Macroecon test 1
Inflation has occured
When the CPI increases from one year to the next:
Rational
When we assume that consumers want to pay the lowest price possible, we assume that consumers are:
Firms
Which actor in the simplified circular flow model buys or rents land, labor, and capital?
Firms
Which actor in the simplified circular flow model is on the supply side of the goods market?
The inflation rate:
calculates the percentage change in the overall price level.
Suppose that only two goods are produced in an economy. If a country possesses a comparative advantage at producing one good, then it:
cannot also possess a comparative advantage at producing the other good.
A decrease in the price of spaghetti noodles is likely to cause a(n) _____ in the demand for penne pasta, due to a change in the price of a _____.
decrease; substitute good
According to the circular flow model, expenditures by one person translate:
directly into income for someone else.
Investment, as a part of GDP, includes:
goods bought by firms that plan to use those purchases to produce other goods and services in the future.
GDP per capita is _______ correlated with quality of life.
highly
The law of demand describes the:
inverse relationship between price and quantity demanded.
Suppose a factory recently removed robots from its production line, decreasing productivity. This will likely cause a:
leftward shift of the supply curve.
When we say the cost of living has gone up, we mean that, looking broadly over a range of goods and services, a dollar buys _______ it used to buy.
less today than
One way to estimate GDP is to:
measure the total expenditure of an economy.
A price index:
measures how much the cost of a market basket has risen or fallen relative to the cost of the same market basket in a base time period.
When the CPI increases from one year to the next:
more money must be spent to buy the same amount of goods as the previous year.
Suppose the price of dog collars has decreased and all other variables have remained constant. This change can be shown graphically as a:
movement along the demand curve to the right.
Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day. On the other hand, a Canadian worker can produce 10 pairs of shoes or grow 20 apples per day. When trade opens up, the United States should produce _____ because it has a(n) _____ and should _____.
only apples; comparative advantage at producing apples; trade for shoes.
GDP counts:
only final goods and services.
A dollar's value changes:
over time and across different locations.
The market value of a good or service is the:
price at which the good or service is bought and sold.
The law of supply states that, all else held equal, quantity supplied rises as:
price rises.
Equilibrium exists at the point where:
quantity supplied equals quantity demanded.
Suppose the demand for chicken has increased. This change can be shown graphically as a:
shift in the demand curve to the right.
A production possibilities frontier is a line or curve that:
shows all the possible combinations of outputs that can be produced using all available resources.
Consumption, as a component of GDP, measures:
spending on goods and services by individuals and households.
A macroeconomist would study how:
the economy works on a regional, national, or international scale.
Consider a market that is in equilibrium. If the market experiences an increase in demand:
the equilibrium price and quantity will rise.
Gross domestic product is the sum of:
the market values of all final goods and services produced within a country in a given period of time.
The demand for Snickers candy bars will decrease if:
the price of Milky Way candy bars (a substitute) decreases.
To determine the income your grandparents would have to earn today in order to have purchasing power equivalent to their income in 1969, you would:
translate their nominal income in 1969 into constant, real dollars of today.
Intermediate goods and services are:
used only as inputs to produce something else and are not counted as separate items in GDP.
Increase in total production, which would benefit every nation involved.When nations trade, the result would most likely be a(n):
Increase in total production, which would benefit every nation involved.
When a country is producing goods and services efficiently it:
Is getting the most output by using all its available resources.
Why do people often choose to specialize and trade?
It allows them to enjoy more goods than they can create on their own.
If a country has an absolute advantage at producing one good, which of the following is true?
It can produce more of that good given the same resources.
If consumption is $7 trillion, wages $10 trillion, interest $1 trillion, rental income $1.5 trillion and profits $2 trillion, what is the value of the economy using the income approach?
$14.5 trillion
In 1976, the cost of a ticket to see a movie in the theater was $4. In 2019, a movie ticket cost $9. If the CPI is 56 for 1976 and 228 for 2019, then we could say the cost of a 1976 movie ticket in 2019 is _______, which indicates that the price of movie tickets _______.
$16.29; has not increased as much as general inflation
The deadline for your research paper is tomorrow and you anticipate you'll need a full day's worth of writing to complete the paper. Unfortunately, you are scheduled to work all day in the cafeteria. You can turn the paper in one day late for a 10 percent penalty or take the day off of work and turn the paper in by the deadline. Losing a day of wages will cost you $90. The marginal cost of turning the paper in on time is:
$90 in forgone wages.
1.She does not count the value of the time it takes her to sort and clip coupons as a cost. 2.She does not count the cost of the gas she uses driving extra miles to multiple grocery stores. 3.She does not count the value of the time it takes her to check out at multiple stores and use multiple coupons, compared to a trip to one store with no coupons.
Your sister always brags about how savvy she is as a grocery shopper, claiming she saves lots of money by using coupons and shopping at multiple stores to get the lowest prices on all goods. Why might your sister be overestimating her savings?
Limited Resources
Scarcity reflects our inability to satisfy wants due to:
Canada has a comparative advantage at producing shoes.
Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day. On the other hand, a Canadian worker can produce 10 pairs of shoes or grow 20 apples per day. Which of the following statements is true?
The U.S. has both an absolute advantage and a comparative advantage at producing apples.
Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day. On the other hand, a Canadian worker can produce 10 pairs of shoes or grow 20 apples per day. Which of the following statements is true?
After paying $12 to enter an all-you-can-eat buffet, you can eat as much food as you desire. The marginal cost of an additional plate of food is:
Zero Dollars
Beyond GDP, which of the following measures can give some indication of the quality of life in an economy?
1) Child Mortality 2) Literacy Rates 3)Life Expectancy
We translate nominal income in any past year into constant, real dollars to:
1)compare changes in purchasing power over time. 2)see what an income earned in the past would be equivalent to today. 3)understand how the purchasing power of a given amount of money changes over time.
The value-added approach of calculating GDP:
1)is an alternative, and equally valid, way of avoiding the problem of double-counting. 2)breaks down the total amount paid for a product to see how much of it was created at each step of the production process. 3)is especially useful when thinking about the services involved in the resale of existing goods.
If a country's real GDP increases from one year to the next, we can conclude the country experienced:
a definite increase in output, and may have experienced an increase in prices.
An increase in the price of ice cream is likely to cause:
a movement to the left along the demand curve for ice cream.
If a producer incorrectly sets the price of its product too low:
a shortage (excess demand) will result.
Which of the following statements best describes the study of economics?
Economics studies how individuals and groups manage scarce resources.
The benefits outweigh the costs of the decision.
Economists assume that people choose to do something when they believe:
The assumption of rational behavior:
Helps economists explain how people behave in a way that will best achieve their goals.
Opportunity Cost
If Johnny weren't in economics class this morning, he'd be sleeping. The value Johnny places on sleeping represents his:
Ten chairs and two tablesTom and Jerry have one day to work, but two tasks to focus on: building chairs and tables. If Tom spends all day building chairs, he will make 16 chairs. If he instead devotes his day to building tables, Tom will make 4 tables. If Jerry spends his day building chairs, he will make 14 chairs; if he spends the day building tables, he will make 7 tables. At the end of the day, if Jerry was efficient with his resources, he will have produced:
Ten chairs and two tables
Consumer preferences
The "Made in the USA" campaign was popularized by unions in an effort to influence which determinant of demand?
Suppose that, given the same number of workers, the United States can produce five times as many computers or ten times as many airplanes as Mexico. Which of the following statements is true?
The United States has an absolute advantage at producing both airplanes and computers.
Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day. On the other hand, a Canadian worker can produce 10 pairs of shoes or grow 20 apples per day. Which of the following statements is true?
The United States has an absolute advantage at producing both shoes and apples.
Suppose the base year of the CPI is 2017, and the CPI calculated for 2019 was 102. What is the correct interpretation of this number?
The cost of living for a typical consumer is 2 percent higher than it was in 2017.
Price and quantity demanded
The demand curve represents the relationship between _____, with everything else held constant.
Marginal Benefit
The extra benefit associated with producing or consuming the next unit of a good or service is known as the:
Trade-offs
The famous saying, "There is no such thing as a free lunch," is an example of which economic concept?
Which of the following is considered a microeconomic issue?
The local university decides to raise tuition for online course offerings.
Consumer Price Index (CPI)
The most commonly used index to track changes in prices for the typical U.S. household is the:
Gross Domestic Product (GDP)
The most commonly used metric for measuring the value of a national economy is:
Which of the following is an intermediate good?
The rice used to make Chex cereal
Suppose there is an unusually large crop of apples this year. How might this affect the market for apples?
The supply would increase, decreasing equilibrium price and increasing equilibrium quantity.
Which of the following is an intermediate good?
The tomatoes a farmer sells to a factory to be used in the production of spaghetti sauce
Microeconomics and Macroeconomics
The two broad fields that make up the subject of economics are:
Which of the following is considered a macroeconomic issue?
The unemployment rate in the U.S. falls during the month of June.
If consumption is $6 trillion, investment is $3 trillion, government purchases are $1 trillion, and GDP is $12 trillion, then net exports must equal:
$2 trillion.
If total consumption is $5 trillion, investments $2 trillion, government purchases $1 trillion, exports $1 trillion, and imports $3 trillion, the GDP must equal:
$6 trillion.
Scarcity can best be defined as a situation in which:
All wants cannot be satisfied due to resource constraints.
Shift Outward
An increase in productivity as a result of a new technology would cause the production possibilities frontier to:
Apple's newest version of the iPhoneWhich of the following is considered a microeconomic issue?
Apple's newest version of the iPhone
inefficient, meaning the society would not be using all its available resources in their best possible uses.
Choosing to produce at any point within (inside, not on) a production possibilities frontier is:
If the opportunity cost of producing corn is lower for Ohio than for Iowa, then:
Ohio has a comparative advantage at producing corn.
The Circular Flow Diagram
One of the most basic models of the economy is:
Yuto is a Japanese citizen working for Toyota at its manufacturing plant located in Tennessee. Yuto's work will contribute toward:
U.S. GDP, because the location of the plant is in the United States.
The real value of any variable is its nominal value:
adjusted for inflation.
Today, Social Security payments:
are adjusted for inflation using the CPI.
Demand describes how much of something people:
are willing and able to buy at alternative prices under certain circumstances.
A market basket:
includes specific goods and services in fixed quantities that roughly correspond to a typical consumer's spending.