficiently. (T/F)
true
Measures of elasticity enhance our ability to study the magnitudes of changes in quantities in response to changes in prices or income. (T/F)
true
One of the effects of gas prices rising from about $2 to about $4 per gallon was airlines ordering new, fuel-efficient aircraft. (T/F)
true
Productivity is defined as the quantity of goods and services produced from each unit of labor input. (T/F)
true
Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%. The price elasticity of demand for this good is equal to 2.0. (T/F)
true
The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price. (T/F)
true
The scientific method is the dispassionate development and testing of theories about how the world works. (T/F)
true
If the consumer price index was 96 in Year 1, 100 in Year 2, and 102 in Year 3, then the base year must be Year 1. Year 2. Year 3. the base year cannot be determined from the given information.
year 2