MACRO MIDTERM

Leaving the labor force or finding a job are two ways that:

an unemployment spell can end.

If the price of tables sold by All-Oak Table Co. increases from $400 to $500, then the:

demand for labor by All-Oak Table Co. increases.

In a free market, if the price of a good is below the equilibrium price, then;

demanders, to acquire the good, will bid the price higher.

All of the following describe trends in U.S. labor markets except:

growing wage equality in the United States in recent decades.

The government purchases component of GDP includes:

purchases of final goods and services.

Last summer, real estate prices in your town soared. You started noticing more "For Sale" signs in your neighbors' yards. You conclude that:

when housing prices rose, they started to exceed some of your neighbors' reservation prices.

Pat earns $25,000 per year (after taxes), and Pat's spouse, Chris, earns $35,000 (after taxes). They have two pre-school-aged children. Childcare for their children costs $12,000 per year. Given that Chris doesn't want to stay home with the kids, regardless of what Pat does, Pat should stay home with the kids if, and only if, the value of Pat spending more time with the kids is greater than:

$13,000 per year.

In 2015, Pete Rich purchases a 1642 painting by Rembrandt for $20 million. He also pays a one percent commission to the auction house that sold the painting. What is the contribution of these transactions to GDP in the year 2015?

$200,000

Suppose the marginal cost of the 1st hour of talking on the phone is $50, the marginal cost of the 2nd hour is $75, and the marginal cost of the 3rd hour is $105. In this case, the total cost of talking on the phone for 3 hours is:

$230

An economy produces only 500,000 tables valued at $100 each. Of these, 100,000 are sold to consumers, 200,000 are sold to businesses, 100,000 are sold to the government, and 50,000 are sold abroad. No tables are imported. At the end of the year, the tablemanufacturers hold the unsold tables in inventory. What is the value of the investment component of GDP?

$25 million

On January 1, 2008, Edward invested $10,000 at 5% interest for one year. The CPI on January 1, 2008 stood at 1.60. On January 1, 2009, the CPI was 1.76. The real rate of interest earned by Edward was ________ percent.

-5

The CPI in 1931 equaled 0.15. The CPI in 1932 equaled 0.14. The rate of inflation between 1931 and 1932 was ________ percent.

-6.7

Which of following is NOT true of an equilibrium price?

It is always a fair and just price.

Assume point A on a linear production possibilities curve represents the combination of 12 coffees and 3 cappuccinos, and point B represents 3 coffees and 6 cappuccinos. Suppose coffees are on the vertical axis and cappuccinos are on the horizontal axis. The absolute value of the slope of the production possibilities curve between points A and Bequals:

3

Working efficiently, Jordan can write 3 essays and outline 4 chapters each week. It must be true that:

3 essays and 5 chapter outlines would be unattainable.

Which of the following would be included in the GDP of the United States?

Boeing builds a plane in Seattle that is sold to Air Canada.

Suppose you bought three tickets to a concert in advance at the University ticket window. At the last minute one friend cancelled, so you could use only two of those tickets. You scalped, or sold, the third ticket just outside the entrance to the concert for slightly more than the price you had originally paid. Which transaction occurred in a market?

Both transactions, the one at the University ticket window as well as the sale at the concert entrance, occurred in markets.

Which of the following is an example of structural unemployment?

Dora lost her job when the textile factory closed. She does not have skills to work in another industry and has been unemployed for over a year.

Which of the following directly follows from the No Cash on the Table Principle?

For a transaction to occur, the buyer's reservation price must be greater than the seller's reservation price.

Which of the following activities is most likely to be counted in GDP?

Gail buys paper and crayons to donate to poor children in need of school supplies.

Due to the fact that Curly used his frequent flyer miles to fly to visit Moe, Curly told Moe that it didn't cost him anything to visit. Is Curly correct?

No, because Curly could have used his frequent flyer miles to go somewhere else instead.

Your classmates from the University of Chicago are planning to go to Miami for spring break, and you are undecided about whether you should go with them. The round-trip airfares are $600, but you have a frequent-flyer coupon worth $500 that you could use to pay part of the airfare. All other costs for the vacation are exactly $900. The most you would be willing to pay for the trip is $1400. Your only alternative use for your frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your sister's graduation, which your parents are forcing you to attend. The Chicago-Atlanta round-trip airfares are $450. Should you use the frequent flyer coupon to go to Miami?

No, your benefit is less than your cost.

Pat can either drive to work, which takes half an hour and uses $1.50 worth of gas, or take the bus, which takes an hour and costs $1.00. How should Pat get to work?

Pat should drive if saving half an hour is worth $0.50 or more.

Assume one investor bought a 10-year inflation-protected bond with a fixed annual real rate of 1.5% and another investor bought a 10-year bond without inflation protection with a nominal annual return of 4.2%. If inflation over the 10-year period averaged 2 %, which investor earned a higher real return?

The investor who purchased the bond without inflation protection.

Which of the following is a real quantity?

The number of tons of steel produced in 2005

Suppose you camped out in front of an electronics store to be one of the 200 lucky people able to purchase the latest gaming system. You bought the system for $350. Two weeks later you see that the same system can be sold on e-Bay for $600, so you sell your system. Your market role is as:

a consumer at the electronics store and as a seller on e-Bay.

