Macroeconomics Exam 1
D
(Exhibit: Demand and Supply Schedules for a Good.) If there were an increase in demand by 50 units at each price, the equilibrium price and quantity would be ________ and ________ units, respectively. A) $2.00; 310 B) $2.50; 295 C) $3.00; 290 D) $3.50; 250
D
(Exhibit: Demand and Supply of Gasoline) The initial price and quantity (at intersection of S1 and D) in equilibrium are: A) $2.00 and 450 gallons. B) $1.50 and 400 gallons. C) $2.00 and 200 gallons. D) $2.50 and 300 gallons.
D
(Exhibit: Guns and Butter) The maximum amounts of guns and butter this economy can produce is: A) 18 units of guns and 0 units of butter per period. B) 0 units of guns and 20 units of butter per period. C) 16 units of guns and 12 units of butter per period. D) all of the above combinations are maximum possible combinations.
A
(Exhibit: Production Possibilities Curve for Firms A and B) In Firm A, the opportunity cost of producing 1 more unit of X in terms of Y: A) is equal to the opportunity cost in Firm B of producing 1 more unit of X in terms of Y. B) is less than the opportunity cost in Firm B of producing 1 more unit of X in terms of Y. C) is greater than the opportunity cost in Firm B of producing 1 more unit of X in terms of Y. D) cannot be determined.
C
The natural rate of unemployment I. includes frictional and structural unemployment. II. is equal to zero when an economy is producing at a point on its production possibilities frontier. III. is the unemployment rate that exists when the quantity of labor demanded is equal to the quantity of labor supplied. A) I, II, and III B) I and II only C) I and III only D) II and III only
D
The observed correlation between baldness and heart disease demonstrates that: A) being bald causes a man to have heart disease. B) being bald actually makes heart disease less likely. C) bald men are generally unreliable. D) there is probably some other factor that causes both baldness and heart disease.
equilibrium price
The price at which quantity demanded equals quantity supplied.
B
The primary emphasis in macroeconomics is on: A) how firms set prices. B) aggregates in the economy. C) marginal analysis and normative economics. D) international trade and environmental economics.
quantity demanded
The quantity buyers are willing and able to buy of a good or service at a particular price during a particular period, all other things unchanged.
equilibrium quantity
The quantity demanded and supplied at the equilibrium price.
quantity supplied
The quantity sellers are willing to sell of a good or service at a particular price during a particular period, all other things unchanged.
natural rate of unemployment
The rate of unemployment consistent with the natural level of employment.
aggregate demand
The relationship between the total quantity of goods and services demanded (from all the four sources of demand) and the price level, all other determinants of spending unchanged.
B
The same factors that lead to a change in quantity demanded also cause a change in demand. A) True B) False
A
The study of how people choose among the alternatives available to them is the: A) definition of economics. B) model of demand. C) theory of opportunity costs. D) method of distinguishing between microeconomics and macroeconomics.
gross domestic income (GDI)
The total income generated in an economy by the production of final goods and services during a particular period.
real GDP
The total value of all final goods and services produced during a particular year or period, adjusted to eliminate the effects of changes in prices.
nominal GDP
The total value of final goods and services for a particular period valued in terms of prices for that period.
gross national product (GNP)
The total value of final goods and services produced during a particular period with factors of production owned by the residents of a particular country.
D
The value, at current market prices, of the final goods and services produced during a particular period is A) disposable personal product. B) gross foreign factor output. C) gross personal product. D) gross domestic product.
A
There is an important role for government in a market capitalist economy. A) True B) False
B
There is no role for government in a market capitalist economy. A) True B) False
B
Transfer payments are A) payments to people for their current production. B) payments that do not require a good or service in exchange. C) considered a part of government purchases. D) an important component GDP because they increase consumption spending.
cyclical unemployment
Unemployment in excess of the unemployment that exists at the natural level of employment.
frictional unemployment
Unemployment that occurs because it takes time for employers and workers to find each other.
structural unemployment
Unemployment that results from a mismatch between worker qualifications and the characteristics employers require.
B
Refer to Table 5-7. Which of the following statements is true? A) Although the nominal wage increased, the real wage fell. B) Both the nominal and the real wage rose. C) Based on the values of the price index, real hourly wage doubled over the 30-year period. D) It is not possible to draw any conclusion without a base year.
C
Refer to Table 6-1. What is the value of GDP? A) $1,820 billion B) $2,170 billion C) $2,280 billion D) $2,550 billion
A
Refer to Table 6-2. What is the value of exports? A) $130 billion B) -$130 billion C) $230 billion D) -$230 billion
shift
A change in a supply shifter causes a change in supply, which is shown as a _______ of the supply curve.
A
A complete business cycle is defined by the passage from A) one peak to the next peak. B) one peak to the next trough. C) one trough to the ensuing expansion. D) one expansion to the next expansion.
