MacroEcon 2305 final review

A U.S.-owned car factory in Mexico produces $5 million of cars. $2.5 million of these cars are sold in Mexico and the other $2.5 million are sold in the U.S. In both cases $1 million of the value of the cars was due to U.S-owned equipment located in Mexico and U.S. managers working in Mexico. How much did this production contribute to U.S. GDP?

$0

Figure 7-8 Refer to Figure 7-8. At the equilibrium price, consumer surplus is

$1,225

Figure 4-19 Refer to Figure 4-19. In this market, equilibrium price and quantity, respectively, are

$10 and 50 units.

Table 23-10 Refer to Table 23-10. What was this country's nominal GDP in 2014?

$10,000

If Martin sells a shirt for $40, and his producer surplus from the sale is $8, his cost must have been

$32

Table 4-10The following table shows the number of cases of water each seller is willing to sell at the prices listed. Price/case: AlpineSprings BrookMountain CascadeWaters DewGood $0.00 0 cases 0 cases 0 cases 0 cases $3.00 100 cases 40 cases 60 cases 100 cases $6.00 200 cases 80 cases 120 cases 200 cases $9.00 300 cases 120 cases 180 cases 300 cases Refer to Table 4-10. If the four suppliers listed are the only suppliers in this market and the market demand schedule is: Price Quantity Demanded $0.00 1200 $3.00 900 $6.00 600 $9.00 300 the equilibrium price and quantity are

$6.00 and 600 cases

Figure 6-18 The vertical distance between points A and B represents the tax in the market. ​ Refer to Figure 6-18. The per-unit burden of the tax on buyers is

$8

for an economy as a whole,

(1) income must equal expenditure (2) the market value of production must equal expenditure

Suppose a gardener produces both tomatoes and squash in his garden. If he must give up 8 bushels of squash to get 5 bushels of tomatoes, then his opportunity cost of 1 bushel of tomatoes is

1.6 bushels of squash.

Table 29-9 Refer to Table 29-9. Metropolis National Bank is currently holding 2% of deposits as excess reserves. What is the reserve requirement?

10 percent

A country's real GDP rose from $500 to $530 while its nominal GDP rose from $600 to $700. What was this country's inflation rate?

10.0%

If the nominal interest rate is 6 percent and the rate of inflation is 2 percent, then the real interest rate is

4 percent

What caused the recent fall in oil prices?

A negative demand shock from the Coronavirus.

According to Economic Research, Does Unemployment Insurance Prolong Periods of Unemployment?

No, most unemployment is caused by a fall in labor demand during a recession rather than labor supply decisions related to incentives.

When shopping you notice that a pair of jeans costs $20 and that a tee-shirt costs $10. You compute the price of jeans relative to tee-shirts.

The dollar price of jeans is a nominal variable; the relative price of jeans is a real variable.

Popeye produces 20 cans of spinach in 8 hours. Wimpy produces 15 hamburgers in 10 hours. If each hamburger trades for 1.5 cans of spinach, then

Wimpy's production is greater than Popeye's, but his productivity is less.

Figure 4-14 ​ [the supply shift to the left] Refer to Figure 4-14. Which of the following best describes the movement from E1 to E2?

a decrease in supply

What caused the Great Recession of 2009-10?

a housing bubble

Figure 6-31 Refer to Figure 6-31. Suppose that a price ceiling is imposed in this market at a price of $30. The effect of this price ceiling would be ​

binding and cause a shortage of 50 units.

Figure 6-14 Refer to Figure 6-14. If the horizontal line on the graph represents a price ceiling, then the price ceiling is

binding and creates a shortage of 40 units of the good.

Adam is looking for a job in marketing. He has had some offers and his prospects are promising, but he has not yet accepted a job. Amanda lost her job working for Mercury Bicycles because many customers decided they prefer bicycles manufactured by Ultimate Bicycles instead. Who is frictionally unemployed?

both Adam and Amanda

A market includes

both buyers and sellers.

Specialization and trade are closely linked to

comparative advantage.

If a tax is levied on the buyers of a product, then there will be a(n)

downward shift of the demand curve.

Serena Williams should probably not mow her own lawn because

her opportunity cost of mowing her lawn is higher than the cost of paying someone to mow it for her.

Inefficiency exists in a market when a good is

not being consumed by buyers who value it most highly

When markets fail, public policy can

potentially remedy the problem and increase economic efficiency

A legal minimum on the price at which a good can be sold is called a

price floor.