One trend in labor markets is:

a slowdown in real wage growth in the United States since 1973.

Any combination of goods that can be produced with currently available resources is an:

attainable point

Consider a graph of a production possibilities curve. If a producer is operating at an inefficient point, then that producer:

can produce more of one good without producing less of the other good.

Changes in business inventories are:

classified as investment expenditures.

An increase in unemployment insurance benefits will:

decrease job search efforts of unemployed workers.

As the price of flour (an input into the cookie production process) increases, firms that produce cookies will:

decrease the supply of cookies.

A war destroys much of the capital stock in the country of Omega. As a result, holding other factors constant, the real wage in Omega will ________ and employment in Omega will ________.

decrease; decrease

Net exports equal:

exports minus imports

Unexpectedly high inflation ________ borrowers and ________ lenders.

helps; hurts

To obtain a given real rate of return, lenders must charge a ________ nominal interest rate in the face of increasing inflation.

higher

Economics is best defined as the study of:

how people make choices in the face of scarcity and the implications of those choices for society as a whole.

The No Cash on the Table Principle asserts that:

in equilibrium, all opportunities have been exploited.

A nominal value is measured:

in terms of current dollar value.

To ensure that a nominal payment represents a constant level of purchasing power over time, one should:

increase it by a percentage equal to the rate of inflation for that year.

Macroland produces dishes and glassware. Before trade, a set of dishes sells for $100 and a set of glasses sells for $50. When Macroland opens to trade, foreign demand for domestically produced china is strong, raising the price of a set of dishes to $125. But foreign competition reduces the demand for domestically produced glasses, so they now sell for $25 a set. Assuming workers cannot move between industries, the wages of workers producing dishes will ________ and the wages of workers producing glasses will ________.

increase; decrease

The typical family on the Planet Econ consumes 10 pizzas, 7 pairs of jeans, and 20 gallons of milk. In 2008, pizzas cost $10 each, jeans cost $40 per pair, and milk cost $3 per gallon. In 2009, the price of pizzas increased to $14 each, while the price of jeans and milk remained the same. Between 2008 and 2009, a typical family's cost of living:

increased by 9 percent

The price of a gallon of gasoline at the pump increased by 10 percent at the same time that the inflation rate was 5 percent. The nominal price of gasoline ________, and the real price of gasoline ________,

increased; also 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

One family earned an income of $28,000 in 1990. Over the next five years, their income increased by 15%, while the CPI increased by 15%. After five years, this family's nominal income ________, and their real income ________.

increased; did not change

A change in the average price level is called ________, while a change in the price of a specific good in comparison with other goods and services is called ________.

inflation; a change in a relative price

The real costs of inflation to society include:

interference with long-term planning.

If individuals are rational, they should choose actions that yield the:

largest economic surplus

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

leisure time

The study of individual choice and its implications for the behavior of prices and quantities in individual markets is:

microeconomics

On a graph of a production possibilities curve, an inefficient point is:

necessarily an attainable point

The annual increase in the dollar value of a financial asset is called the:

nominal interest rate.

If the borrower and lender agree to a loan at 8% when the inflation rate is 3%, then 8% is the ________ interest rate and 5% is the ________ interest rate.

nominal; real

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.

Total spending on final goods and services in an economy must equal total:

production value.

A shortage occurs when:

quantity demanded exceeds quantity supplied.

Globalization ________ the wages of workers in the exporting industries and ________ the wages of workers in the import-competing industries.

raises; lowers

Inflation is a measure of the ________ of prices; the CPI is a measure of the ________ of prices.

rate of change in the level; current level

A measure of GDP in which quantities produced are valued at the prices of a fixed base year is called:

real GDP

The minimum payment you are willing to accept to do a job is your:

reservation price.

The value added by any firm equals the firm's ________ from selling the product minus ________.

revenue; the cost of inputs purchased from other firms

A long-term mismatch between the skills of some workers and the jobs available is a principal cause of ________ unemployment.

structural

Microeconomics differs from macroeconomics in that microeconomics focuses on:

the choices made by individuals the implications of those choices.

Final goods and services are ________ production and ________ counted in GDP.

the end products of; are

Structural unemployment will decrease when:

the minimum wage is decreased.

The opportunity cost of an activity includes the value of:

the next-best alternative that must be foregone.

The idea that tradeoffs have to be made when resources are scarce is reflected in the fact that:

the production possibilities curve has a negative slope

The value of final goods and services equals:

the sum of the value added by all firms.

Suppose that the price of doughnuts decreases and that doughnut-holes are a by-product of producing doughnuts. One would expect:

the supply of doughnut holes to decrease.

A person 16 years or older who does not work, but is actively looking for work, is officially classified as:

unemployed

Intermediate goods and services are ________ production and ________ counted in GDP.

used up in the process of; are not

The real rate of return on holding cash is equal to:

zero minus the inflation rate.

The introduction of word processing software that increases the demand for workers with computer skills relative to those without such skills is an example of:

skill-biased technological change.