A
A decrease in supply is caused by: A) an increase in returns from other alternative activities. B) suppliers' expectations of lower prices in the future. C) an advancement in the technology for producing the good. D) a decrease in the price of a good using the same resources.
inferior good
A good for which demand decreases when income increases.
normal good
A good for which demand increases when income increases.
demand curve
A graphical representation of a demand schedule.
A
A hypothesis is an assertion that can be: A) proven to be false. B) proven to be true. C) proven to be true or false. D) tested only in the normative sense.
A
A market price floor for wheat: A) increases the price paid by consumers. B) decreases the price paid by consumers. C) decreases the price received by farmers. D) does not change the price received by farmers.
C
A market price support policy establishes a price floor, which: A) decreases the price paid by consumers. B) does not change the price paid by consumers. C) increases the price received by farmers. D) decreases the price received by farmers.
price ceiling
A maximum allowable price.
D
A measure of the degree to which capital wears out or becomes obsolete during a period is A) net private domestic investment. B) gross private domestic investment. C) national income costs. D) depreciation.
price floor
A minimum allowable price set above the equilibrium price.
change in quantity demanded
A movement along a demand curve that results from a change in price.
D
A period of falling real GDP is a(n) A) peak. B) trough. C) expansion. D) recession.
consumer price index (CPI)
A price index whose movement reflects changes in the prices of goods and services typically purchased by consumers.
sticky price
A price that is slow to adjust to its equilibrium level.
B
A production possibilities curve measures cost in terms of dollars spent, not in terms of sacrificed alternatives. A) True B) False
change in demand
A shift in a demand curve.
A
A surplus will cause pressure on the price to fall. A) True B) False
B
A systematic set of procedures through which knowledge is created is: A) the economy. B) the scientific method. C) a market. D) a model.
supply schedule
A table that shows quantities supplied at different prices during a particular period, all other things unchanged.
demand schedule
A table that shows the quantities of a good or service demanded at different prices during a particular period, all other things unchanged.
A
A theory or model is a simplification of reality, in much the same way that a road map shows only those features needed to get from one point to another. A) True B) False
nominal value
A value expressed in dollars of the current period.
real value
A value expressed in units of constant purchasing power.
decrease
A(n) ________ in supply is shown as a shift to the left of a supply curve.
increase
A(n) ________ in supply is shown as a shift to the right of a supply curve.
C
An increase in real GDP A) is clearly progress, since there are more goods and services available. B) is equal to an increase in human happiness because total income is higher. C) may or may not correspond to an increase in human happiness. D) means that all people in the country are better off.
C
Dividing real GDP by the population equals A) consumption per capita. B) average cost of living. C) real GDP per capita. D) a measure of happiness.
B
Economic data adjusted for price level changes are said to be expressed in terms of current dollars. A) True B) False
B
Economists classify health care as: A) an inferior good. B) a normal good. C) a good with many close substitutes. D) a good whose quantity changes considerably with a change in price.
A
Economists concerned about the behavior of individual households, firms, and industries are studying: A) microeconomics. B) macroeconomics. C) neither macroeconomics nor microeconomics. D) the "forest" of economic behavior, rather than the "trees."
law of demand
For virtually all goods and services, a higher price leads to a reduction in quantity demanded and a lower price leads to an increase in quantity demanded.
C
Goods that are produced in a particular period but not sold in the current period A) go into inventories and are called consumption. B) end up in inventories and are included in gross private investment. C) are excluded in the current year's GDP and included in GDP in the year they are sold. D) are classified as intermediate goods.
A
Health-care spending as a percentage of total U.S. output generally rose between 1960 and 1995. A) True B) False
C
If the price in the market for a commodity is above the market equilibrium price, the: A) price will remain unchanged. B) price will rise to clear the market. C) quantity supplied exceeds the quantity demanded. D) quantity demanded exceeds the quantity supplied.
C
In 2008, the average price of the baseball fan market basket (based on the cost of the basket for 30 major league baseball teams) was $191.92. The cost of attending a Boston Red Sox game was $320.71 in 2008. Calculate the fan price index for the Boston Red Sox using the average price of the market basket as the equivalent of a base year. A) 0.59 B) 0.67 C) 1.67 D) 4.01
D
In a market capitalist economy, which of the following is not an accepted role for government? A) provision of national defense B) enforcing a legal system C) establishing policies to encourage full employment D) All of the above are acceptable roles for government.
long run
In macroeconomic analysis, a period in which wages and prices are flexible.
short run
In macroeconomic analysis, a period in which wages and some other prices are sticky and do not respond to changes in economic conditions.
C
In the generation of GDP, pollution often occurs. As a result, A) the value of nominal GDP will always be greater than the value of real GDP. B) the value of real GDP will always be greater than the value of nominal GDP. C) GDP is not always a good measure of economic or social welfare. D) the value of GDP is underestimated.