When supply and demand both increase, equilibrium

price may increase, decrease, or remain unchanged.

Over the last ten years productivity grew faster in Mapoli than in Romeria while the population and total hours worked remained the same in both countries. It follows that

real GDP per person grew faster in Mapoli than in Romeria.

A decrease in the money supply might indicate that the Fed had

sold bonds to decrease banks reserves.

The maximum price that a buyer will pay for a good is called

willingness to pay

A painter pays $500 for paint he uses to repaint a house. He then presents a bill for $1200 that covers his time and expenses to the homeowner. How much do these transactions add to GDP?

$1200

A steel company sells some steel to a bicycle company for $150. The bicycle company uses the steel to produce a bicycle, which it sells for $250. Taken together, these two transactions contribute

$250 to GDP

Figure 7-16 ​ Refer to Figure 7-16. If the price of the good is $500, then producer surplus amounts to

$700

Figure 7-26 [the point where the supply and demand curve intersect is at (30,60)] Refer to Figure 7-26. At the equilibrium price, producer surplus is

$900

consumer surplus

(1) measures the benefit buyers receive from participating in a market (2) is the amount a consumer is willing to pay minus the amount the consumer actually pays

According to the Paper Discussed in Our Livestream, What Economic Phenomena Reduced Employment Levels Over the Past Two Decades? (Note, click all of the correct answers, leave the incorrect answers unclicked)

-Import Competition from China -Adoption of Industrial Robots -Increased Rate of Incarceration

Figure 3-21 Refer to Figure 3-21. Azerbaijan's opportunity cost of one nail is

1/4 bolt and Uzbekistan's opportunity cost of one nail is 1/2 bolt.

Figure 3-15 ​ Refer to Figure 3-15. The opportunity cost of 1 poem for Perry is

1/6 novel

Stock in Tasty Greens Restaurants is selling at $80 per share with 1 million shares outstanding. Last year, Tasty Greens earned $4 million, of which it retained $2.4 million for future investments. The dividend yield on the stock is

2 percent

Given the following graph, what is the opportunity cost of producing one more chicken nugget?

3/4 Designer Jeans

Figure 28-3 ​ Refer to Figure 28-3. At the equilibrium wage, how many workers are employed?

5,0000

Ken and Traci are two woodworkers who both make tables and chairs. In one month, Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs. Given this, we know that the opportunity cost of 1 table is

6 chairs for Ken and 3 chairs for Traci.

The opportunity cost of an item is

what you give up to get that item.

Table 3-38 Output produced in one growing season Corn Soybeans Iowa 30 45 Nebraska 40 80 ​Refer to Table 3-38. Iowa and Nebraska can both produce corn and soybeans, and can switch between the production of corn and soybeans at a constant rate. The table illustrates the amount of corn or soybeans each state can produce in one growing season. Using the information from the table, Iowa's and Nebraska's opportunity cost of producing one bushel of corn is

​Iowa's is 1.5 bushels of soybeans and Nebraska's is 2 bushels of soybeans.

​Beth, an American citizen, travels to Italy on vacation and buys an espresso machine to bring home. Her purchase increases

​Italy's GDP.

Figure 7-10 ​ Refer to Figure 7-10. When the price rises from P1 to P2, which area represents the increase in producer surplus to existing producers?

ABGD

in the past decade [today in fall 2020 semester], Which economy has the highest growth rate of real GDP?

China

Which of the following statements is correct?

Differences in natural resources can explain some of the differences in standards of living around the world.

Suppose the number of buyers in a market decreases and a technological advancement occurs also. What would we expect to happen in the market?

Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.

The 19th century economist, Karl Marx, author of the communist manifesto was in favor of complete equality.

False. Marx understood some people work harder than others.

hich statement is a normative economic statement?

If we increase government debt, then we will distort our sense of responsibility.

Figure 4-27 Refer to Figure 4-27. Which of the four panels represents the market for winter coats as we progress from winter to spring?

Panel (b)

Figure 4-25 The graph below pertains to the supply of paper to colleges and universities. ​ Refer to Figure 4-25. All else equal, an increase in the price of the pulp used in the paper production process would cause a move from [this is an increase in a production cost; is this a supply curve shift or a movement along the supply curve?]

SB to SA

Which economy has the highest GDP per capita?

The United States

Which economy has the highest GDP?