D
In the market for health care: A) equilibrium occurs at the intersection of supply and demand, just as it does with most goods. B) the effect of third-party payers decreases the price that consumers pay. C) providers are encouraged to supply a greater quantity than they would without third-party payers. D) B and C are true.
change in quantity supplied
Movement along the supply curve caused by a change in price.
D
Positive statements are: A) microeconomic in nature. B) macroeconomic in nature. C) statements involving value judgments. D) statements that can be tested.
B
Positive statements: A) imply value judgments must be made. B) are factual and can be tested. C) deal with what ought to be. D) are dealt with primarily in microeconomics.
C
The bulk of the nation's output is produced by: A) partnerships. B) proprietorships. C) corporations. D) none of the above.
B
The demand curve for stocks shows that: A) at lower prices, less stock will be purchased. B) at lower prices, more people calculate that the expected value of the firm's future earnings justify the stock's purchase. C) at lower prices, more stock will be offered on the market. D) A and B are true.
A
(Exhibit: Rent Controls) If rent controls are imposed, they will most likely be set at either _______ or _______ . A) Rent0; Rent1 B) Rent1; Rent3 C) Rent3; Rent4 D) All of the above are equally likely rent control levels.
B
(Exhibit: Strawberries and Submarines) The downward slope of the production possibilities curve implies that resources: A) must be used efficiently. B) are scarce. C) should not be wasted. D) should be allocated so that approximately equal amounts of both goods are produced.
C
(Exhibit: Sugar and Freight Trains) The "bowed-out" shape of the production possibilities curve shown here demonstrates: A) that freight trains cost more than sugar. B) that sugar costs more than freight trains. C) that the opportunity cost of additional freight trains increases as the economy produces more and more of them. D) that the opportunity cost of additional freight trains decreases as the economy produces more and more of them.
A
(Exhibit: Third-Party Payers) Three million physician office visits per week are available at a price of __________ per visit: A) $60 B) $40 C) $20 D) none of the above prices are correct.
B
Refer to Figure 6-1. "D" represents A) the flow of factors of production. B) the flow of factor incomes. C) the flow personal consumption expenditures. D) the flow of consumer goods and services.
C
Researchers demonstrate conclusively that drinking 4-6 ounces of ginger ale each day increases life expectancy by 3 years. What happens in the market for ginger ale? A) The equilibrium price falls, and the equilibrium quantity rises. B) The equilibrium price rises, and the equilibrium quantity falls. C) The equilibrium price and quantity rise. D) The equilibrium price and quantity fall.
D
Statements that make value judgments are: A) pecuniary. B) positive. C) nominal. D) normative.
C
Supply is best defined as the: A) relationship between the quantity of a good or service buyers are able to purchase and the independent variables that determine quantity. B) relationship between the quantity of a good or service buyers are willing to purchase and the independent variables that determine quantity. C) relationship between the quantity of a good or service sellers are willing to offer for sale and the independent variables that determine quantity. D) quantity of a good or service sellers are willing and able to offer for sale at a specific price.
C
The CPI is a useful index for all of the following reasons except A) it is used to determine whether people's incomes are keeping up with the costs of the things they buy. B) it is used to measure changes in the cost of living. C) it used to measure the average price level of all final goods and services produced. D) it is used to compute the U.S. inflation rate.
B
The Oregon Plan for the provision of health care to people living below the poverty line generally increased the number and type of procedures for which they were eligible. A) True B) False
quantity supplied
The ______ _______ of a good or service is the quantity sellers are willing to sell at a particular price during a particular period, all other things unchanged.
A
What does the phrase "jobless recovery" refer to? A) It refers to a recovery from a recession which does not produce strong growth in employment. B) It refers to a situation in which rising productivity has made it possible for firms to reduce their workforce and increase output at the same time. C) It refers to the phenomenon where U.S. firms move their production abroad, thereby destroying jobs in the domestic market and creating new jobs in foreign markets. D) It refers to a situation in which a worker's real wage falls despite increases in productivity.
D
When making a choice to do more of one activity, the highest-valued other choice society does not make is called _______ , and it is measured _______ . A) opportunity cost; in terms of the money it costs B) increasing cost; in terms of the amount of money spent doing so C) constant cost; by the slope of the production possibilities curve at that level D) opportunity cost; by the slope of the production possibilities curve at that level
C
When the market price is established where demand and supply curves intersect: A) consumer buying tends to exceed the quantity producers supply. B) the quantity consumers demand generally fall short of the quantity producers supply. C) the quantity demanded and the quantity supplied are equal. D) all of the above will result.
B
Which of the following is not capital? A) a computer in the office of an accountant B) a migrant worker in the fields of California C) a wrench in an auto-repair shop D) a new machine used for producing microchips
C
Which of the following statements is false? A) A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. B) Between trough and peak, the economy is in an expansion. C) Between two peaks, the economy is in a recession. D) Expansion is the normal state of the economy
C
Which would not cause the supply curve to shift? A) a change in technology B) a change in factor costs C) a change in the price of the good D) a change in the prices of related goods