The United States

Suppose private saving in a closed economy is $12b and investment is $10b.

The government budget deficit must equal $2b.

Which statements do the majority of economists NOT agree?

The minimum wage causes large unemployment

Potential buyers of ABC Corporation bonds are concerned about ABC Corporation declaring bankruptcy. Potential buyers of XYZ Corporation bonds are not concerned that XYZ Corporation may declare bankruptcy. Which of the following statements is correct?

XYZ Corporation bonds carry less default risk than do ABC Corporation bonds.

Is a free concert a scarce good?

Yes, because we have to give up what we would have done with our time.

a transfer payment is

a form of government spending that is not made in exchange for a currently produced good or service.

The gains from trade are

a result of more efficient resource allocation than would be observed in the absence of trade.

​The incidence of a tax is or who bears the larger burden of the tax is,

always determined by the interaction of the demand and supply side of the market..

Stocks and bonds

and checking accounts are all stores of value, but only checking accounts commonly function as mediums of exchange.

If the demand for a product decreases, then we would expect equilibrium price

and equilibrium quantity to both decrease.

Changes in nominal GDP reflect

both changes in prices and changes in the amounts being produced

An increase in the price of bread produced domestically will be reflected in

both the GDP deflator and the consumer price index.

When a union raises the wage above the equilibrium level,

both the quantity of labor supplied and unemployment rise.

A legal maximum on the price at which a good can be sold is called a price

ceiling

A bond is a

certificate of indebtedness.

When comparing each producer's own opportunity costs in the context of trade, economists use the term

comparative advantage.

Which list ranks assets from most to least liquid?

currency, stocks, fine art

total surplus is

equal to the total value to buyers minus the total cost to sellers

Figure 4-18 Refer to Figure 4-18. At a price of $20, there would be a(n)

excess demand. The law of supply and demand predicts that the price will rise from $20 to a higher price.

net exports equal

exports minus imports

One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI

fails to account for the introduction of new goods.

Dilbert's Incorporated produced 6,000,000 units of software in 2010. At the start of 2011 the pointy-haired boss raised employment from 10,000 total annual hours to 14,000 annual hours and production was 7,000,000 units. These number indicate that productivity

fell by about 16.7%.

By definition, exports are

goods produced domestically and sold abroad.

The nominal interest rate tells you

how fast the number of dollars in your bank account rises over time.

The real interest rate tells you

how fast the purchasing power of your bank account rises over time.

A country's human capital increases

if its workers become better educated or healthier.

in the GDP accounts production equals

income

Table 28-2Labor Data for Aridia Refer to Table 28-2. The labor force of Aridia

increased from 2010 to 2011 but decreased from 2011 to 2012.

If there are diminishing returns to capital, then

increases in the capital stock increase output by ever smaller amounts.

An open-market purchase

increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public.

The real interest rate is 4 percent and the nominal interest rate is 6 percent. Is there inflation or deflation? What is the inflation or deflation rate?

inflation; 2 percent

Economists differ in their views of the role of the government in promoting economic growth. At the very least, the government should

lend support to the invisible hand by maintaining property rights and political stability.

If a nonbinding price floor is imposed on a market, then the

quantity sold in the market will stay the same.

Other things the same, an increase in taxes with no change in government purchases makes national saving

rise. The supply of loanable funds shifts right.

If the value of a dollar falls, then the quantity of money demanded

rises, meaning people want to hold more of their wealth in a liquid form.

The law of supply states that, other things equal, when the price of a good

rises, the quantity supplied of the good rises.

A bond buyer is a

saver. Bond buyers may sell their bonds prior to maturity.

Figure 4-20 Refer to Figure 4-20. If the price is $25, then there would be an excess

supply of 300 units, and price would fall.

A payroll tax is a

tax on the wages that firms pay their workers.

The production possibilities frontier illustrates

the combinations of output that an economy can produce.

If a price ceiling is not binding, then

the equilibrium price is below the price ceiling.

Collective bargaining refers to

the process by which unions and firms agree on the terms of employment.

The CPI for all goods and services excluding food and energy is called

the ​core CPI.

People hold $400 million of bank deposits but no currency. Banks have made $380 million dollars of loans and only hold enough reserves to satisfy reserve requirements. Because of uncertainty, banks choose to hold $10 million more in reserves. The Fed takes no action. What happens to bank loans?

they fall $200 million